Expert Column Will the Global Air Cargo Market Continue to Grow?

1. Global Air Cargo Demand (Transportation) Has Grown by Double Digits for Nine Consecutive Months Compared to the Previous Year. The global air cargo market maintains its gradual growth despite concerns over continuous international conflicts and an outbreak of another pandemic, in particular, Mpox in Africa, which can impact the global cargo logistics chain.

According to the report from IATA (International Air Transport Association), the global air cargo market has recorded double-digit growth for nine consecutive months since 2023, driven by an 11.4% YoY increase in air cargo demand (CTKs, Cargo Tonne Kilometres) as of August 2024.

The global air cargo transport capacity (supply) (ACTKs, Available Cargo Tonnes Kilometres) also saw a 6.2% YoY increase.

This is due to an increase of e-commerce cargo across the world and challenges of ocean transportation (diversion to safe and long-distance routes to protect cargo from attacks on ships in the Red Sea), which led to a gradual increase in air cargo, contributing to the growth of the air cargo market.

For reference, the unit of the amount of air cargo demand (transportation) is CTKs, Cargo Tonne Kilometres, which refers to a carriage of revenue load over one ton for one kilometer.

The unit of available cargo transport capacity (supply) is ACTKs, Available Cargo Tonne Kilometres, which is calculated by multiplying the available tonnage by distance.

The CLF, Cargo Load Factor, is a percentage indicating how much revenue load is loaded in the available cargo capacity, and a valuable index that impacts air carriers’ operational efficiency and revenue. Also, it shows the status of the balance between the cargo supply and demand. 2. Cargo Transportation Performance of International Cargo Routes by Regions (YoY) The rise of CTKs in international routes is observed in all major routes across the globe, but the scope of expansion varies. In the case of a seasonal cargo demand transition period, the belly cargo capacity goes up along with the full recovery of passenger demand.

As stated in the report of the IATA, the international cargo routes — which account for 86.6% of the entire global air cargo — saw a 12.4% growth YoY in air cargo demand (CTKs) and an 8.2% increase YoY in available capacity (supply) for air cargo (ACTKs) as of August 2024, showcasing that the international cargo transportation has grown from 7% to 14.8% YoY in August in every region.

By regions, the annual growth of airlines in Asia-Pacific was the highest at 14.6% YoY (International lines 14.8%), followed by airlines in both Europe and the Middle East, each hitting the second highest growth of 13.5% YoY (international lines 13.6%).

The air carriers in South America witnessed a 14.2% YoY growth (international line 12.5%).

On the other hand, air carriers in Africa and North America recorded 7.5% YoY (international line 7.5%) and 4.8% YoY (international line 7.1%) growth, respectively. It is analyzed that airlines in Africa, in particular, had little impact on the total air cargo amount (CTKs) even though WHO declared Mpox to be a Public Health Emergency of International Concern (PHEIC). Performance in North America has declined after the peak season as it is going through a seasonal transition period with a decrease in air cargo demand.

3. Air Cargo Market Trend by International Routes The Middle East-Europe routes saw a whopping 28.9% growth as international air transport volume (CTKs) has been restored since September 2023. They have played the role of a global logistics hub of airports in the Middle East, connecting and transporting various products.

Especially, airlines are ordering additional cargo aircraft to improve the capacity of cargo supply (ACTKs), including cold-chain facilities for perishable items, and converting existing passenger aircraft into cargo aircraft. Among representative air carriers in this region, Emirate SkyCargo signed a deal to purchase five B777 cargo aircraft and recently contracted to buy five more B777 cargo airplanes. These planes will be delivered by 2025 and 2026 to Emirate SkyCargo. Also, the airline announced that it will turn the existing B777-300ERs (passenger airplanes) into cargo airplanes. Following that, air cargo volume (CTKs) in Africa-Asia and Europe-Asia routes surged by 21.1% and 18.4%, respectively. Particularly, air cargo volume (CTKs) of Africa-Asia rose by 5.3% in August, compared to July, presenting a noticeable result in major international routes.

Also air cargo volumes of Within Asia, Within Europe, and Middle East-Asia have gone up by double digits of 16.1%, 15.0%, 13.5%, respectively.

However, the performance in August within Asia dropped by 5% compared to July due to the international logistics stoppage caused by an uprising in Bangladesh and airport closure and plane cancellations because of typhoon Shanshan in Japan, partly impacting the decrease in air cargo transport volume (CTKs) in August. Meanwhile, the air cargo performance of Asia-North America routes was improved by 9.3% and North America-Europe by 6.1% (Table 2). The air cargo demand has risen mainly due to an exponential increase in e-commerce (online shopping).

The demand for air cargo is expected to go up consistently as long as e-commerce keeps booming and consumer demand for rapid, accurate delivery continues. However, due to the characteristics of the industry by nature, which is easily affected by unpredictable factors like geopolitical conflicts and global economic downturns, it would be difficult to prejudge it only from an optimistic point of view. But if the current trends continue as now, the market could have a gradual and constant growth. 4. Freighter, Preighter and Belly cargo The available capacity for transporting cargo of global airlines in August went up by 6.2% YoY, offering more than 50 million tons of global available cargo transporting capacity (ACTKs) for four months in a row, and recording the highest in air cargo history. (Table 3).

