Air Cargo Faces Capacity Crisis as eCommerce Goes into Peak Season

Air Cargo Capacity Crisis: Key Insights 

• Demand Pressures Capacity: As eCommerce demand surges during peak shopping periods, air cargo faces unprecedented capacity challenges, worsened by geopolitical issues disrupting sea freight routes.

• eCommerce Share in Air Freight: eCommerce now represents 20% of global air cargo volume, up from 10% in 2017, and is expected to rise to nearly one-third by 2027.

• Rising Prices and Limited Space: Increased air cargo demand, particularly from Asia, has driven rates up by 70% on critical trade lanes, with eCommerce companies securing most available capacity, leaving shortages expected through the end of Q4.

The air cargo industry is bracing for a turbulent end to 2024 as rising demand and capacity constraints intensify competition for freight space, especially in key markets like Asia and Europe. 

Air freight operators and general cargo shippers are facing increased pressure from the dominance of eCommerce giants, which have already secured a significant portion of air cargo capacity for the year-end peak season. 

eCommerce Growth Intensifies
Air Cargo Capacity Shortage 

According to Stefan Krikken, DSV's head of global airfreight, the capacity constraints seen this year are "unprecedented," with eCommerce players driving demand during major shopping events like Black Friday and Singles Day. 

While this is nothing new, the weight of eCommerce in total air cargo volume has been steadily increasing over the past few years and is forecast to continue to do so: 

• According to McKinsey data, the share of cross-border eCommerce in air cargo volume was 10% in 2017. After the pandemic hit, the share was 20% by 2022.

• Projections show that this figure will rise to 25-30% by 2027. This means that eCommerce could account for as much as one-third of global air cargo volume. 

The strain on capacity is not just limited to eCommerce-driven demand. The ongoing disruption of sea freight routes, particularly in the Red Sea and ongoing geopolitical issues in Ukraine and the Middle East, is pushing more businesses to rely on air freight, compounding the situation.

Rising Air Freight Rates 

With global air cargo demand rising by 13.6% in July year-over-year, carriers are prioritizing routes from Asia, further exacerbating the capacity shortage in other regions. Rates have soared on certain key trade lanes, such as the Asia-Pacific to the U.S., where prices have increased by up to 70% since August.

DHL's market outlook reflects similar concerns, with the company forecasting continued high rates for air cargo through Q4 as demand remains strong despite the overall global economic slowdown. Capacity shortages are expected to persist, especially in Asia, where over 80% of available air cargo capacity has already been contracted by eCommerce companies. 

DHL highlights that geopolitical tensions and the threat of additional tariffs in the U.S. and Europe are also pushing businesses to expedite shipments via air, further tightening capacity. 

Preparations for the
eCommerce Peak Season 

Major freight forwarders like DB Schenker are taking proactive measures to secure capacity ahead of the peak season. This sentiment is echoed by industry leaders like Richard Broekman of Atlas Air, who pointed out that eCommerce companies are better prepared for the peak season, having locked in long-term capacity contracts, while general cargo shippers may struggle to keep up with rising demand.

Despite these challenges, the air cargo industry has shown remarkable resilience. July's figures reflected the 8th consecutive month of double-digit growth in global demand.

Asia Pacific emerged as the dominant region, with a 17% increase in air cargo demand, driven by strong trade along major routes such as Europe-Asia and Middle East-Asia. Meanwhile, Europe recorded a 13% growth, with robust performance on the Middle East-Europe corridor. 

Air Cargo Capacity Crisis: Closing Thoughts 

Looking ahead, industry insiders are warning that the competitive environment for air cargo is unlikely to ease. General cargo shippers are being advised to "brace for impact" as they contend with rising rates and capacity shortages. 

As peak season approaches, the air freight sector will continue to see high load factors and strong pricing, particularly on routes from Asia, with rates potentially doubling as demand outpaces supply.

Sources: The Loadstar, Air Cargo News: 1, 2, Freight News, AirInsight, ECDB