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Air Freight: What’s The New Normal?

The air freight market is highly volatile and uncertain at present. While global air freight rates did fall over the month of January, the rates still remain well above the peaks we would expect to see. So, what is the new normal for air freight?

Cargo plane
Inflated air freight rates may become the new normal as the market changes

Bruce Chan, Vice President of Global Logistics, Stifel doesn’t expect the situation to resolve any time soon.

“The unfortunate news for end-purchasers of capacity is that we see availability remaining a constraint for some time,” he confirmed.

“Consensus is pointing toward a pickup in passenger flight traffic towards the back half of the year as vaccines are disseminated, but that is heavily weighted towards short-haul, domestic leisure lanes, in our view. Long-haul travel, which is a much bigger part of global air cargo capacity, should be slower to resume.”

“Our baseline assumption is that the market will not be back to normal until 2023.”

A Market Shift

Chan predicts that charter usage will become more mainstream as a large freight forwarders are planning for charter become a permanent part of their service offerings. As such, the market will shift in their favour. He sees a market favouring the larger players, with their increased purchasing power and scope.

“It may further separate the shipper ‘haves’ from the ‘have nots’,” says Chan. “It also means that total average airfreight rates are likely to stay higher for longer.”

What’s causing this market shift? It may not just be the pandemic disruption and post-covid restocking affecting capacity and pricing. E-commerce also has a part to play. The need for fast lead times and rapid replenishment means that all-cargo or charter flights have the advantage.

It seems that the air freight rates may stay high for longer than we expected. And, as we leave the pandemic behind, the resulting changes to the air cargo market may signal a new higher normal for rates.

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