Global Market Outlook on Global Air Freight

  • In Q1 2018, average global air freight prices have been increased by 5.44 percent compared to the same period last year. Freight rates have steadied from Q2 2018, the same trend is expected to continue 
  • Strong demand in the air freight market is having a strong impact on air freight rates in H2 2018 and considering tight capacity, the impact is 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, difference between demand and supply index would be starting to reduce with shipments volume growth starting to range between 3-4 percent annually while capacity available in the market would gradually increase, however starting mid of 2018, market demand is estimated to have growth of more than 6 percent compared to 2017

Supply Analysis

  • Growth of capacity index has been gradually increasing since January 2018, available capacity in air freight market grew by 6.2 percentage in May compared to the same period previous year
  • Sanctions and trade disputes between US and China had minimum impact on capacity as AFTK has been consistently growing by 1-3 percentage on a monthly basis leading up to the peak season
  • However, during second half of the year, the shortage of available space in market and demand growth outpacing the capacity growth is expected to increase through to end of 2018 owing to the seasonal demand
  • Challenge of capacity constraints are expected to continue in 2018 due to weak order book as well climatic disruptions in 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 have been steadily increasing majorly due to transpacific east bound volume to the destination in North America
  • FTKs have increased to 4.2 percent in May, demand growth has been at a slow pace majorly due to factors such as lower purchasingmanager’s index and global trade scenario. A modest FTK growth is expected through 2018, growth in the region of 2-4 percent over all
  • In H1-2018, demand in air freight is driven by US –China trade volume ahead of trade sanctions and China –Europe trade which surged as shippers in China have 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 a 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 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 EU recorded a growth of 3.3 percent
  • African carriers saw a decrease in freight volumes by 8.5 percent in June comparing to the same period last year
  • Major volume of transpacific and Asia-EU shipments share has been driven by carriers of APAC, MEA,EU and followed by North America which will 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 a slow market growth. Freight rates from Hong Kong to Europe trade have increased by 23.2 percent Y-o-Y. Frankfurt to North America lane also saw an increase by 24 percent Y-o-Y
  • Freight rates have continued to grow at a steady phase for the past three months, and outlook for the rest of 2018 looks bright,however, individual carrier’s decision to deploy excess capacities to high demand lanes may look effective to control increasing freight rates