Air cargo finds its next lift in Southeast Asia

Southeast Asia’s airfreight market is surging as global manufacturers pivot production away from China, even as tariffs and excess capacity distort rate stability. Beneath the surface of this growth story lies a complex balancing act between opportunity, infrastructure, and logistics resilience.

While the United States-imposed tariffs have disrupted seasonal air cargo flows and depressed rates on most major routes, Southeast Asia has been one of the regions most affected. For instance, Dimerco Express Group’s October 2025 Asia-Pacific Freight Market Report highlighted that AI servers, semiconductors, and consumer electronics are driving demand surges from Southeast Asia, creating bottlenecks at key transit hubs.

Kathy Liu, VP, Global Sales and Marketing, Dimerco Express Group, wrote in the report, “September to November is always the peak season for air freight. This year, demand growth is more focused on Southeast Asia, particularly Thailand, Vietnam, Malaysia, and Singapore. With high-tech, AI, and semiconductor production increasing in these countries, more finished goods are being shipped out. As a result, we expect capacity pressure at major transit hubs including Singapore, Taiwan, Hong Kong, and Korea.”

Similarly, air cargo consultancy firm Aevean noted that Asia Pacific to US air trade in January to July 2025 was up 11% YoY, led by high-tech electronics from Taiwan and Vietnam. 

Tech manufacturing drives cargo boom

The demand for air cargo from Southeast Asia to North America grew 50% YoY in 2025 (Jan to July), and in July 2025 alone, the growth was at 68%, according to the data from air cargo consultancy firm Rotate.

Adding more clarity, Tim van Leeuwen, Vice President and Head of Consulting at Rotate, said, “Direct capacity between Southeast Asia and North America is not at all sufficient to carry all demand between the two regions, with most cargo being routed via North East Asia in particular (and partly via the Middle East/Europe).”

Even as supply chains shift towards the Southeast Asia market for production to lessen the impact of tariffs, “September’s Southeast Asia to the US spot rates failed to grow, declining -2% month-on-month and a striking -22% compared to a year ago,” according to Xeneta in its October 2025 analysis.”

Meanwhile, TAC Index, in its October 2025 first week report, attributed the decreased rates to increased capacity deployment in the region. “Overall, out of Asia, rates from other locations such as Vietnam and India were still languishing a long way lower YoY – with increases in capacity this year helping hold rates down despite significantly higher volumes,” it reads.

According to the data from Rotate, air cargo capacity (including widebody passenger and freighter) on the Southeast Asia to North America lane grew 85% YoY year-to-date, and in September 2025, it grew 63%.

Earlier, Rotate in a September 2025 LinkedIn post informed that Vietnam has registered an air cargo demand increase of 55% year-to-date. “Unsurprisingly, Vietnam Airlines offers the most capacity out of the Southeast Asian powerhouse, but the gap to Korean Air (ranked #2) is surprisingly small. Qatar Airways, Atlas Air, and Cathay Pacific round out the top 5. Notably, out of these carriers, Atlas Air grew its capacity fastest, more than doubling its capacity compared to a year ago,” reads the post.

In fact, in June 2025, Vietnam Airlines announced its plans to launch a dedicated cargo airline by 2026, and in August 2025, it announced plans to enhance their cooperation with Korean Air in the cargo sector, as part of a bilateral initiative to meet rising freight demand. 

Southeast Asia, according to Mark Jason Thomas, CEO of MASkargo, is fast becoming a central hub for high-value technology exports. “With new product launches coinciding with the year-end e-commerce surge, we anticipate heightened congestion across the region’s major gateways. MASkargo’s network is built for resilience, and we remain agile in adjusting our routes and capacity to capture shifting market demand while ensuring service reliability across our network,” he said.

“The majority of semiconductor shipments are ex-SIN due to production and safe handling. Singapore is facing slow demand and often working on ad hoc charters and a very erratic supply of space. For the peak, I foresee an increase in ad hoc charter.”
Andrea Bettoni, SAAA

Ad hoc charters flexing capacity
Meanwhile, Andrea Bettoni, Council Member, SAAA (formerly known as Singapore Aircargo Agents Association), pointed out that the majority of semiconductor shipments are ex-SIN due to production and safe handling. “Singapore is actually facing slow demand and often working on ad hoc charters and a very erratic supply of space. For the peak, I foresee an increase in ad hoc charter,” he said.