Available air cargo transportation capacity (ACTKs) for international flights rose by 8.2% YoY due to an increased supply of belly cargo (transportation of cargo in the lower deck of passenger aircraft) as passenger demand increased during the summer season. (Table 4)

Prior to the pandemic, volume of belly freight using passenger aircraft had contributed substantially to the total air cargo transportation volume (CTKs). However, since the pandemic outbreak, cargo transportation via passenger aircraft mostly halted globally and passenger seats were converted into cargo deck, so-called cargo-carrying ‘Preighters’ (Passenger+Freighter). (Table 4)

Since the pandemic, most air cargo has been transported via freighter and belly cargo of passenger flights. Available global air cargo transportation capacity (ACTKs) plummeted and showed a recovery trend since the pandemic outbreak. (refer to Table 3) When we take a look at the seasonality-adjusted line in the graph, growth (%) of ACTKs slowed down as the year 2024 approached. Total cargo transportation capacity (ACTKs) has already surpassed the level of pre-pandemic but the slowdown might be stabilized at the maximum level of pre-pandemic.

However, as shown in Table 4, the growth of passenger aircraft belly cargo (ACTKs) is noticeable compared to that of freighter’s available transportation volume (ACTKs). This is the reflection of a soaring demand for international transportation via passenger flights. However, international passenger flight transportation has not recovered to the pre-pandemic level yet. Belly cargo supply capacity (ACTKs) is expected to escalate after the passenger flight operation normalizes completely with a recovery.

In the first half of 2024, air cargo transportation performance shows that transportation of cutting-edge technology products and automotive-related cargo reduced YoY. In contrast, clothing and accessories rose by approximately 21%, fresh foods by 5%, and computers and household consumer goods by 9% and 12% respectively. ^[2]

5. Air Cargo Rates Remains on a Stable Rise Events like airport shutdown and flight cancelation caused by international logistics disruption and Japanese typhoon damages following Bangladesh’s political turmoil not only had an impact on air cargo transportation volume (CTKs) simply but also resulted in a sharp rise in cargo rates. According to WorldACD’s data, as of mid-September now, overall cargo rates increased by 14% and the cause for the increase is a direct impact of a 24% rise in the Asia-Pacific region and a 56% rise in the Middle East-South Asia. ^[5]

In particular, air cargo rates rise in the Middle East-South Asia mainly came from Bangladesh, India and Dubai, and the rise was caused by the increasing demand for air cargo due to Red Sea attacks on maritime transportation. ^[3]

According to WorldACD’s report, global air cargo spot rates at the beginning of October reached $2.84 per kg, up by 1% compared with the previous week. Global air cargo contract rates, as of October 6, stood at $2.65 per kg on average, up by 2% compared with the previous week.

6. Need for monitoring of changes in air cargo transportation capacity (ACTKs) following flight cuts in Europe-China route European airlines announced they will end passenger flight operation services to China shortly. [4] Due to the Ukraine-Russia conflict, European airlines have not been allowed to enter Russian airspace and instead take detours for longer routes. Thus, Europe-China route flights took more than an hour additionally to operate and China-Europe route flights took more than two hours longer due to westerlies. On the other hand, Chinese airlines have relatively enjoyed the advantages of cost and operation time by flying over Russian airspace through direct routes.

European airlines notified of ceasing operation or cutting flights for Europe-China routes passenger flights. This situation will likely result in belly cargo supply capacity (ACTKs) reduction, cargo transportation rate increase, etc.

* Notice about European passenger aircraft on Chinese route*
- Scandinavian Airlines (SAS): SAS will cease its service departing from Copenhagen to Shanghai with A350-900 on November 7.
- LOT Airlines: October 24 will mark LOT’s last flight of B787-8 on the Warshaw-Beijing route.
- Finnair: Seats of passenger flight A350-900 to China will be cut by 90% compared to 2019 and will drop its service to other cities in China. Only Shanghai route will be served.
- Virgin Atlantic Airlines: Virgin Atlantic Airlines is discontinuing its London to Shanghai service, with the flight on this route scheduled for October 25.
- British Airways will put its London-Beijing route on hold as of October 26 and suspend flights until at least November 2025.

The global air cargo market is impacted by various internal and external factors. It plays a vital role in global logistics chain, and has its own unique characteristics of air cargo transportation at the same time. It values agility and safety and the growth of the e-commerce sector with various item sales contributes to a bright future for the air cargo market. In particular, the rising demand for flowers and fresh goods, the need for cold-chain, is already driving the expansion of the Middle East and European air cargo markets. Establishing new warehouses for fresh goods storage (perishable cargo) at London Heathrow Airport (LHR) is in progress.

From our perspective, the rising demand for air transportation with safety guaranteed from vessel attacks is a positive signal. Moreover, due to the US sanctions against China, cargo departing from China to the US has to transit through Korea so, from Korea’s perspective, its airport has the advantage of serving as Northeast Asia’s logistics hub.

However, concerns over shrinking available ocean cargo transportation capacity (ACTKs) due to flight cuts and cessation of service caused by international conflicts will negatively impact the global logistics chain beyond the air cargo market. As part of the ongoing project of merging Korean Air and Asiana Airlines in Korea, which are full-service carriers (FSC), selling the existing Asiana Airlines cargo division to another airline is in progress, apparently. I hope that the progress continues in the direction of enhancing available cargo transportation capacity (ACTKs) rather than deteriorating it. # Reference [1] International Air Transport Association (Air Cargo Market Analysis, August 2024, IATA)
[2] Accenture Research Report (27 Sep. 2024) Current State of Global Air Cargo Industry Capacity | Accenture
[3] Air Cargo News (20 Sep. 2024) Surging air cargo rates out of Japan and Bangladesh boost buoyant market. aircargonews.net/data/surging-air-cargo-rates-out-of-japan-and-bangladesh-boost-buoyant-market/
[4] The STAT TRADE TIMES (19 OCT 2024) European Airlines depart China. European airlines depart China: What does it mean for air cargo?
[5] WORLDACD (11 Oct 2024) WorldACD Weekly Air Cargo Trends 2024 - week 40 - WorldACD

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