The rise of US air cargo amidst changes and challenges

The US air freight market is projected to grow at a CAGR of 3.84% from 2024 to 2032, driven by e-commerce growth and demand for timely deliveries. Logistics providers are enhancing their capabilities to meet rising consumer expectations.

The US air cargo industry has undergone significant transformation in recent years, shaped by global events, technological advancements, and shifting market dynamics. From the pandemic-induced disruptions to the current focus on sustainability and digital innovation, the sector continues to evolve while maintaining its crucial role in global commerce and supply chain logistics.

Current market overview and projections

According to data from IMARC, the air freight market size in the US is projected to grow at a compound annual growth rate (CAGR) of 3.84% from 2024 to 2032.

While data from Global Market Insights states that the US held over 70% of the air cargo market share in North America in 2023, with projections to surpass $50 billion by 2032. The report highlights that the US leads this market due to its extensive infrastructure, advanced logistics capabilities, and significant demand from both domestic and international markets.

Despite global economic uncertainties, the sector has maintained steady growth, driven primarily by e-commerce expansion and the increasing demand for time-sensitive deliveries.

According to the International Air Transport Association's (IATA) September 2024 air cargo market analysis, North American carriers saw 3.8% year-on-year demand growth, and capacity increased by 4.2%.

The report also mentioned that international routes saw exceptional traffic levels for a fifth consecutive month, with a 10.5% year-on-year increase in September, airlines are benefiting from rising e-commerce demand in the US and Europe amid ongoing capacity constraints in ocean shipping.

Challenges and opportunities facing the US air cargo industry

Explaining the challenges and opportunities in the US air cargo industry from an airline perspective, a spokesperson from United Cargo — the cargo division of United Airlines, which provides a range of air cargo services worldwide and primarily ships goods in its belly cargo says, “There are just as many challenges as there are opportunities in the air cargo market in the Americas. For us, it is primarily capacity. Most of our widebodies are from the East Coast to Europe, the Middle East, India, and Africa (EMEIA), or from the West Coast to the Asia-Pacific (APAC) region. We need more widebodies going hub-to-hub, but once we receive our new fleet, we hope this will alleviate the capacity issues. Over the summer, there were also many challenges involving the weather and climate change. Florida and North Carolina were hit particularly hard by Hurricanes which caused service disruptions. Increased competition is always a way to keep us on our toes. Finally, as a passenger airline, we are always dictated where we fly by our passengers — so cargo-friendly routes may not be the ski resorts or island hopping destinations tourists are looking for.

As for opportunities, we are looking toward e-commerce to fill the gaps in our aeroplanes. Digitalisation is simplifying process, and we expect to see some AI advancements in technology. Cold chain logistics are increasingly becoming more important for our specialty product line. United Airlines has been at the forefront of sustainability innovations and United Cargo customers are eager to sign up for sustainable fuel initiatives and more.”

“The US market is extremely competitive and has high operating costs. However, it is a large and very diverse market in terms of industry verticals and trade lanes.”
Daniel Randig, Kuehne + Nagel

Infrastructure capacity constraints present another significant hurdle. Despite major hubs like Chicago O'Hare and Memphis International investing in expansion projects, many airports struggle to keep pace with growing cargo volumes.

According to the ‘2023 US Airport Infrastructure Needs Report’ by Airports Council International (ACI), the FAA projects that passenger traffic will reach 158% of 2019 levels by 2040, while ACI World expects cargo traffic to grow to 167% over the same period. Current US airport infrastructure is insufficient to support this level of growth.

Both existing and future traffic demand that airports maintain and modernise legacy assets while simultaneously expanding capacity. Airports are ageing rapidly, with operators depreciating approximately $8 billion in airport assets each year. As infrastructure continues to age, replacement becomes essential, along with incremental capacity additions to accommodate growth in both passenger and cargo traffic, the report notes.

One of the major airports in the US, Miami International Airport (MIA) is a leading hub for both cargo volume and passenger traffic, serving the city of Miami, Florida.

Emir Pineda, Director Marketing & Air Service Development Division Miami-Dade Aviation Department, emphasises the proactive steps Miami International Airport is taking to address future cargo demands by developing. Pineda says, “MIA is in the early stages of developing its 784,087-square-foot Vertically Integrated Cargo Community (VICC), programmed to handle up to 2 million tonnes of cargo annually when it opens in approximately five years. The VICC alone will increase MIA’s total cargo capacity by a massive 50%, creating ample opportunities for additional cargo traffic and helping it keep pace with forecasted cargo growth.”

Rising operational costs present another multifaceted challenge for the US air cargo industry, with significant increases in labour expenses.

