Geneva - The International Air Transport Association (IATA) released data for July 2023 global air cargo markets, showing a continuing trend of recovering growth rates since February. July air cargo demand was tracking just 0.8% below the previous year’s levels. Although demand is now basically flat compared to 2022, this is an improvement on recent months’ performance that is particularly significant given declines in global trade volumes and rising concerns over China’s economy.

Global demand, measured in cargo tonne-kilometers (CTKs*), tracked at 0.8% below July 2022 levels (-0.4% for international operations). This was a significant improvement over the previous month’s performance (-3.4%).

Capacity, measured in available cargo tonne-kilometers (ACTKs), was up 11.2% compared to July 2022 (8% for international operations). The strong uptick in ACTKs reflects the growth in belly capacity (29.3% year-on-year) due to the summer season.

Several factors in the operating environment should be noted:

· In July, both the manufacturing output Purchasing Managers Index or PMI (49.0) and new export orders PMI (46.4) were below the critical threshold represented by the 50 mark, indicating a decline in global manufacturing production and exports.

· Global cross-border trade contracted for the third month in a row in June, decreasing 2.5% year-over-year, reflecting the cooling demand environment and challenging macroeconomic conditions. The difference between the annual growth rates of air cargo and the global goods trade narrowed to -0.8 percentage points in June. While air cargo growth is still lagging world trade, the gap is the narrowest since January 2022.

· In July, the global supplier delivery time PMI was 51.9, signaling fewer supply chain delays. All major economies, except China, had PMIs above 50. The U.S., Europe, and Japan recorded PMIs of 54.2, 57.7, and 50.4, respectively.

· Inflation saw a mixed picture in July, with the increase in US consumer prices picking up pace for the first time in 13 months. Meanwhile, in China, both consumer and producer prices fell, pointing to a possible deflationary economy.

"Compared to July 2022, demand for air cargo was basically flat. Considering we were 3.4% below 2022 levels in June, that’s a significant improvement. And it continues a trend of strengthening demand that began in February. How this trend will evolve in the coming months will be something to watch carefully.  Many fundamental drivers of air cargo demand, such as trade volumes and export orders, remain weak or are deteriorating. And there are growing concerns over how China’s economy is developing. At the same time, we are seeing shorter delivery times, which is normally a sign of increasing economic activity. Amid these mixed signals, strengthening demand gives us good reason to be cautiously optimistic," said Willie Walsh, IATA’s Director General.

Air cargo market in detail

July Regional Performance (*1) % of industry CTKs in 2022    (*2) Year-on-year change in load factor     (*3) Load factor level

Asia-Pacific airlines saw their air cargo volumes increase by 2.7% in July 2023 compared to the same month in 2022. This was a significant improvement in performance compared to June (-3.3%). 

 Carriers in the region benefited from growth on three major trade lanes: Europe-Asia (3.2% year-on-year growth), Middle East-Asia (up from 1.8% in June to 6.6% in July), and Africa-Asia (returning to double-digit growth of 10.3% year-on-year from -4.8% in June). Additionally, the within-Asia trade lane also performed considerably better in July, with an annual decline of international CTKs at 7.5% compared with the double-digit decreases observed since September 2022. Available capacity in the region increased by 26.0% compared to July 2022 as more belly capacity came online from the passenger side of the business.

North American carriers posted the weakest performance of all regions, with a 5.2% decrease in cargo volumes in July 2023 compared to the same month in 2022, marking the fifth consecutive month in which the region had the weakest performance. It was, however, a slight improvement compared to June (-5.9%).  The transatlantic route between North America and Europe saw traffic declining by 4.3% in July, 1.2 percentage points worse than the previous month. Capacity increased 0.5% compared to July 2022.

European carriers saw their air cargo volumes decline by 1.5% in July compared to the same month in 2022.  This was, however, an improvement in performance versus June (-3.2%). Volumes were affected due to the aforementioned Europe–North America performance and contractions in the Middle East-Europe (-1.2%) and the within-Europe (-5.1%) markets. Capacity increased 5.3% in July 2023 compared to July 2022.

