According to Xeneta's latest weekly market analysis, global air freight volumes and spot rates saw a slight increase in October this year, but overall demand remains subdued, dashing hopes for traditional year-end revenue growth among airlines and freight forwarders.

The latest industry data shows that air freight volumes increased by 2% month-on-month in October 2023, which is considered a seasonal level compared to the past five years. Spot rates, on average, increased by 2% from September, reaching $2.28 per kilogram, marking the first time since mid-May 2023 that they surpassed seasonal rates in the first two weeks of October before dropping back below seasonal levels.

Compared to last year, the decline in global air freight spot rates in October this year slowed to -30%, mainly due to a slight increase in global freight volumes and a slowdown in freight capacity growth. Global belly cargo capacity has also returned to pre-pandemic levels, although the extent of recovery varies on major routes.

In October, the global dynamic load factor, which measures the relationship between freight volume, available capacity volume, and weight, increased to 59%, but still remained 2% lower than the same period last year. The performance of the load factor has been below all corresponding monthly levels of the past five years in the first ten months of 2023, indicating continued softness in the global air freight market.

Niall van de Wouw, Chief Air Freight Officer at Xeneta, said, "The market performance in October is in line with our expectations. It was a relatively busy month, but it did not trigger too much optimism or pessimism. Carriers and forwarders expect the market situation to improve significantly only in the second half of 2024. The current market is volatile, and the ongoing Russia-Ukraine situation and conflicts in the Middle East will exacerbate this situation. Forwarders will continue to procure capacity in the short term, but in the long term, they will sell more capacity. This carries significant risks, but due to too much uncertainty, forwarders are clearly reluctant to invest too much in capacity."

Against the backdrop of a persistently soft freight market, global carriers saw a continued decline in revenue in October, with the overall industry level down 26% compared to the same month last year, reflecting a trend also evident in the latest third-quarter performance reports from airlines. However, October 2023 revenues still surpassed those of October 2019, pre-pandemic, by 21%, attributed to widening rate differentials, with freight rates for high-value and special cargo remaining elevated and yet to fully normalize, while rates for general cargo transportation have almost returned to pre-pandemic levels.

Overall, carriers continue to be impacted by rising operational costs. Firstly, aviation fuel costs remain elevated, with spot prices along the U.S. Gulf Coast in the first three weeks of October 55% higher than in October 2019. Additionally, rising labor costs due to high inflation and labor shortages further escalate operating costs for airlines, presenting potentially greater challenges for air cargo carriers without additional passenger revenue.

On the air freight corridor from Europe to the United States, spot rates for carriers in October stood at $1.85 per kilogram, up 7% from the previous month. This is due to seasonal adjustments to passenger schedules by airlines starting October 29th, significantly impacting the availability of capacity on this freight corridor, leading the market to anticipate a reduction in freight capacity. Meanwhile, volume-based charges saw a slight increase of 3% from the previous month but a significant decrease of 10% compared to the same period last year.

Looking at trade between East and West, in October, air freight spot rates from China to Europe increased by 14% to $3.66 per kilogram compared to the previous month. Meanwhile, spot rates from Southeast Asia to Europe increased at a slower pace of 9% to $2.51 per kilogram. In contrast, trends in the trans-Pacific market show opposing patterns between these two major manufacturing regions: spot rates from China to the United States increased by only 10% to $4 per kilogram compared to the previous month, while spot rates from Southeast Asia to the United States surged by 15% to $3.61 per kilogram, primarily due to a significant increase in chargeable weight per month.

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