The air freight industry is in the middle of challenging times. What’s the root of these difficulties? Is it an air freight capacity drop, or are other factors causing people to choose methods besides shipping by air? Here’s a closer look at the situation.
Recent Statistics Don’t Show a Major Air Freight Capacity Drop
If the industry had a genuine, sustained air freight capacity drop, that would explain the decline in activity throughout this sector. However, recent data paints a different picture. June 30, 2023, statistics revealed a 2% week-on-week drop in tonnage.
However, the same source examined year-on-year capacity, finding an 11% increase overall since this time in 2022. There was also notable regional growth over the period, including a 32% rise in the Asia-Pacific region and a 16% rise in the Middle East and South Asia.
Elsewhere, an Accenture study looked at a longer span, taking data from May 15-28, 2023, and seeing how the capacity compared to the same time in 2019. The results indicated 2% more in 2023 than in the earlier year. Moreover, it grew as much as 21% in some regions. That said, some areas did experience an air freight capacity drop, but it was not a widespread slump that would explain the industry’s current struggles.
Route Planning Is a Tricky Business
Challenges associated with planning cargo routes could partially explain the air freight industry’s ongoing challenges. Representatives from Fluent Cargo collected data in April 2023 for a global survey that shed light on some of the associated difficulties.
One part of the study asked respondents which information sources they relied on regularly. The findings indicated 53% used ocean freight carrier websites. However, only 25% used air cargo and carrier sites. Additionally, 23% mentioned asking colleagues for advice when planning their routes.
Another finding was that 19% said arranging air or sea charters was the most time-consuming part of their jobs. About 65% said organizing the shipments of goods to unfamiliar destinations took the most time. Generally, respondents reported spending 15 minutes on internet research regarding standard shipments and routes. However, the time frame was two to three times longer for those handling loads characterized by complicating factors, such as hazardous goods.
These collective challenges could discourage route planners from pursuing new relationships with air cargo carriers. Relatedly, people looking at their route options on ocean freight websites may mean shipping things by air is less familiar and not an option they choose as frequently.
Some Air Freight Operators Are Scaling Down
Recent news in the air cargo industry suggests some operators believe the current downturn will be a long-term problem. For example, Florida-headquartered Amerijet recently laid off more than a dozen workers, with executives citing the prolonged industry slump as a factor. This decision is the latest move to protect the bottom line at the company. Earlier this year, Amerijet stopped operating its freight-forwarding division and outsourced its accounting needs to Trinidad & Tobago.
International Air Transport Association’s May 2023 data showed a 5.2% drop in global demand compared to May 2022. Even so, there was a 14.5% rise in capacity. The research attributed it to the additional room in passenger planes’ bellies, helped by more people traveling after the COVID-19 pandemic.
Moreover, the report highlighted a manufacturing industry decline, examining the Purchasing Managers Index (PMI). It indicated a 5.2% year-on-year production decrease. There was also a 0.8% dip in the global goods trade during April 2023. These factors may encourage air cargo operators to minimize operating costs where possible.
Profitability Is Not Guaranteed
Marketplace conditions may discourage new carriers from entering it or increasing their reach. That’s especially true due to what entities must do to operate lawfully.
The United States has stringent requirements for companies operating as air carriers. For example, all businesses must get two certificates from the U.S. Department of Transportation. The first permits working as an air carrier. The second is more specific and mandates how the company must conduct operations. This certificate details requirements related to airplane maintenance, crew members, and the handling or carrying of dangerous goods.
Some business leaders may balk at getting those certifications and meeting other requirements unless they feel their efforts will result in near-guaranteed profitability. Unfortunately, the market’s general downturn means they’re probably hoping for too much.
Cargo Conversions Are Extensive and Expensive
Leaders worried about a future air freight capacity drop may investigate their options for converting passenger planes into air freighters. A January 2023 forecast from Cirium Aviation Analytics predicts an annual 3% rise in capacity, coupled with a 3.7% increase in traffic volume compared to 2019’s numbers.
Cirium’s data predicts a freighter aircraft boom of 3,560 planes over the next two decades. About 70% of the total will come from converting former passenger planes. New builds comprise the remaining 30%.
These predictions suggest the current fall in air cargo activity could be relatively short-lived and due to start an upswing soon. That said, the research’s publishers admit the rise in conversion activity may not signal a prolonged change. They noted that one upside is that the conversions allow carriers to use more eco-friendly planes.
Repurposing a plane so it can carry cargo is not a quick change. Those responsible for the transition must remove many elements that made an aircraft suitable for passengers, including lavatories, seats and galleys. The necessary work can cost more than $30 million per plane. Despite the massive costs, people working at companies specializing in these transitions say orders keep coming.
No Single Factor to Blame
This overview shows why people must not be too quick to pin the recent decrease in air cargo activity on one event or reason. They can’t assume there’s an air freight capacity drop because statistics show otherwise. Instead, the problem closely aligns with decreased demand, making running a business in this space more challenging.
Although it’s too soon to say how long these conditions will persist, the evidence indicates there’s no end in sight. That reality requires decision-makers to remain creative, open-minded and willing to adapt as situations dictate. Additionally, because the overall industry outlook remains uncertain, people must realize that developments may change or cancel some of their mid- to long-term plans.
Emily Newton is the Editor-in-Chief of Revolutionized Magazine, an online publication that explores innovations in science and technology.