The US domestic air cargo market today is about as big as it was in early 2017 – despite a boom in e-commerce. After growing at about 3.7% per year between 2012 and 2021, flown traffic has dropped by almost 20% since early 2022. The bad news is that we may see more declines in the next 18 months. The good news is that declines are likely to be more moderate. This article looks at the outlook for the US air cargo market and discusses what it means for the demand for air capacity.
Posts tagged as “E-Commerce”
Australia’s economy is 12% larger today than it was in 2018. Yet Australian air cargo imports are about 8% below October 2018 peak and about 15-20% below the long-term trend. Exports are 25% below the March 2019 peak. Meanwhile, container volumes are about 6% higher. The share of total non-bulk trade has generally hovered around 30% of total trade but dropped to 26% in the most recent 12 months. However, since mid-2023, both air cargo import and export traffic have been improving. E-commerce and more capacity could lead to a recovery of inbound and a resumption of lost Chinese demand in a recovery of exports. This article discusses the outlook for Australian air cargo.
Low value trade accounts for about 2.5% of Chinese export trade value. Much of this is cross border e-commerce traffic and has grown by 37% in 2023 and 32% so far this year. This has been good for long haul airfreight, may not be sustainable in the long run unless platforms continue to subsidize shipping costs. This article provides an assessment based on Chinese customs statistics which contrary to US or European statistics provide information on low value trade.
Despite a strong start for the air cargo business in the first quarter of this year, the underlying economic fundamentals point to more subdued growth for the remainder of the year. Compared to our last forecast prepared just under three months ago, we expect global air cargo growth for 2024 to be slightly lower - 8.9% vs 9.9%. Much of this is due to a slight downgrade of economic growth and trade projections, as well as a diminishing boost from cross border e-commerce volumes. Full year growth for 2024 will still be dependent on the recovery of manufacturing and small package volumes staying strong.
The e-commerce fuelled boom in US domestic air traffic appears to be over. This could have profound implications for the domestic air express business and the need for aircraft capacity in a market that is home to 43% of the world’s freighter fleet. Historically, there has been a strong correlation between growth in online shopping, overall economic growth and traffic moving through US domestic air express, e-commerce and general cargo networks. However, since late 2022 this relationship seems to have broken down – the market declined by 11% when the underlying fundamentals should have led to moderate growth in 2023 and acceleration in 2024.This article digs deeper into the data and provides an explanation as to what is happening.
International air express, air freight and containerised ocean freight do not always move in sync – even though growth in all three is correlated to changes in economic activity. Part of this is due to how quickly each responds to changes in the inventory cycle or relative price differences, but also the underlying industry segments and customer profile that driven each segment. Consumer demand has performed better (or less worse) than manufacturing activity and as such containerised shipping and express have performed better than general airfreight. Air cargo traffic – which consists of a mix of express, cross border e-commerce and general air freight – has been strong, primarily because of e-commerce.
After two bad years of declining international air cargo volumes, we should be in for a good year – possibly somewhere in the order of 10% growth based on our latest forecast. For context, that would put us somewhere close to where we were at the end of 2021. Should we believe our own numbers? If cross border e-commerce traffic remains strong, manufacturing recovers and the outlook for global growth continues to improve then it is likely that we also see a recovery in air cargo traffic. The ongoing situation in the Red Sea forcing longer routings between Asia and Europe is also likely to increase the demand for air (and rail) freight on that lane.
The last twelve months have seen a large increase in cross-border e-commerce traffic, primarily driven by China which has increased its share as the main origin of shipments. Chinese cross-border e-commerce growth in turn appears to have been largely driven two platforms, Temu and Shein, which together with the various Alibaba Group marketplaces and Amazon account for the bulk of international volumes. We estimate that Chinese cross border e-commerce trade grew by almost 30% last year and accounted for over 8% of the value of Chinese international trade.
The decline in US air trade with China is being compensated by cross border e-commerce. After declining 11% in 2022, cross border e-commerce volumes have grown 55% in 2023 and are now 38% higher than in 2021. This increase is evident in South China and Hong Kong air cargo traffic into the US.
Chinese cargo traffic data indicates an e-commerce driven surge in year-end air freight volumes not reflected in trade data. Due to value reporting thresholds trade data does a poor job of tracking cross border e-commerce volumes which by some accounts could account for a fifth of international air cargo volumes. Chinese international air cargo shows strong growth over the last three months.