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Air Cargo Sees Steady Decline As Rates Plummet 37%

Global air cargo demand is maintaining its decline in line with general container demand, according to preliminary figures from WorldACD Market Data.

For the first two weeks of April 2023, chargeable weight on cargo planes was down 12 percent when comparing the overall global air cargo market from a year ago. This represented a return to the double-digit percentage declines seen in the preceding five months to March—which saw an 8 percent year-over-year weight decline.

Figures for the week of April 10-16 show a continuation of the decreasing trend in air cargo tonnages observed since mid-March, with a week-over-week drop of just 2 percent compared to a 8 percent decline reported on April 3 based on more than 400,000 weekly transactions covered by WorldACD’s data.

Notable percentage decreases in year-over-year tonnages were seen on flights exiting North America (down 25 percent) and Europe (18 percent).

Overall air freight capacity is up 12 percent compared with 2022, with double-digit percentage increases from almost all regions, except from Central and South America, which was slightly down at 2 percent, and North America, which saw a 5 percent increase. The most-notable increases were flights out of Asia Pacific (33 percent) and Africa (19 percent).

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Worldwide air cargo rates plummeted 37 percent below their levels from a year ago, at an average of $2.56 per kilograms for the week of April 10-16, despite the effects of higher fuel surcharges, although they remain significantly above pre-Covid levels. Rates have dropped off 6 percent from four weeks prior, when they were $2.73 per kilogram. For the comparable week in 2022, air cargo rates averaged $4.11 per kilogram.

When comparing the weeks of April 3-9 and April 10-16 with the preceding two weeks, overall tonnages decreased by 9 percent versus their combined total, and average worldwide rates decreased by 4 percent, with stable capacity. By this same level of comparison, capacity levels have remained the same.

On a regional level, the “two-week-over-two-week” downward trend in air cargo tonnages is visible from all of the main origin regions and on all lanes, particularly flows out of Europe—most notably to Central and South America (a 21 percent decrease), Africa (a 17 percent decline), North America (a 16 percent dip), Asia Pacific (a 14 percent decrease) and Middle East and South Asia (a 14 percent decline).

This relatively strong decline in tonnage flying out of Europe is partially due to the Easter holidays. Furthermore, significant declines were observed on flows out of the Middle East and South Asia to the Asia Pacific and goods headed from North America to Europe—both which saw 18 percent tonnage declines.

In terms of pricing, the average rates show a positive trend for goods flown out of Central and South America to North America, inching up 1 percent. This is the only lane that saw an increase in cargo prices, with all other lanes experiencing decreasing rates. The most significant drop was seen from the Middle East and South Asia to Asia Pacific, at a 23 percent slip.

The next-steepest significant cargo rate declines were 7 percent in three trade routes: North America to Asia Pacific, North America to Europe and Europe to Central and South America.

IATA outlines air cargo priorities for 2023

As rates continue to decline, The International Air Transport Association (IATA) outlined three priorities to enable the air cargo industry to maintain momentum against the challenging operating environment.

At the 16th World Cargo Symposium (WCS), held in Istanbul, Brendan Sullivan, global head of cargo at IATA, said businesses must focus on sustainability, digitization and safety as the top major imperatives that must account for the next six years.

“Air cargo is a different industry than the one that entered the pandemic. Revenues are greater than they were pre-pandemic. Yields are higher,” said Brendan Sullivan, global head of cargo at IATA. “The world learned how critical supply chains are. And the contribution of air cargo to the bottom line of airlines is more evident than ever. Yet, we are still linked to the business cycle and global events. So, the war in Ukraine, uncertainty over where critical economic factors like interest rates, exchange rates and jobs growth are concerns that are real to the industry today. As we navigate the current situation, air cargo’s priorities have not changed, we need to continue to focus on sustainability, digitalization and safety.”

IATA, which represents approximately 300 airlines comprising 83 percent of global air traffic, noted that sustainable aviation fuel (SAF) is critical to achieving the aviation industry’s Long-Term Aspirational Goal (LTAG) of net-zero carbon emissions by 2050, in line with the industry’s commitment adopted in 2021.

While 65 percent of carbon abatement will come from SAF, IATA says that production levels remain challenging. The association is urging the government to incentivize production.

“SAF is being produced. And every single drop is being used. The problem is that the quantities are small. The solution is government policy incentives,” said Sullivan. “Through incentivizing production, we could see 30 billion liters of SAF available by 2030. That will still be far from where we need to be. But it would be a clear tipping point towards our net-zero ambition of ample SAF quantities at affordable prices.”

IATA outlined three other areas where it was working to support the energy transition of the industry, including: supporting effective carbon calculations and offsetting; expanding the IATA Environmental Assessment (IEnvA) to airports, cargo handling facilities, freight forwarders, and ramp handlers; and developing environmental, social and governance (ESG) related metrics to cut through the many methodologies in circulation with ESG Metrics Guidance for Airlines.

The association also outlined three digitalization goals for the aviation industry as players in the space aim to continuously improve their efficiency.

For one, IATA wants to get 100 percent of airlines onto its freight digitalization platform, One Record, by January 2026. This initiative is designed to replace the many data standards used for transport documents with a single record for every shipment. The IATA Cargo Services Conference agreed on Sunday that it wants to achieve 100 percent airline capability by Jan. 1, 2026 and the association’s Cargo Advisory Council supports this vision.

The organization said it wants to ensure that digital standards are in place to support the global supply chain, and that compliance and support for customs, trade facilitation and other government processes are increasingly digitized.

Beyond sustainability and digitalization, IATA outlined three safety priorities for air cargo, noting how lithium batteries caused 62 smoke- and fire-related incidents in 2022 in airports and airplanes, according to the Federal Aviation Administration (FAA).

“Alongside sustainability and efficiency is safety. The agenda for air cargo continues to be dominated by lithium batteries. A lot has been done. But, quite honestly, it is still not enough,” Sullivan said.

The IATA recommends that civil aviation authorities take strong action against shippers not declaring lithium batteries in cargo or mail shipments. Additionally, the association wants to accelerate the development of a test standard for fire-resistant aircraft containers with a fire involving lithium batteries.

Finally, the organization wants to ensure that world governments recognize a single standard to identify all lithium battery-powered vehicles, which comes into effect Jan. 1, 2025.

“Air cargo is a critically important industry. It helps build a better future for the people of the world. it’s an industry that saves lives, delivering aid and relief to those in need. The industry mobilized to support those affected by the earthquakes in Syria and Türkiye,” concluded Sullivan. “Working together to ensure that air cargo remains a reliable and efficient means of providing support to those in need, while simultaneously strengthening our global supply chains and contributing to the sustainable development of our economies is essential.”