To fully tap into the enormous potential of the e-commerce air freight sector and meet the surging demand from Chinese e-commerce platforms, major airlines are launching new routes and repositioning flights in hopes of capitalizing on these opportunities.

Image Source: Internet

1. Strong Growth in Air Cargo at the Start of the Second Quarter

The continuous growth in e-commerce demand, coupled with a shift from sea freight to air freight due to geopolitical conflicts, continues to drive the increase in air cargo volumes. According to a report by the International Air Transport Association (IATA), the global air cargo market saw robust growth in April, with demand increasing by 11.1% compared to April of the previous year. This marks the fifth consecutive month of double-digit growth. Willie Walsh, the Director General of IATA, stated that air cargo demand in Q2 started with a strong growth of 11.1%.

The DHL Air Cargo Industry Status Report pointed out that due to the booming e-commerce sector in China, global air cargo demand remained stable in May 2024, growing by 9% compared to May of the previous year. The global air cargo capacity increased by 11% year-on-year, with overall capacity from Asia to the United States, the EU, the Middle East, and Europe remaining tight. Spot prices saw year-on-year growth in April for the first time since August 2022. Regarding expectations for the third quarter, the report stated, "Although the reliability of container shipping has improved and adapted to longer transit times, air cargo demand is expected to continue growing as Chinese e-commerce platforms seek expansion in the U.S. market."

Image Source: DHL

Latest data from Xeneta also indicates a strong performance in regional freight demand for six consecutive months, boosting expectations. In May, global air cargo demand increased by 12% year-on-year, and spot prices rose for the second consecutive month, up 9% year-on-year to $2.58 per kilogram, a month-on-month increase of 5%. The highest year-on-year increase was seen in spot prices for routes from the Middle East and Central Asia to Europe, rising by 110% to $3.21 per kilogram, influenced by the Red Sea crisis. Spot prices for routes from Southeast Asia and China to North America rose by 65% and 43%, respectively, reaching $4.64 per kilogram and $4.88 per kilogram.

Image Source: Xeneta

Niall van de Wouw, Chief Airfreight Officer at Xeneta, stated: "Once is chance, twice is coincidence, three times is a pattern. Now, in the air cargo sector, an undeniable pattern is emerging. As the air cargo market moves into the second half of the year, following the significant sales increase at the end of 2020, the bright prospects for air cargo in the fourth quarter of 2024 may soon be realized."

Image Source: Xeneta

The air cargo market from China to North America continues to benefit from the rebound of the U.S. economy and strong e-commerce demand from China.

Direct-to-consumer shipping from China has significantly impacted air cargo demand and freight rates. According to Catherine Chien, Marketing Director at Dimerco Express Group, e-commerce goods currently account for about 50% of air cargo in South China and Hong Kong. Additionally, 30% of air cargo exported from Shanghai Pudong Airport is contributed by e-commerce goods.

Image Source: Dimerco

According to the TAC Index, as of mid-April, freight rates for routes from Hong Kong to Europe and North America increased by approximately 11% and 8% year-on-year, respectively, while rates for outbound routes from Shanghai to North America remained flat compared to last year. Currently, the cost of shipping products from Hong Kong to the U.S. is around $5.5 per kilogram, which is one-third higher than pre-pandemic levels.

The air cargo industry is now preparing for a "tsunami of e-commerce growth," with parcel shipments expected to surge from 170 billion in 2022 to 256 billion by 2027. Over the past five years, China's e-commerce has experienced staggering growth, expanding tenfold. Even before the rise of Chinese e-commerce platforms like SHEIN and TEMU, China was already the busiest shipping hub in the world. The emergence of these platforms has further intensified this trend.

Andre Majeres, Head of Cargo, Mail, and E-commerce at the International Air Transport Association (IATA), noted that about 70 wide-body freighters (or equivalent flights) are dedicated daily to transporting e-commerce goods from China to destinations worldwide. Michael Steen from Atlas Air added, "We are now witnessing an explosive growth of new e-commerce platforms. TEMU was not well-known in the market before, but now the combined volumes of TEMU and SHEIN account for approximately 3% of the total air cargo growth in 2024."

2. Foreign Airline Giants Scramble to Increase Investment

To fully seize the immense potential of the e-commerce air cargo sector and meet the soaring demand from Chinese e-commerce platforms, major airlines are launching new routes and repositioning flights to capitalize on these opportunities. Not only are the three major domestic airlines expanding their layouts, but many foreign airlines are also focusing on the volume of cross-border e-commerce parcels from China. These include Atlas Air from the U.S., Geodis from France, Etihad from the UAE, Cargojet from Canada, Saudia Cargo, among others.

