Urgent. Flexible. Sexy. This is the appeal of sending cargo above the clouds. After all, air freight may be the sleekest mode on the block.
Shipping by way of the sky heightened during pandemic-era chaos. Air transit became a viable alternative for averting port congestion, delays, and tightened space on the coasts.
Shippers could call on the mode when they needed their cargo moved as soon as possible—a situation they often found themselves in over the last couple of years.
While more expensive than its ocean counterpart, air freight blossomed from an once premium before the pandemic to an “X-Factor” service over the last two years.
However, this magical appeal dissipated as market conditions became softer and more stable. At this time, air freight is a wildcard.
A quiet year for air freight
Low tides of shipper demand have lowered all modes down a peg. While most coverage has focused on the ocean sector, the air freight industry has also observed less volumes taking off in 2023.
This revelation isn’t too surprising. Start-of-the-year forecasts mostly indicated the air sector was in for muted demand with a theme of recovery throughout the year.
As July sits two days out, air’s first half performance certainly rhymes with expectations. And, while demand has been low, air cargo volume isn’t dropping as emphatically as some feared it would—lending some encouragement to the industry’s rehabilitation.
In fact, after plunging eight percent in 2022, its slide this year has slowed in comparison. In other words, this reflects some goods news of recovery.
However, everyone should stay seated and fasten their seatbelts—there are other factors to consider as well.
Capacity outweighs demand, continues to expand
The industry still has a few bridges to cross in order to fully recover. Not only is demand low, but available capacity is also plentiful.
This lack of reasonable equilibrium has made this year’s recovery model a bit awkward to follow.
For starters, the rebound to passenger travel has opened up more space for freight movement thanks to available capacity in the underbellies of typical commercial jets.
This development hasn’t been fully enjoyed though. While people themselves are looking to be transported, it hasn’t been the same case for cargo.
That said, even with muted demand this year, air freight executives are unphased with their intentions to expand capacity over time.
At the beginning of the year, IATA , a global air transport group, reported a rise in deliveries for freighter planes, whether converted or “straight-out-of-the-box”.
Maybe, these execs have a fair share of moxie, but it’s not totally a delusional strategy on their end. Thanks to e-commerce and online retail, air freight certainly has a reason to invest in its assets.
These booming markets have insatiable cravings for faster and more reliable deliveries to customers. Air freight provides the best bet for these ambitious companies to fulfill these expectations.
Last fall, retail titan Amazon directly partnered with air carrier Hawaiian Airlines, signaling the growth potential this area of commerce has for air freight going forward.
Will air freight have a peak season this year?
Though, this isn’t about air freight’s probable relationship in 2040 with an e-commerce company headed by C-Level AI employees. Let’s keep the focus on 2023.
The capacity glut, while likely a rewarding investment down the road, is not pulling the industry any favors this year.
Air freight will have more than enough capacity to weather any peak season storm. The only problem is the storm will likely be a pleasant drizzle instead.
Retailers remain skeptical on how much they’ll order ahead of peak season. With inventories still leftover from last year, many of them are trimming the fat and cutting down on new shipments.
It’s likely air freight’s true opportunity will come at the top of the fourth quarter.
Remember—urgent, flexible, and sexy. The transport mode will be called upon to handle last-second orders before the holidays. The uncertainty around consumer behavior and inventory levels leading up to the holidays play into air freight’s hand as a last resort option.
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