Global air cargo volumes and spot rates inched up slightly in October, offering a glimmer of hope for airlines and freight forwarders. However, overall demand remained subdued, dampening expectations of a traditional year-end revenue boost, according to the latest weekly market analysis by Xeneta.
In October, airfreight volumes showed a 2% month-over-month improvement, but this increase was sub-seasonal compared to the previous five years. General air cargo spot rates also saw a 2% uptick from September, reaching USD 2.28 per kilogram. Notably, they briefly exceeded seasonal rates in the first two weeks of October, a deviation from the trend since mid-May 2023 before reverting to below seasonal levels.
In comparison to the previous year, the global air cargo spot rate exhibited its slowest decline in October at -30%. This can be attributed to a slight uptick in global cargo volumes and a deceleration in cargo capacity growth, as global belly capacity returned to pre-pandemic levels, albeit unevenly across major routes.
The global dynamic load factor, a metric that measures cargo volume and weight concerning capacity, rose to 59% in October but remained 2 percentage points below the level of the previous year. Load factors have consistently underperformed corresponding monthly levels of the past five years during the first 10 months of 2023, indicating a persistently weak global air cargo market.
Niall van de Wouw, Chief Airfreight Officer at Xeneta, commented, “October’s market performance is what we expected to see. It was a marginally busier month but not a cause for much optimism, nor pessimism. Carriers and forwarders are not expecting the market situation to improve significantly until well into the second half of 2024. The ongoing situation in Ukraine and now the conflict in Israel and Gaza will only add to these concerns. This is a volatile market. Freight forwarders are still procuring capacity on a short-term basis but are selling more long-term. That’s a risk, but clearly forwarders are not willing to commit to capacity because of so much uncertainty.”
Against the backdrop of a soft cargo market, global carriers continued to report declines in their October revenues, with an industry-wide drop of 26% compared to the same month last year. This trend was also reflected in carriers’ Q3 results, although October 2023 revenues outperformed October 2019’s pre-pandemic figures by 21%.
One reason for the relatively higher revenue compared to 2019 is the widened freight rate spread. High rates for the transportation of premium and special cargoes remained elevated, while low rates for general cargoes returned to their pre-pandemic levels.
However, carriers continued to grapple with rising operating costs. Jet fuel costs remained high, with US Gulf Coast jet fuel spot rates in the first three weeks of October 55% above their October 2019 level. Additionally, rising labor costs due to inflation and labor shortages added to carrier operating expenses, presenting challenges, especially for cargo airlines without the supplementary revenue from passenger operations.
Examining specific corridor-level rates, cargo spot rates from Europe to the US stood at USD 1.85 per kilogram in October, a 7% increase from the previous month. This change was influenced by carriers’ seasonal passenger schedule adjustments, which began at the end of October, leading to expectations of reduced cargo capacity.
In the East-to-West trades, October air cargo spot rates from China to Europe saw a 14% month-over-month increase, reaching USD 3.66 per kilogram. Meanwhile, Southeast Asia to Europe spot rates rose at a slightly slower pace, increasing by 9% to USD 2.51 per kilogram. In contrast, the transpacific market showed the reverse trends. Spot rates from China to the US increased by 10% from the previous month, reaching USD 4.00 per kilogram, while spot rates from Southeast Asia to the US surged by 15% to USD 3.61 per kilogram, primarily due to substantial growth in chargeable weight month-on-month.