The quicker than expected recovery to July’s global IT outage meant that there was no significant ongoing disruption to rates amidst ongoing strong demand for air cargo, according to the latest market analysis from Xeneta.
Airfreight rates rose for a sixth consecutive month, with global average air cargo spot rates reaching $2.66 per kg in July, up 20% on the same month of 2023.
Rates rose off the back of the ongoing growth in cargo demand. July’s volumes were up 13% year on year, due in large part to buoyant e-commerce demand from Asia as well as to the comparatively low demand base for the corresponding month of 2023.
The slower growth in global air cargo capacity of just 2% year on year – stimulated the rise in rates and in what Xeneta calls the dynamic load factor – its measurement of capacity utilisation based on volume and weight of cargo flown alongside available capacity.
The dynamic load factor was up on last year’s level by five percentage points, reaching 59% in July.
In a month on month comparison, the picture was less different, however. Global air cargo demand slowed month on month in July, with the peak summer holiday season starting in the month.
Limited disruption
The global IT outage that impacted Microsoft systems less than two weeks ago brought widespread disruption, including flight delays and cancellations that lasted in some cases for more than a week.
The resulting backlogs saw cargo load factors on some affected airlines increase up to 4 percentage points compared to the previous week. But load factors had mostly recovered to pre-outage levels by July 28.
As is often the case, short-term panic among shippers and forwarders pushed up the price of capacity, which rose to its highest level of the year in the last week of July to a global average air cargo spot rate of $2.70 per kg.
According to Xeneta, strong year-on-year growth in air cargo demand is expected to extend through this month and into September, in part due to the low base set last year.
Furthermore, disruption in the Red Sea region is expected to continue to pose risks to supply chains due to container vessels’ longer sailing times and reduced schedule reliability.
Plus, potential sea port strikes in Hamburg and in facilities on the US East and Gulf Coasts could create further upward pressure on air cargo rates, Xeneta said.
Niall van de Wouw, chief airfreight officer at Xeneta, stated: “For the air cargo market, it’s now all eyes on late August for the first signs of a proper peak season, which would be the cherry on top of the cake for airlines after such unexpected volumes and demand growth in the first seven months of the year.
“In July, had the IT outage taken longer to fix, we might have seen a slightly different outcome.
“However, once again, air cargo showed resilience, after seeming to have dodged another major disruption.
“Going into the peak time of the year, airlines might just be starting to think their tailwinds will hold out.”
Regional variations
There were of course regional variations in cargo spot rate developments in July.
The Middle East and Central Asia to Europe lanes continued to lead year-on-year growth. Its July average spot rate surged 126% year on year to reach $3.16 per kg.
Outbound Southeast Asia to North America and Europe lanes took second and third places in terms of growth. Surging cargo demand more than doubled cargo spot rates from a year ago to $5.78 per kg and $3.85 per kg respectively on these lanes.
Outbound Northeast Asia markets, supported by strong e-commerce demand and general cargo volume recovery, also rose. Cargo spot rates to North America and Europe grew around 30% year-on-year to reach $4.39 per kg and $4.17 per kg.
Meanwhile, Xeneta noted that as expected backhaul trades on these lanes and transatlantic trades experienced year-on-year declines in cargo spot rates. This was due to adequate capacity on the return leg and increased belly capacity on passenger flights as more flights were introduced to meet summer holiday season passenger demand.
Statistical confirmation
Xeneta’s latest analysis supports the thinking of other agencies involved in the airfreight sector.
Thus, for example, the latest data from airfreight price reporting agency (PRA) TAC Index showed that global air cargo rates only edged up in the week ending July 29.
The overall Baltic Air Freight Index (BAI00) calculated by TAC in the week to 29 July was only 0.7% higher than the week previously (and 8% up over the same period 12 months ago). TAC acts as the Calculating Agent for the Baltic Exchange air cargo index.
The latest data from IATA, published at the end of July, showed that June’s figures have contributed to what the trade body has described as “an exceptional first half-year performance for air cargo”, with airfreight volumes exceeding those of last year, of 2022, and even of record-breaking 2021 levels.
Global demand, as measured in cargo tonne kilometres, rose year on year in June by 14.1%. June represented the seventh consecutive month of double-digit year-on-year growth in airfreight traffic.
June’s airfreight capacity figure, as measured in available cargo tonne kilometres, increased by 8.8% compared to the same month of 2023 and the cargo load factor improved by 2.1 percentage points to 45.8%.
Airfreight rates remain stable despite July global IT outage
IATA data highlights continued strong demand for air cargo
