Air Freight Services
Market, Supplier, Risk and
Competitive Intelligence

Industry Outlook & Drivers

Global Market Outlook on Air Freight Services

The logistics and transportation sector is fast-growing with overseas transportation services being in high demand. Air freight is used to send goods to other countries quickly and conveniently. 3PL companies are growing fast and for international transportation; they offer air cargo, belly cargo, and freighter cargo services. Apart from shipping regular goods, they also ship special goods that require temperature-controlled environments. The popularity of freight forwarding services has helped boost air freight services. Carrier airlines operate cargo flights through air freight trade lanes from one airport to another. 

The air freight market was estimated to be worth $99.78 billion in 2020. The air freight market size is expected to increase to $175.16 billion by 2025. The trends show that the market is expected to grow at a CAGR of 9.83%. 

The air freight market demand is being driven by the North American market with the US being the main contributor. The air freight market forecast underlines that the e-commerce sector would help improve the performance of the air freight market. With e-commerce fulfilling orders worldwide, products are moving across the globe through air services.

The air freight services industry is segmented as follows:

• In terms of service, it is segmented as express service and regular cargo service. Express services are growing fast with more and more customers using e-commerce, preferring quick delivery of products and willing to even pay a premium for it.
• In terms of region, the market is segmented into North America, South America, Europe, Asia-Pacific, Middle-East, and Africa.
• In terms of the end-user for the market, it is segmented into consumer electronics, retail, food and beverages, pharmaceuticals, healthcare, chemicals, third party logistics, and manufacturing.

The COVID-19 pandemic has affected this sector. Lockdowns and flight restrictions brought down the market in 2020. The commencement of vaccination drives is expected to help improve things in 2021. The top players in the air freight market are Cathay Pacific, Bollore Logistics, UPS Airlines, China Airlines Cargo, Able Aerospace, DHL Aviation, Emirates SkyCargo, Korean Air Co, DB Schenker, Singapore Airlines Cargo, FedEx Corporation, etc.    

In Q1 2018, average global air freight prices increased by 5.44 percent compared to the same period last year. Freight rates steadied from Q2 2018, the same trend was expected to continue.

Strong demand in the air freight market had a strong impact on air freight rates in H2 2018 and considering tight capacity, the impact was expected to extend in Q3 and Q4 2018.

While specific lanes could witness double-digit growth in air freight rates moving into the peak season, trans-pacific eastbound and westbound routes, which have a volatile nature, are expected to face an increase of around 5 percent.

Carriers and freight forwarders are willing to negotiate on established lanes of US–EU since the market fluctuation is minimal and the volumes are high. However, on lanes connecting to Asia, negotiation is challenging since the market is highly unpredictable and risky.

Air Freight Market Analysis

• In 2018, the difference between demand and supply index started to reduce with the annual growth of 3-4 percent in shipments volume. The capacity available in the market gradually increased, however starting mid of 2018, market demand was estimated to have a growth of more than 6 percent compared to the previous year.

Supply Analysis

• The growth of capacity index started increasing since January 2018; available capacity in the air freight market grew by 6.2 percent in May compared to the same period the previous year.
• Sanctions and trade disputes between the US and China had minimal impact on capacity as AFTK has been consistently growing by 1-3 percent on a monthly basis leading up to the peak season.
• However, during the second half of the year, the shortage of available space in the market and demand growth outpacing the capacity growth was expected to increase through to the end of 2018 owing to the seasonal demand.
• Challenges of capacity constraints were expected to continue due to weak order book as well as climatic disruptions in the EU and North America.

Demand Analysis

• There was a dip in the air freight demand in the first quarter of 2018 which soon recovered into Q2 2018; volumes steadily increased majorly due to transpacific east-bound volume to the destination in North America.
• FTKs increased to 4.2 percent in May, demand growth was on a slow pace majorly due to factors such as lower purchasing manager's index and global trade scenario. A modest FTK growth was expected through 2018, along with growth in the region of 2-4 percent overall.
• In H1-2018, demand in air freight was driven by US-China trade volume ahead of trade sanctions, as well as China-Europe trade which surged as shippers in China rushed to deliver shipments to Europe to fulfill their volume commitment before European companies close for summer break.

Regional Market Analysis

• All regions except for Africa have reported steady growth in terms of freight volumes, North America, LATAM carriers, and APAC carriers experienced growth in volume by more than 5 percent annually.
• More than 5 percent of growth for North American and APAC carriers for the next half of the year would have a strong impact on freight in the peak season of the year.

Regional Demand Trend for Air Freight

• Carriers of EMEA and North America reported stronger growth in freight volumes, which is at the rate of 3.8 percent while the EU recorded a growth of 3.3 percent.
• African carriers saw a decrease in freight volumes by 8.5 percent in June compared to the same period last year.
• The major volume of transpacific and Asia-EU shipments share has been driven by carriers of APAC, MEA, EU and followed by North America, which expects to set the tone for the upcoming peak season.

Global Air Freight Rates

• Freight rates on major trade lanes reached their highest in July 2018, in spite of slow market growth. Freight rates from Hong Kong to Europe trade increased by 23.2 percent YoY. Frankfurt to North America lane also recorded an increase by 24 percent YoY.
• Freight rates continued to grow at a steady phase. However, individual carrier's decision to deploy excess capacities to high demand lanes look effective to control increasing freight rates.