Daniel Randig, Senior Vice President of Air Logistics, US at global logistics company Kuehne+Nagel, notes, “The US market is extremely competitive and has high operating costs. However, it is a large and very diverse market in terms of industry verticals and trade lanes. Therefore, there are plenty of opportunities for those with the ability to serve across the country and to offer specific solutions for the different industries.”

He added that, despite uncertainties in market development, geopolitical factors, and recent events impacting trade flows, Kuehne+Nagel remains optimistic. The company continues to invest in various areas, including expanding cargo capacity, upgrading facilities, and upskilling its team members.

Technological innovation and digital transformation

The industry is witnessing an unprecedented push toward digitalisation and technological advancement. Leading cargo carriers are investing heavily in artificial intelligence, machine learning, and automation to streamline operations and enhance efficiency. The implementation of digital booking platforms, real-time tracking systems, and automated warehouse operations has become increasingly common.

For instance, American Airlines Cargo and cargo.one have recently expanded their global partnership to encompass the carrier’s entire domestic cargo capacity on cargo.one’s leading digital booking platform. This expansion offers US forwarders enhanced digital access to American Airlines' extensive domestic network, which serves over 115 destinations across the United States.

“One of the most challenging topics for any logistics provider is to find the balance between having their own, long term fixed capacity and the ad hoc market. In recent years, we saw incremental usage of data and tools to help predict the demand,” says Randig of Kuehne+Nagel.

The impact of E-commerce

According to data from Mordor Intelligence, the US e-commerce market is projected to reach $1.19 trillion in 2024 and is expected to grow to $1.86 trillion by 2029, with a compound annual growth rate (CAGR) of 10.35% over the forecast period (2024-2029). The report highlights that the US e-commerce market is highly developed due to the presence of major vendors and an increasing number of online shoppers. Additionally, online shopping continues to gain popularity in the US, driven by growth in internet users, rising demand for beauty and fashion products, and increased mobile adoption and social media engagement.

“MIA is in the early stages of developing its 784,087-square-foot Vertically Integrated Cargo Community (VICC), programmed to handle up to 2 million tonnes of cargo annually.”
Emir Pineda, Miami-Dade Aviation Department

“The rise of e-commerce has really changed the game for us at United Cargo, boosting demand for fast and reliable shipping solutions. While we see e-commerce as a fantastic way to fill the extra space on our planes and supplement our services, we believe it can't replace the personal touch that comes from direct customer interaction. Being customer-focused is at the heart of what we do, and we’ll always prioritise those relationships. Our approach includes expanding expedited shipping options and investing in advanced tracking technology, all while building strong partnerships with e-commerce companies. This way, we can meet their unique needs while delivering the high-quality service our customers expect. It’s all about blending the benefits of e-commerce with the meaningful connections that truly define our business,” says United Cargo's spokesperson.

“In 2021, following years of steady, incremental growth, MIA’s cargo volume jumped more than 18% year-over-year. Since then, MIA has logged its highest 3 years ever for annual total air freight (above 2.75 million tonnes each year), marking new annual records for the airport between 2022 and 2024. The recent e-commerce boom, combined with robust trade across established commodity groups, is driving this continued growth,” says Pineda of Miami-Dade Aviation Department.

Randig of Kuehne+Nagel explains that Kuehne+Nagel provides specialised solutions to support e-commerce businesses in the US “Kuehne+Nagel offers e-commerce customers access to its global network and solutions. In light of the projected e-commerce growth of 8%-9%, according to the US National Retail Federation (NRF), we work with our customers to enable them to find the right solutions for their individual needs.”

Global logistics company FedEx has also recently announced a strategic alliance and investment with Nimble, an AI robotics and autonomous e-commerce fulfilment technology company, to scale FedEx Fulfilment with their fully autonomous 3PL model across North America.

According to Dimerco's September report, Global air traffic is experiencing significant growth in the US, fueled by the ongoing e-commerce boom and constraints in ocean shipping. "E-commerce demand has surged to levels 10 times higher than pre-Covid with high-value goods such as technology, pharmaceuticals and perishables driving air freight growth.”

Disruptions creating more opportunities

Recent global disruptions like the Red Sea crisis and US port strikes have reinforced air cargo’s position as a reliable transportation alternative for shippers. For example, during the recent US port strikes, many shippers, particularly those handling perishable goods, shifted from ocean to air transport to avoid delays. Although the tentative deal on wages has ended, the strike, this shift underscores air cargo’s value in maintaining supply chain stability amid uncertainties.

“It is extremely beneficial that we are present in every corner of the world, so in case of a disruption in any corridor, we have alternatives to serve customers through other hubs.

In the case of the Red Sea disruption, air logistics and sea-air logistics can help mitigate the impact to our customers’ supply chains. Sea-Air logistics has experienced considerable growth as customers look for sustainable and cost-efficient solutions to reduce transit times. We have seen a surge in demand from the UAE to North America. UAE is an important hub for Sea-Air and Air-Air services from Asia to Europe and the Americas.

