Airfreight Demand is Sky High
Learn the secret to securing and maintaining Stable Air Freight rates
Posted: November 23, 2020 |
We will discuss the current state of the Air Freight industry and indications why Air Freight rates will trend higher in the post COVID-19 era. How can the shipper combat these market conditions?
Air cargo and passenger demand have gone in opposite directions since COVID-19. The air cargo sector has retained 92% of its business while almost 90% of passenger demand has evaporated because of travel fears and government restrictions. Further improvement in cargo volumes could be capped by the shortage in passenger airlift, despite carriers deploying more dedicated cargo aircraft. Several airlines have recently announced capacity reductions for the end of the year, one indicator of increases in air cargo rates in the future.
The air cargo providers are benefiting from COVID-19’s new normal as demand for air cargo remains high. Air carriers remain comfortable maintaining the increased rates and raising rates in the months ahead due to increased demand in air freight. Key Trends to watch for in transportation - Air freight demand outstripping supply causing further cost increases.
Air freight Carriers will incorporate rate increases and surcharges to their advantage while demand continues to surge. Shippers may avoid many of the increases with proper planning, partnerships and contracting with freight forwarders with block space agreements. The shipper will avoid the severe rate spikes by doing so.
The air freight industry is becoming more viable; Profits and a few of the positive indicators below are driving improved results.
E-Commerce Demand Surge: With the pandemic largely restricting people to their homes, the need for door-to-door delivery of essentials during this unprecedented crisis is rising. E-commerce, which has already become part and parcel of our daily lives in today’s fast-paced world, is higher volumes.
FedEx and UPS, Atlas Air and others have reported better-than-expected earnings per share and revenues for the first three quarters of fiscal 2020 on solid e-commerce demand. FedEx financial performance was aided by a 36% jump in Ground revenues, driven by higher residential delivery volume. With the pandemic showing little signs of subsiding, e-commerce demand is likely to continue surging.
Holiday Season is providing a Boost: The current holiday season is adding volume to UPS and FedEx. Last month, they hired more than 100,000 seasonal employees to meet the anticipated expansion in package volumes during this period. E-commerce transactions are forecasted to rise 27% during the vacations (November 2020-December 2020).
Cargo Carriers Receiving a Stimulus: The rise in e-commerce sales in the current economic uncertainty have proved to be a boon for cargo carriers too. Cargo carriers are adding to the revenue line and flying higher volumes of air cargo. To meet the increase in e-commerce demand requirement for flying cargo, many carriers are expanding their fleet. UPS’ air freight division is adding MD-11 and Boeing 747-8 freighter jets to its fleet to meet the demand.
New Business Model
Commercial airlines now shifting from passenger freight to cargo freight. Air cargo has outperformed first-class air travel three times over the previous decade and the carriers are jumping at the opportunity to maximize profits.
Thanks to Amazon, overnight or even same-day shipping has become the new norm. Customers have learned to expect quick and on-time deliveries as they come to demand an Air Cargo solution. All point to increased air cargo demand.
Key take aways:
- Cargo payload capacity is outperforming passenger seat capacity in all regions and is at the lowest percentage declines since the early weeks of the pandemic crisis.
- Air freight traffic is outperforming passenger traffic even more strongly today.
- Most air freight carriers are showing improved profits
- Freighter capacity is rising, whereas passenger belly capacity is falling.
- Overall freight load factor is up due to lack of capacity.
- Outlook for air cargo: volume will continue to rise.
What Can a Shipper do?
- Given the outlook for air cargo volumes to continue to rise, Partner and plan longer term Air Freight contracts by using a freight forwarder with strong Block Space Agreements with cargo carriers.
- Work with a consultant who knows the landscape and a proven track record for delivering efficiencies
- Incorporate favorable terms with the forwarder – custom fuel surcharge scale, limited fees and guaranteed transit times
CPC has the proven expertise and specific industry knowledge in International air freight that drive efficiencies. Let CPC perform a free diagnostic to ensure you have the best transportation program as we surgically find the improvements and savings that are available. There is no obligation to hire us, but we believe this is a totally unique time as rates trend up in the marketplace to stop profit leaks and add incremental cash flow to your bottom-line. Call CPC for expertise and guaranteed savings.