Middle Eastern carriers experienced a 1.5% year-on-year increase in cargo volumes in July 2023. This was also an improvement to the previous month’s performance (0.6%). The demand on Middle East–Asia routes has been trending upward in the past two months. Capacity increased 17.1% compared to July 2022.

Latin American carriers posted a 0.4% increase in cargo volumes compared to July 2022. This was a drop in performance compared to the previous month (2.2%). Capacity in July was up 10.0% compared to the same month in 2022. 

African airlines had the strongest performance in July 2023, with a 2.9% increase in cargo volumes compared to July 2022. Notably, Africa–Asia routes experienced significant cargo demand growth (10.3%). Capacity was 11.0% above July 2022 levels.

The Global Air Freight and Logistics Market is segmented by service (Forwarding, Airlines, Mail, and Other Services), destination (Domestic and International), carrier type (Belly Cargo and Freighter), and geography (Asia-Pacific, North America, Europe, Middle East & Africa, and Latin America). The report offers market size and forecasts for the global air freight market in value (USD Billion) for all the above segments.

Air Freight Market Size

Air Freight Market Analysis

The Global Air Freight Market size is estimated at USD 142.77 billion in 2023, and is expected to reach USD 190.30 billion by 2028, growing at a CAGR of 5.92% during the forecast period (2023-2028).

· Although land and ship cargo transportation remains favorable options, goods transport by air is considered the quickest and the unhindered mode of transportation. With the COVID-19 pandemic, air cargo faced significant challenges in 2020, such as fallen global trade volumes, global economic activity, and weakening consumer confidence.

· However, as per the data released by the International Air Transport Association (IATA) in January 2021, the air cargo demand returned to pre-COVID levels (January 2019) for the first time since the onset of the crisis.

· The air freight market gained growth in pre-crisis volumes through the transportation of lifesaving medical equipment, vaccines, and PPE. Also, delivery of e-commerce during the lockdown periods.

· IATA's Cargo Account Settlement System (CASS) simplified the billing and account settlement between airlines and freight forwarders. It is done through the CASS link, an advanced web-enabled e-billing solution, which generated more than USD 40 billion with on-time settlement.

Air Freight Market Trends

This section covers the major market trends shaping the Air Freight Market according to our research experts:

Growing Demand for the Air Freight Market

· A notable improvement in air freight services was experienced after the pandemic in the second half of 2020, which continued into 2021. Cargo tonne kilometers (CTKs) from January 2021 to July 2021 held more than a 7% share above the same period in 2019.

· Air cargo also performed global goods trade to meet the increasing demand from different supply chain dynamics like exceptionally long supply delivery times and other transport modes, which cost high fares.

· Improved air cargo routes in different countries at different paces helped in the growth of the air freight market.

· From January 2021 to July 2021, the size of the global air freighter fleet increased by around 12% to meet the increasing demand.

E-commerce Growth Creating Great Opportunities for the Air Freight Industry

· E-commerce is accelerating the growth rate in the global air freight market, as the growth rate for 2020 was almost 20%.

· The average transaction volume using e-commerce increased by almost 70% in 2020 compared to 2019.

· According to Adobe's 2021 Digital Economy Index, global e-commerce hit USD 876 billion in the first quarter of 2021, almost 30% more than the previous year.

· Owing to the opportunities in the air freight market due to e-commerce and digitalization, many retailers digitalized their business activities by 20% to sustain the market competition.

Air Freight Industry Overview

The air freight industry is moderately fragmented in nature. The industry is dominated by some of the major players operating in multiple regions across the world. The growing demand for air freight transportation services has posed new challenges to the air cargo service providers. Airlines need to focus on implementing fuel-efficient solutions and accommodate innovative technologies to provide cost-effective services.

Companies like Lufthansa Cargo have invested in digital capabilities with their own e-booking and also want to make their bookings available to others so that the Application Programming Interface can offer the accessibility of the inventory in the systems.

The air freight industry has been recently immense disturbed by the recent regulatory disputes (US-China trade war), anti-national activities, and the COVID-19 pandemic leading to the cancelation of a huge number of flights due to safety concerns and a fall in the number of passengers. Special economic zones (SEZ), free trade zones (FTZ), and bonded warehouses are projected to cater to significant warehousing needs for the freight moving in and out of the airport shortly.