“For now, the pre-booking is done by freight forwarders with steady volumes and very predictable, many others are on the 'wait and see' and using online tools to pre-book when necessary,” he added.

United Airlines, which also operates in this market, confirmed the trend. Mirco A. Renfer, Vice President of Cargo, Asia Pacific at United Cargo, explained that much of the previously existing capacity had already shifted to Southeast Asia after the first round of tariffs significantly impacted cargo volumes from Mainland China and Hong Kong. “In addition, the surge in e-commerce shipments to the U.S. has also played a major role,” he noted.

Renfer also gave an update on their recent freighter charter services to the region. “Demand is clearly on the rise from these regions. That’s why we at United are pleased to have already launched charter services to Vietnam.”

United has been flying a Boeing B757F to Vietnam since the beginning of September 2025 with two weekly frequencies from Tan Son Nhat International Airport (SGN), Ho Chi Minh City, to Antonio B. Won Pat International Airport (GUM), Guam which connects to United’ network ex GUM via Daniel K. Inouye International Airport (HNL), Honolulu, to the US.

United started Thailand on October 7, 2025, with two weekly frequencies from Suvarnabhumi Airport (BKK), Bangkok, to Guam with the B757F.

“By October 26th, we will stop both of these services again, as by then United is going to fly daily from Bangkok to Hong Kong International Airport (HKG) and from Ho Chi Minh City to Hong Kong with Boeing 787-9 passenger aircraft.

He pointed out that it is important for shippers and forwarders to get the capacity they need upfront. “We all know that planning upfront these days isn’t as easy as it sounds, but I would recommend taking some risk and securing capacity upfront to not end up in a potential bottleneck every year in preparation for a potential peak season.”

“All the major airlines, including ourselves, are offering capacity for a longer duration, which is also important to our planning and therefore last-minute to get extra capacity is always tricky and therefore costly as well,” he added.

“Geographically well placed, with the world's third largest workforce, abundant raw materials, advancing significantly with digitalisation, and within many significant trade agreements, it is no wonder that more businesses are looking to relocate to the region.”
Chris Humphrey, EU-ASEAN Business Council

ASEAN as top choice
Established in 1967, the ten Southeast Asian countries have the intergovernmental organisation Association of Southeast Asian Nations (ASEAN) to promote political and economic cooperation, regional stability, and cultural development in the region.

ASEAN is already one of the most attractive regions in the world for businesses to invest in. For instance, the 11th ASEAN-EU Business Sentiment Survey published by the EU-ASEAN Business Council in September 2025 found that European businesses saw the region as one of the best economic opportunities over the next five years, significantly ahead of India and China. Malaysia has emerged as one of the four most attractive ASEAN markets for European businesses, alongside Vietnam, Indonesia and Thailand.

Chris Humphrey, Executive Director, EU-ASEAN Business Council, points out that ASEAN as a region is extremely well placed to take advantage of supply chain diversification and relocation. “Geographically well placed, with the world's third largest workforce, abundant raw materials, advancing significantly with digitalisation, and within many significant trade agreements, it is no wonder that more businesses are looking to relocate to the region,” he said.

“In order to take real advantage of the current geoeconomic turmoil,” Humphrey added, “advancing faster on regional economic integration, removing non-tariff barriers to trade in the region, would clearly make the region even more attractive.”

There was also some concern about the pace, or lack of it, of ASEAN regional economic integration. Humphrey noted that removing intra-ASEAN trade barriers and speeding up customs procedures would make it easier for companies, in whatever sector, to maximise use of regional supply chains.

He thinks ASEAN, at least in some respects, is a victim of its own success. “As the region has seen trade volumes increase, some of the infrastructure at ports of entry has not evolved quickly enough, and intra-region connectivity, particularly by road or rail, does need some improvement,” he said.

