Air freight charges are falling, however some firms are seeing long-term power

The cost of shipping air freight globally is falling, but some companies say the global shift to air freight around the world will keep the market attractive for years to come.

“I don’t think it’s going to give any share back to other modes of transportation,” Boeing CEO Dave Calhoun told reporters at an industry conference in Washington, DC last month. “I think it will return to its previous pace of growth.”

Air freight is a tiny part of the overall freight market, but supply chain issues, travel restrictions and voracious consumer spending have pushed the niche to the fore during the pandemic.

Boeing and Airbus are both selling freighter versions of their latest widebody jets, which are more fuel-efficient than older freighters, and demand to convert older passenger jets into freighters is so strong that some slots have been booked for years.

Traditional ocean freight companies like Maersk have recently entered the air freight market. And passenger airlines have reaped the rewards of strong cargo demand during the Covid pandemic to supplement traditional revenue streams.

Belly cargo is unloaded from an American Airlines Boeing 787 Dreamliner at Philadelphia International Airport.

Leslie Josephs | CNBC

The recent fall in air freight costs is a departure from a year ago, when bustling companies around the world pushed air freight rates to record highs ahead of the year-end holidays as they paid for flights and avoided maritime chaos like congested ports.

Now worries about the economy, shifts in consumer spending habits amid pandemics — e-commerce binges have given way to a rush of holiday travel this summer instead — and an increase in capacity are pushing air freight rates lower.

Belly cargo carried on passenger aircraft has increased global capacity as demand for travel, particularly on long-haul international routes, has returned.

FedEx shocked investors last month by withdrawing its forecast and announcing major cost cuts, including cutting air capacity. Its CEO predicted a global recession.

“The single largest expected contributor in FY23 will be the changes we are making to our express air network as we reduce global flight hours,” FedEx CEO Raj Subramaniam said at an analyst call last month.

Consumers may have shed their boxed-in shopping frenzy during the peak of the pandemic, but they’re unlikely to become much less discerning.

“If you look at the e-commerce segment of air freight, it’s grown significantly and probably won’t go down because we’ve all learned to buy things differently,” said Rob Morris, global consulting director at aeronautical data firm Cirium.

You might also like

Comments are closed.