Driven by e-commerce, freight demand has risen rapidly. The biggest confusion in the industry now is that there are too few planes and not enough capacity
Text | Zhao Yaqing
Edit | Wang Jingyi
After 30 years in the civil aviation industry, He Ying has held various positions in passenger and cargo transportation, and now the cargo director of Cathay Pacific Chinese mainland, she lamented: "Cargo is far more complex than passenger transportation. ”
Air freight, at first glance, sounds just a simple loading and unloading process, but in fact it is not - passenger transport is just "selling chairs", and the category of freight is much more complex, with fine requirements for size, carrying conditions, etc.; Moreover, freight is greatly affected by the external environment, and uncertainty is everywhere, so it is difficult to predict exactly what will happen in the next week.
In the first half of this year, the unexpected air bull market brought surprises to many freight companies. According to data from the Civil Aviation Administration of China, in the first quarter of 2024, the industry completed a total of 2.007 million tons of cargo and mail transportation, the highest cargo volume in the first quarter of the previous year, a year-on-year increase of 34.4%.
But under the surprise, the industry is being enveloped by insecurity:
First, the demand for freight has soared, how to coordinate the capacity, and whether the wealth of the sky can be catched?
Second, will the peak season continue under external factors such as the Red Sea crisis and e-commerce demand, and how will it be arranged in the future?
Third, the goods are becoming more and more rich and diverse, but the goods can't speak, how can we be lucky?
No one can prepare in advance, and preparation cannot be guaranteed to be foolproof, how to find certainty in uncertainty is the eternal theme of air cargo.
01
The off-season is not light
Recently, DHL released an industry observation that the air cargo market in the Asia-Pacific region is showing an unseasonal "bull market".
Generally speaking, the first half of the year is the off-season for the air freight industry, and "the air freight market has been surprisingly busy this year. Niall van de Wouw, chief air freight officer at transport data company Xeneta, said.
In the first half of the year, HKIA achieved record double-digit year-on-year growth in cargo throughput every month. Exports in April alone were up 24.7% compared to the same period last year. According to air cargo data firm WorldACD, global cargo volumes increased by 9% year-on-year between May 13 and 19, with strong demand in the Asia-Pacific region up 15% and the Middle East and South Asia up 16%.
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Under the strong demand, prices rose in tandem. In May this year, the global air freight spot rate continued to rise, increasing by 9% year-on-year, to $2.58 per kilogram, an increase of 5% month-on-month.
Specifically, spot freight rates on the Middle East and Central Asia to Europe routes increased by 110% year-on-year to US$3.21 per kilogram, spot freight rates from China to Europe set a new record with a 34% increase to US$4.14 per kilogram, and Southeast Asia and China to North America routes increased by 65% and 43% respectively to US$4.64 and US$4.88 per kilogram, respectively.
Airline capacity is also catching up, with AAPA member airlines offering a 14.4% increase in cargo capacity in April. However, capacity has not kept pace, with Xeneta's April data showing that the growth in cargo volume (+11%) outpaced the increase in capacity (+5%).
Source: Xeneta Air Cargo spot price dynamics for selected routes in May 2024
(Percentage refers to year-over-year change in per kilogram per dollar)
"Compared with before, the categories of goods transported this year are richer and more diverse. The whole market is still quite gratifying at present, and it is also a sign of economic development. He Ying said.
It can be seen that in addition to traditional goods, the volume of Sino-foreign exchange cultural relics, live animals, cold chain medicine and so on is increasing. Among them, electric vehicles and their accessories, which originally relied on sea freight, have also been transferred to air transportation.
According to the International Air Transport Association (IATA), the share of goods transported by air in the world's trade in goods is less than 1% by weight, but its economic value is more than 35%, and the unit value of air cargo is about 108 times that of other modes of transport.
02
E-commerce demand has skyrocketed
The off-season is not light, and the two direct reasons are caused by the external environment.
First, cross-border e-commerce has brought huge demand.