“Equally, as shown in the ASEAN-EU Business Sentiment Survey, there are concerns about the adequacy of customs procedures in the region, with only 3% of European businesses reporting that they saw customs procedures as being speedy and efficient,” he added.

“Planning upfront these days isn’t that easy, but I would recommend taking some risk and securing capacity upfront to not end up in a potential bottleneck.”
Mirco A. Renfer, United Cargo

Work closely with carriers, handlers
Looking into the peak season ahead, Shantanu Gangakhedkar, Senior Aviation Consultant & Commercial Aviation Lead, Frost & Sullivan, expects stronger demand. “The demand is expected to be specifically driven by AI, semiconductor and related supply chains for both finished products and components.”

He thinks it will positively impact both hub airports, such as Singapore, Hong Kong, as well as regional routes linking high-demand countries. “A key factor to watch out for will be available freight capacity in both belly hold and dedicated freighter services.”

Given tight demand, Gangakhedkar also warns, may lead to longer lead times and higher rates, leading to the need for some ad-hoc charter bookings and use of alternate airports. “Singapore will continue to show strong growth, especially given its role in supporting the transhipment hub for the region, while carriers have been exploring adding capacity to support an increase in production from Vietnam,” he added.

He has some advice on how to handle the market challenges. “Aim to secure block-space agreements (BSA) or guaranteed-space contracts with carriers in advance. Explore multi-origins to combine and consolidate volumes as a way of streamlining. Build contingency plans through secondary hubs or alternative airports when faced with capacity and cost constraints at primary airport hubs.”

“Work closely with carriers and ground handlers and customs brokers to minimise dwell times and make best use of limited slots,” he added.

As capacity tightens, Thomas of MASkargo also advised shippers and forwarders to plan early and explore long-term agreements to secure space and manage costs effectively. “In a constrained capacity environment, early planning is key,” he noted, suggesting that time-sensitive cargo should move under hard-block agreements that guarantee fixed capacity and stable rates. For less urgent shipments, Thomas pointed to flexible routings with slightly longer transit times as a way to achieve cost efficiency without compromising service quality.

Meanwhile, the most populous country in Southeast Asia, Indonesia, is in an experiment to streamline its supply chain and reduce logistics costs. For instance, introduced in 2015 as part of Indonesia’s economic reform agenda, Bonded Logistics Centers (PLBs) are specialised storage facilities designed to streamline the movement of goods through the country’s supply chain. Operated under customs supervision, these centres offer strategic logistics solutions by deferring import duties, enabling light processing, and reducing congestion at ports.

“The demand is expected to be specifically driven by AI, semiconductor and related supply chains for both finished products and components.”
Shantanu Gangakhedkar, Frost & Sullivan

Reducing logistics costs in Indonesia
Utami Prasetiawati, Chairwoman of the Indonesian Bonded Logistics Centers Association (PPLBI) and Director of PT Transcon Indonesia, argues that PLBs reduce costs and boost competitiveness for exporters, particularly in high-value sectors such as electronics and automotive. For instance, importing components for electronics and cars can be tricky. “Many parts face import restrictions and require special permits. While waiting for these permits, companies normally have to store their goods in a port or overseas, which is incredibly expensive and inefficient,” she said.

A company can ship its raw materials directly to a PLB. “The goods can be stored there without paying import duties or taxes while waiting for all the required permits. This is like having a free "time-out" from taxes,” she added.

PLBs help companies cut costs and improve efficiency by eliminating expensive port or foreign warehouse storage fees, allowing import duties to be paid only when goods are withdrawn for use, and offering the flexibility to release materials in small batches based on production needs. “On the export side, PLBs simplify logistics by treating goods as exported once they enter the facility, after paying export duties, freeing up factory space while companies wait for the next available ship or flight.”