Take Cargojet as an example. Recently, Cargojet signed a three-year contract with Hong Kong logistics company Great Vision HK Express to provide regular charter services between China and Canada, supporting the growing e-commerce demand from China.

Under the contract, Cargojet will operate flights from Hangzhou to Vancouver, British Columbia, using a converted Boeing 767-300 freighter, with at least three weekly flights starting from May 22. So far, eight flights have been completed. Some parcels will be delivered to customers in the Vancouver area, while the rest will be distributed across Canada through daily cargo flights to 15 other cities. Cargojet expects this plan to generate over CAD 160 million (approximately USD 117 million) in total revenue over the agreement period, helping to further expand its 767 freighter network.

Cargojet Co-CEO Jamie Porteous said, "Leveraging Cargojet's timeliness and reliability, and connectivity from Vancouver to 15 other Canadian cities, Great Vision HK will be able to provide better logistics services to Chinese e-commerce providers, meeting their customer demands across Canada."

Cargojet Co-CEO Pauline Dhillon added, "We will continue to look for opportunities to maximize asset and aircraft utilization and look forward to building a strong partnership with Great Vision HK Express."

Cheng, Co-founder and COO of Great Vision HK, responded, "International air freight is a crucial part of the logistics supply chain, and we believe that our strategic partnership with Cargojet can provide customers with extremely reliable and efficient services, while continuing to promote trade between China and Canada."

Image Source: Cargojet

Cargojet is renowned for operating a domestic overnight air cargo network in Canada for Amazon and DHL Express. Currently, it operates a fleet of 41 freighters comprised of 767 and 757 aircraft, providing air cargo services to cities across North America, transporting over 25 million pounds of cargo weekly, and offering dedicated ACMI and international charter services.

Thanks to the demand for e-commerce, although Cargojet's revenue in the first quarter of this year fell by 0.3% year-on-year to CAD 231.2 million, EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) grew by 8.7% to CAD 37.6 million, and net profit increased by 6.6% to CAD 32.5 million. Driven by e-commerce, Cargojet's domestic network revenue in Canada grew by 7.1% year-on-year, with domestic, ACMI, and charter business revenue increasing by 6.5% to CAD 181 million.

Meanwhile, Cargojet has strengthened its strategic partnership with Great Vision, complementing each other in international air network layout, customs clearance warehousing, trunk transport, and last-mile delivery resources. This collaboration aims to provide more stable and efficient services for customers, including large manufacturers, freight forwarders, and e-commerce platforms, continually breaking new ground in terms of price, speed, and product variety.

In addition to Cargojet, other airlines are also increasing their investments. Atlas Air began operating a 777 freighter in April, flying between China and the U.S. six times a week. In the third quarter, it will add two new Boeing 747-400 freighters dedicated to SHEIN and TEMU's business, establishing specialized air cargo channels connecting China with the U.S. and South America. Geodis and Titan have opened new cargo routes between China and the UK. Etihad Cargo has added a weekly Boeing 777 freighter service at Ezhou Huahu Airport and launched a new service to Guangzhou. Saudia Cargo has inaugurated regular cargo flights from Shenzhen, China, to Riyadh.

It's not just airlines; courier and shipping giants are also increasing their stakes. DHL Express has launched direct cargo flights between Sydney and Hong Kong. Maersk Air Cargo has introduced new pilot services between China and the UK to meet peak season demand. CMA CGM Air Cargo plans to launch new Boeing 777 freighter routes connecting Hong Kong, Chicago, and Seoul in the second half of the year, with a second freighter expected to be operational by the end of the year to strengthen cargo connections between China and North America.

The increased capacity investments by overseas airlines and courier giants reflect that over the past two years, Chinese cross-border e-commerce platforms have become the main driver of the post-pandemic air cargo market recovery. It is foreseeable that the capacity demand for e-commerce platforms will significantly increase in the third quarter, especially as TEMU and SHEIN expand into new markets, adding to the volumes of traditional players. Many companies are already considering what TEMU and SHEIN will do in the fourth quarter and peak season.

The rise of cross-border e-commerce has had a positive impact on the air cargo market, driving its continuous development and growth. As the air cargo market continues to expand, particularly driven by Chinese e-commerce demand, the involvement of major airline giants will undoubtedly continue to transform the global air cargo landscape.

It seems that all airlines are now prepared for the surge in e-commerce air cargo, but can the boom in cross-border e-commerce parcels sustain the growth of air cargo? How will the balance between air cargo supply and demand be maintained? In the ever-changing global environment, how will the future of air cargo find its certainty? These are all questions worth pondering.

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WeChat Public Account: Cross-Border E-commerce Logistics Baixiaosheng