China's four major cross-border e-commerce platforms, SHEIN, Temu, AliExpress and TikTokShop, are becoming the mainstream platforms for global e-commerce consumption, and their goods have become an important source of air freight. According to incomplete statistics from the Civil Aviation News of China, the export air cargo volume of SHEIN and TEMU alone is not less than 5,000 tons per day. In 2023, Shanghai Pudong Airport and Hongqiao Airport will guarantee 350,000 tons of cross-border e-commerce goods, a year-on-year increase of 260%.
According to the International Air Transport Association (IATA), 80% of cross-border e-commerce goods are transported by air, accounting for 20% of the revenue of the air cargo industry, which is expected to reach $4.4 trillion by 2026.
Andre Majeres, head of cargo, mail and e-commerce at the International Air Transport Association (IATA), points out that around 70 wide-body freighters (or equivalent flights) are dedicated to transporting e-commerce cargo from China to the rest of the world every day.
It is foreseeable that when the second half of the year enters the peak season of e-commerce promotion, the demand for freight will increase significantly.
The second is geopolitical conflicts, which have led to the transfer of part of the sea cargo volume to air freight.
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The disruption of the Red Sea shipping lanes has had a knock-on effect on the global shipping industry, and there is no sign of easing so far. According to data released by the International Monetary Fund (IMF), the number of merchant ships passing through the Suez Canal in the first quarter of this year fell by 45% compared to a year earlier.
According to market intelligence company Rotate data, globally, the current air freight price is only one-sixth of the sea freight price, and the price difference between the two has narrowed to the smallest in two years, and historically, the air freight price is usually 12~15 times that of sea freight.
Supply chains are closely linked, and this blocked maritime trade corridor has boosted the prosperity of the air cargo industry. The geopolitical situation has boosted the transportation and logistics budgets of many shippers, making people frantically search for air cargo capacity to deliver goods to Europe and North America in a timely manner.
Willie Walsh, President of IATA, said: "Air cargo will continue to grow steadily in 2024 as global cross-border trade and industrial production continue to show a modest upward trend. ”
03
Lack of aircraft, lack of capacity
"Freight operations are much more complex than passenger transport. This chair should be sold for the same price for men, women and children. However, shipping a case of water is completely different from transporting a box of clothes or odd-shaped things, and the operational requirements are completely different. He Ying said to us.
For example, medicines, perishables, animals, valuables, mail, special cargo, and dangerous goods all require professional transportation solutions.
On the one hand, this places huge demands on operational capabilities; On the other hand, the uncertainty and volatility of the market raises a common question in the industry: Am I closing the deal at the right time and at the right level?
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The increasing variety of cargo types also brings the challenge of cargo space coordination. How to put oversized goods, how to place different types of goods, and how to place special items or animals when transporting them still rely on manual experience to coordinate.
In addition, goods are not like passengers who can act independently and can speak, in addition to helping goods "buy tickets" and "find seats", they also have to solve the problems of how to get the goods to the airport, how to check in and board, and who will pick up them when they get off the plane. Placing air freight in a single supply chain grows exponentially in complexity.
The biggest challenge for all airlines is how to prepare for capacity in an uncertain supply chain.
The lack of aircraft is the most critical, and it is also a common problem faced by global air transport.
There are about 650 large freighters in service in the world, and the overall average age is 16 years, while the typical service life of the aircraft is 30-35 years, and a considerable number of freighters over 30 years old will face retirement in the next few years.
Boeing expects the global capacity gap for large freighters to be around 60 by 2027.
However, due to the fact that neither the 777-8F nor the A350F will be able to provide delivery slots until 2029-2031, only the 777F and 777 passenger-to-freighter models can currently provide delivery, but the available slots for these aircraft will not be able to fully meet the capacity gap in 2027.
He Ying told us: "Now the whole industry has a sense of insecurity, because when you see someone preparing capacity, you are worried about what to do if you don't have capacity, and it is easy to chase up and down." How to stay flexible is a very important question. ”
However, trade will always find its path of least resistance, and goods will always find their way. After the first half of the year, the traditional peak season of air freight in the second half of the year is coming, and practitioners still have confidence in this year's market.