Piqued by the peak: air cargo faces tight capacity

Guest Blog By Julia Kuzeljevich

We’re in the midst of air cargo’s peak shipping season, and it’s left many logistics service providers “peaked”, not to mention piqued by the resulting mad rush, delays, and volatility.

Ecommerce volumes and a healthy global air transport industry are contributing to a phenomenon where it seems there are two distinct “seasons” and two “processes” to handle them.

“These are good times for the global air transport industry. The demand for air cargo is at its strongest level in over a decade,” said Alexandre de Juniac, IATA’s Director General and CEO, in a recent speech. Certainly asset-based carriers are benefiting from the upswing. Benefits to forwarders who are trying to provide service to customers in such a volatile market, however, are much less obvious.

Forget about forecasting-in many ways this has gone out the window as nobody knows what, when or how buyers are buying. For the first time ever, neither airlines nor forwarders had an understanding of what to expect this peak season – because importers and exporters are unable to advise their requirements more than a few hours/ days in advance.

Belly freight capacity is tight into Canada from most regions and there is virtually no freighter capacity. CIFFA forwarders advise that main-deck lift out of Asia is booking now for mid-January and customers who expect lift to be available before then are not being realistic.

Added to this unexpected spike in demand and to the limited lift created over the past few years of declining air freight, is an unprecedented volatility in rates. Customers can now expect that air freight quotations will be held for just hours, not days or weeks as was the norm. Decision-making around air cargo has become a pressure filled, stressful undertaking – where often there are simply no options.

And it may not end with the arrival of Christmas. As an IATA survey to airline execs revealed this fall, over the next 12 months, we can continue to expect robust demand for air freight. The cargo business continues to benefit from a strong cyclical upturn in volumes, with some recovery in yields. Volumes are expected to grow by 4.5% in 2018 (down from the 9.3% growth of 2017). The boost to cargo volumes in 2017 was a result of companies needing to restock inventories quickly to meet unexpectedly strong demand. This led cargo volumes to grow at twice the pace of the expansion in world trade (4.3%). Cargo yields are expected to improve by 4.0% in 2018 (slower than the 5.0% in 2017).

The growth of e-commerce is expected to support continued momentum in the cargo business beyond the rate of expansion of world trade in 2018. On December 11, online pricing platform Freightos reported that airfreight in Europe had reached full capacity two weeks prior. Bad weather was compounding the situation across Europe with early snow impacting airport operations. Earlier this week Brussels Airport for example grounded freighters, allowing only passenger flights to move, due to extreme snow conditions on the ground.

Air cargo is expected to remain congested throughout the holidays and well into January. If relief comes at all, be prepared-it’s not expected to last long as the effect of Chinese New Year in mid-February hits the air cargo market.