Air cargo demand continues to grow but peak surge looking unlikely

Air cargo demand growth remained strong, but the chance of there being a further end-of-year surge seems to be fading, according to data provider Xeneta.

The data firm’s latest figures show that in October air cargo demand increased by 6% year on year while capacity was flat. As a result of demand growing faster than supply, the cargo load factor increased by two percentage points to 63%.

Meanwhile, average spot rates were up 29% compared with last year at $3.11 per kg as carriers failed to add capacity to the growing market and fuel prices drove up the cost of air cargo operations.

While demand is on a run of seven months of consecutive growth, Xeneta says it doesn’t seem like there will be a further surge in volumes during the air cargo Christmas peak season.

“Market conditions showed few signs of a sudden increase in capacity pressure, a surge in rates above the levels already seen across the year, or freight charter prices ‘hitting the roof’ that would signal a late peak in volumes,” said Xeneta’s chief airfreight officer, Niall van de Wouw.

The transpacific has been this year’s growth leader as AI-related shipments continue to fill aircraft. Xeneta figures show that Asia Pacific to North America volumes were up 15% in October.

The demand growth fed through to freight rate increases. Southeast Asia to North America spot rates rose 3% month on month to $6.34 per kg, while Northeast Asia to North America prices were up 4% to $6.21 per kg.

However, Xeneta said that the largest rate increase was on the transatlantic westbound corridor, where Europe to North America spot rates rose 10% to $2.31 per kg as airlines “shifted to their winter schedules”.

“Tighter capacity on this corridor is consequently pushing up airline rates being quoted to forwarders in recent tenders,” Xeneta said.

Rates from Northeast Asia to Europe increased 4% month on month in October to $4.97 per kg and Southeast Asia to Europe was up 3% to $4.35 per kg.

However, Xeneta warned that Asia to Europe e-commerce volumes were 61% down year on year in the third quarter as a result of the European Union’s €3 charge for packages that was added on 1 July.

Meanwhile, exports from China to Europe fell by 29%, which was in part down to a tripling of exports to Russia, Xeneta said.

“Freighter capacity has also moved,” the data provider explained. “Direct freighter capacity between Asia and Europe fell again in October, on top of the capacity lost on routings via the Middle East.”

Outlook

Looking ahead, Xeneta warned that some Asia-Europe air cargo volumes would shift back to ocean as shipping line transits through the Suez Canal continue to recover.

“Scheduled container shipping capacity crossing the Red Sea reached around half of its pre-crisis level in October, according to Xeneta ocean data,” Xeneta said.

“Just over half of Asia–Europe capacity is now routed via the Suez Canal in at least one direction, with around a third sailing through both ways.

“Air’s share of European Import (EU) import tonnage from Asia rose from 1.1% in 2023 to 1.7% in 2024, at the height of the Red Sea crisis, as ocean freight schedule reliability from the Far East to North Europe fell from 28% to 9.3%.

“When reliability recovered to 20% in 2025, air’s share fell back to 1.2%. In the first eight months of 2026, it edged up to 1.3%, after the closure of the Strait of Hormuz in February led carriers to shelve their planned return to the Suez Canal.”

Xeneta expects cargo that moved to air for reliability rather than speed to start returning to ocean once schedule reliability shows a sustained recovery, most likely from the second quarter of 2027.

“Until then, air will likely keep the cargo it has,” it added.

Next year, Xeneta’s baseline is for airfreight rates to decline overall.

“In the past couple of years, it has not been the level of demand that caused the uptick in rates; it has been the availability of capacity, says van de Wouw.

“If the Middle East situation recovers, there will be a rebalancing of demand and supply, and rates will then become lower. But things will happen. We don’t know what or where, but this is the lesson the market has learned.

“We can’t call these ‘Black Swan’ events anymore because they are too frequent. This makes contract negotiations challenging for everyone.”