Transatlantic air cargo market bucks global trend

The Transatlantic air cargo corridor has had a weak start to the year, which is in stark contrast to the global market, according to the latest update from Xeneta.

"This is one of the world’s top three air cargo corridors but in the first two months of this year, demand from Europe to North America was down by four percent compared to the same period in 2023 and five percent lower than 2019 levels.

"Interestingly, this trend has also been seen within ocean freight shipping on the Transatlantic trade, which saw a four percent year-on-year decline in demand in January."

Different global story
The global air cargo market paints a different picture with double-digit year-on-year growth (11 percent) in the first two months of 2024 and three percent compared to the same period in 2019, the update added. "This has been driven by factors such as disruptions in the Red Sea and strong demand for e-commerce out of China."

The decline in demand growth on the Transatlantic westbound corridor in 2024 is also a reversal of the trend seen in the final four months of 2023, which saw a four percent increase compared to the same period in 2019. The Transatlantic westbound also outperformed the growth in global demand during this period, which was down by six percent.

Downward pressure on rates
The Transatlantic market supply had already surpassed its pre-pandemic levels in 2023 and has continued to grow in 2024, the update added.

"In the first two months of this year, capacity has increased by four percent compared to the same period in 2023 and is 12 percent above the level in 2019. Thanks to increasing supply and decreasing demand, the average general cargo spot rate on this corridor fell by 27 percent year-on-year in February, ending at $1.82 per kg.

"There has also been turbulence in the spot rate market after it fell below its 2019 level in January for the first time since the onset of the pandemic. This was only temporary with the spot rate returning to its 2019 level during February."

Summer schedules to drive cargo revenue down
The Europe to North America market will inevitably face downward pressure on spot rates when airlines begin summer schedules on March 31.

"Last year, increasing demand for passenger travel during the summer months saw air cargo capacity increase by 33 percent from March to its peak in June. This exposure to seasonal changes in passenger belly capacity is likely why freight forwarders continue to allocate a significant proportion of cargo volumes on the spot market.

"By the week ending March 10, the share of volumes shipped under spot rates was 46 percent, which is a 15-percentage point increase from the same period in 2019. Freight forwarders will expect the upcoming influx of capacity to follow historical trends and drive rates down.

"With rates continuing to face downward pressure, it is likely carriers will see cargo-only revenues on the Transatlantic fall to their pre-pandemic levels. In just the first two months of 2024, air cargo revenues have reduced by 38 percent to sit at the same level as 2019."