“Many parts face import restrictions and require special permits. While waiting for these permits, companies normally have to store their goods in a port or overseas, which is incredibly expensive and inefficient.”
Utami Prasetiawati, Indonesian Bonded Logistics Centers Association (PPLBI)

Bridging the data gap
In this evolving market, greater visibility has become a crucial driver of both operational efficiency and collaboration across the air freight sector. Martin Schulze, CEO, BlueBox Systems, argues that despite recent advances, the industry still faces significant opportunities to enhance data-driven decision-making, a challenge observed globally and notably in Southeast Asia. “Encouragingly, the sector is increasingly committed to digital transformation and insights-based management. With AirCheck360, our latest solution, we deliver actionable operational insights and benchmarking for all industry stakeholders. In markets like Southeast Asia, information remains limited - especially for small and medium-sized businesses,” he said.

Through its partnership with Cargo Community Network (CCN), they are bridging this gap, providing a user-friendly tool that empowers companies of all sizes to unlock new efficiencies and compete with greater confidence.

Jeff Pan, founder of the AI cargo technology startup Belli, sees artificial intelligence reshaping how airlines operate and optimise revenue in Southeast Asia’s rapidly evolving air freight landscape. He said the region’s carriers are beginning to use AI platforms like Modal and Browserbase to migrate data seamlessly from legacy cargo systems — a process that once took months of API development. Early applications of AI agents, he added, are now allowing airlines to “chat” directly with their cargo systems to automate decision-making and improve responsiveness.

According to Pan, AI-powered engineering tools are dramatically reducing IT build times and costs. “Software that once took months to deploy can now be built in days,” he said, noting that the most forward-looking airlines are moving away from traditional IT vendors that charge millions for incremental software changes.

However, he believes many carriers still struggle with internal capability gaps. “In many cases, legacy systems remain because inexperienced IT teams or outdated leadership don’t fully understand cargo operations,” he observed. “I still meet cargo heads managing everything on spreadsheets. That simply won’t cut it in this environment.”

Looking ahead, Pan expects a surge in small, time-sensitive shipments as e-commerce expands across Southeast Asia, driven by direct-to-consumer models. He predicts airlines will adopt more advanced load optimisation, real-time cargo tracking, automated booking, and enhanced customs integration tools to meet rising service expectations. “Legacy systems can’t keep pace with the speed of this market,” Pan said. “To stay competitive, airlines need modern, digital-first solutions that deliver real impact on the ground.”

“Using alternate routes via regional hubs like Singapore, Bangkok, or Kuala Lumpur allows for quick response to disruptions such as typhoons or rail delays. To manage urgent demands and reduce peak costs, inventory pooling and micro-warehousing near major airports should be established.”
 Lars Bäumann, BVL – The Supply Chain Network

Maximising yield across short, medium, long term
In the immediate term, Lars Bäumann, Representative South East Asia, BVL – The Supply Chain Network, thinks providers should focus on building resilience and maximising yield. “This includes adopting dynamic capacity and pricing strategies that combine contracted capacity with flexible spot buying. Contingencies should be pre-planned for peak demand periods such as Golden Week and local festivals. Leveraging predictive analytics can further support capacity and pricing hedging.”

“Using alternate routes via regional hubs like Singapore, Bangkok, or Kuala Lumpur allows for quick response to disruptions such as typhoons or rail delays. To manage urgent demands and reduce peak costs, inventory pooling and micro-warehousing near major airports should be established.”

For the medium term, focus on building digital visibility by adopting industry standards (e.g., IATA’s ONE Record) and integrating with airport and customs systems to speed up cargo release. “Form strategic alliances to pool capacity or launch joint freighter services, stabilising supply and pricing. Develop multimodal products by linking expanded rail, road, and port infrastructure to cut costs on key corridors.”

For the longer term, prioritise sustainable solutions like green or certified air products, supported by CO₂ reporting and sustainable fuel partnerships. “Build or join digital freight platforms to aggregate carrier capacity, offer real-time rates, and boost spot demand capture and margins.”

As supply chains continue to migrate toward Southeast Asia, the region’s air cargo ecosystem faces a decisive moment to turn today’s congestion, rate volatility, and uneven digitalisation into long-term competitive strength. Its success will depend on how quickly airlines, forwarders, and governments can align capacity, connectivity, and policy in a fast-moving global trade landscape.

The article was originally published in the Oct 2025 issue of The STAT Trade Times.