The same applies to port strikes. Kuehne+Nagel is committed to helping its customers based on their needs to mitigate supply chain disruptions by offering alternative solutions and capacity such as air freight or combined sea-air freight solutions,” says Randig of Kuehne+Nagel.

The role of the new US president in trade

In the recent 2024 US election, former President Donald Trump secured a projected victory, meaning he will succeed current President Joe Biden and begin his new term in January 2025. According to a blog article published by Thomson Reuters, which highlights the potential impacts of Trump’s new presidency on global trade, the article mentions that Trump’s economic policies characterised by increased US spending and tax cuts could result in higher US debt, potentially driving inflation and prompting restrictive monetary policy responses. These fiscal changes may alter trade dynamics, influencing import and export patterns.

The blog also specifically addresses the US-China trade relations, noting that under the Most-Favoured-Nation (MFN) principle, countries agree to treat each other equally regarding trade tariffs and barriers. During Trump’s previous term, the US-China trade relationship was strained, with tariffs imposed on Chinese goods. If Trump follows a similar approach, it could result in higher tariffs and trade barriers, potentially impacting China’s MFN status and influencing global trade dynamics.

This is significant as in a landmark development, 2023 marked the first time when in over two decades that Mexico surpassed China as the largest exporter of goods to the US. Mexican exports to the US totaled $475 billion in 2023, which is a 4.6% increase from the previous year, according to a data.

This shift occurs amid ongoing US-China trade tensions, efforts to bring imports closer to home, and the rapid expansion of Mexico’s manufacturing sector. Adding to this trend, Chinese companies are increasingly using Mexico as a gateway to the US to circumvent American tariffs.

Growing importance of perishables in US air cargo

According to a report published by the Global Cold Chain Alliance, nearly 70% of all goods shipped via air freight between Latin America and North America are perishable products.

Pineda of the Miami-Dade Aviation Department emphasises the significance of Miami International Airport (MIA) in handling perishables, stating, “MIA is a leading entry point and distribution hub for international goods entering the US market. This is most notable in the perishables segment, where MIA alone accounts for 68% of all US perishables imports by air. This figure includes 91% of all cut flower imports, 65% of all fruit & vegetable imports, and 56% of all seafood imports.”

Exclusive to MIA, American Airlines Cool Perishables provides on-site pre-cooling and guaranteed cooler space for fresh shipments. The airline's website states that this service includes two pre-coolers, container handling systems, and a simplified schedule of charges.

“Demand for perishables and flower transportation in air freight has evolved significantly in recent years due to several key factors. Globalisation has opened up international markets for producers, leading to increased airfreight demand for fresh flowers and perishables. Changing preferences for fresh, organic, and locally sourced products have also driven this trend. Advances in tracking technology have improved transit management, reducing spoilage,” says United Cargo’s spokesperson.

Regulatory environment and security measures

The regulatory landscape continues to evolve, with the Federal Aviation Administration (FAA) and United States Transportation Security Administration (TSA) implementing new security measures and operational guidelines. According to a report published by the British International Freight Association (BIFA), in response to increased civil aviation threats, the TSA and Transport Canada have recently enacted new emergency measures, effective immediately, for all air cargo destined for or transiting through the United States that originates from Europe and the Commonwealth of Independent States (CIS). The Air Cargo Advance Screening (ACAS) programme has become mandatory for all international shipments entering the United States. Additionally, the BIFA report states that the new emergency measures include changes to the US ACAS programme, introducing “Enhanced ACAS Security Filing.” This must be conducted by entities responsible for filing the standard ACAS Security Filings and requires additional data elements regarding the actual shipper of the goods to better identify the parties involved in the air cargo supply chain before the cargo is loaded onto a US-bound aircraft.

The report further indicates that these emergency measures will significantly affect shippers in these regions, especially micro, small, and medium-sized enterprises (MSMEs) that handle lower-volume shipments.

Pineda, Director Marketing & Air Service Development Division Miami-Dade Aviation Department says “MIA is currently helping facilitate Customs and Border Protection’s (CBP) plans to construct a new Central Examination Station (CES) at the airport. When built, the CES will provide a large, dedicated space for CBP to examine and clear cargo – particularly high-volume e-commerce shipments. The facility would allow CBP to assign additional officers to MIA and maximise its overall workforce here.

For now, CBP deploys additional staff to meet demand and keep goods flowing during busy cargo periods, such as the winter holidays and flower peaks.”

Despite various challenges including infrastructure constraints and regulatory complexities, the US air cargo industry continues to demonstrate remarkable resilience and adaptability. Driven by e-commerce growth, increasing perishables demand, and ongoing supply chain disruptions, the sector is investing heavily in technological innovation and infrastructure development.