The air freight industry which kept fluctuating throughout 2023 is finally witnessing an uptick in demand. According to Oslo-based ocean and air freight market analytics platform Xeneta, the air freight forwarders might finally see the return of a more predictable ‘classic seasonality’ in the coming year. Niall van de Wouw, Xeneta’s Chief Airfreight Officer, anticipates that 2024 could provide a much-needed breather for air freight forwarders, following the turbulence experienced in recent years. In today’s post we will take a quick glance at the air freight market outlook for 2024 as highlighted by Xeneta.
Air freight industry trends for 2024- Insights for air freight forwarders
“2024 could be an opportunity for shippers to catch their breath after the volatility of the past few years,” says Niall van de Wouw, Chief Airfreight Officer of Xeneta. The rapid rate decline observed earlier in the year has subsided in recent months, leading to a potential stabilization of the market. Van de Wouw emphasizes that the air cargo sector may have found a new baseline, paving the way for the re-emergence of classic seasonality patterns.
Moreover, Xeneta’s data points to the increasing capacity and declining rates as a key theme for 2024. Environmental sustainability and improving schedule reliability in ocean freight shipping are two factors that will impact the air cargo industry in 2024.
Challenges and Opportunities
The air freight industry, marked by soaring costs during the Covid-19 pandemic and subsequent sharp declines in 2023, still faces a 32% increase compared to pre-pandemic levels. However, the market remains challenging, requiring a keen understanding of global and regional supply chain data.
Long-Term Contracts: A Double-Edged Sword
While there’s a rising trend in longer-term contracts, Xeneta warns that this approach might pose challenges for air freight forwarders in 2024. Fierce competition and the desire to secure volumes lead forwarders to opt for extended contracts. However, buying the majority of volume from carriers on the short-term spot market can also become problematic if rates rise unexpectedly.
Consumer Spending and Demand Dynamics
The Xeneta Air Freight Outlook 2024 highlights muted consumer spending as a significant factor for the year ahead. With demand for air freight down by -8% compared to pre-pandemic levels in 2023, a modest growth of 1-2% is predicted for 2024. Simultaneously, supply is expected to grow by 2-4%, reflecting a delicate balance.
Looking to the Ocean for Stability
Van de Wouw underscores the importance of the air freight industry keeping an eye on the ocean freight sector. With 97% of global containerized goods transported by sea, any disruptions in the container shipping industry can create opportunities in air freight. While ocean reliability is improving, unforeseen events like a drought in the Panama Canal or geopolitical conflicts can swiftly impact the air freight landscape.
Air freight market around the world
Dynamic Growth in Middle East and Africa Fueled by Oil, Mining, and Construction Sectors
In the Middle East and Africa, the air freight market is witnessing significant support from the rising demand for oil and mining equipment. Concurrently, the construction sector is experiencing an upswing, contributing to the overall market growth in the region. Notably, Africa is registering a robust and positive growth rate in the demand for air freights.
North America’s Air Freight Market Driven by Hi-Tech Appliances and Enhanced Capex
The North American air freight market is on an upward trajectory, driven by the surging demand for hi-tech appliances. Furthermore, increased capital expenditure (Capex) is propelling the freight market forward. The anticipated addition of another terminal at the Mexico airport is poised to further boost the demand for air freight in the region, indicating a promising outlook for the industry.
Surging Demand in Pharmaceuticals and Medical Equipment to boosts European Air Freight Market
The air freight market in Europe is experiencing substantial growth, fueled by an escalating demand for pharmaceuticals and medical equipment. Additionally, the region’s thriving automobile industry is acting as a catalyst, as air freight proves indispensable for the efficient transportation of these products both domestically and internationally.
Major Global Players Shaping the Landscape of the Air Freight Market
In-depth insights into the global air freight market are provided in the report, highlighting key players and their pivotal roles. The analysis encompasses a detailed overview of their competitive landscape, capacity, and recent activities such as mergers, acquisitions, investments, capacity expansions, and plant turnarounds. The major players shaping the dynamics of the market include:
- Deutsche Post AG
- DSV A/S
- Expeditors International of Washington, Inc. (NASDAQ: EXPD)
- Kintetsu World Express (I) Pvt. Ltd.
- CEVA Logistics
- DB Schenker
Wrapping up
As 2024 approaches, the air freight industry stands at a crossroads. While signs of stability are emerging, the potential for unexpected twists and turns remains. As Van de Wouw aptly puts it, “If we do get a black swan event in 2024, then strap yourselves in for another ride on the rollercoaster.” The future of air freight, much like a rollercoaster, is poised for an uncertain yet promising journey.