1.E-commerce Drives Global Air Cargo Growth

In July 2024, the global air cargo market achieved double-digit year-on-year growth for the eighth consecutive month, reaching its highest level since the record peak in 2021.

According to the International Air Transport Association (IATA), global air cargo demand in July 2024 grew by 13% compared to July 2023. With the peak season yet to arrive, IATA Director General Willie Walsh believes that this year will be a very strong year for air cargo. Air cargo continues to benefit from global trade growth, the e-commerce boom, and limited sea freight capacity.

E-commerce has played a significant role in the growth of air cargo during this phase. Over the past decade, e-commerce has steadily grown, and the surge in online shopping due to the pandemic further fueled this growth. Andre Majeres, IATA’s Head of E-commerce and Cargo, stated, “In the past, South America experienced slightly faster growth, and Europe also saw growth. But this year, the main e-commerce markets are China and Southeast Asian countries, including the Philippines, Vietnam, and Indonesia. The rapid growth in these countries is due to large-scale outsourcing of manufacturing from China.”

Due to consumers’ reliance on e-commerce and habits of online ordering, e-commerce will persist, but current capacity limitations are a challenge for its development. E-commerce companies are seeking every possible way, such as planes, roads, trains, and sea transport, to deliver goods to their destinations. Some goods need to be transported quickly to consumers, which gives air transport a competitive advantage.

2.Challenges Brought by E-commerce Supply Chain

While e-commerce freight has brought revenue growth to airlines, freight forwarders, and other stakeholders in the supply chain, it also comes with many challenges.

The first challenge is the transportation process. Majeres explained, “E-commerce in the air freight industry is not like designated products such as mail, live animals, or pharmaceuticals but is a service level that requires efficient supply chain management. Generally, e-commerce is still considered general goods or general mail, but if it includes dangerous goods like lithium batteries, it is classified as hazardous material. E-commerce is just an online transportation method, but everyone believes it has a special nature.”

Another challenge is dealing with the complex and changing customs regulations of different countries. As customs authorities increase their focus on security and fraud prevention, the demand for accurate, real-time parcel-level data is rising. For instance, the European Union’s Import Control System 2 (ICS2) requires detailed electronic data for all goods entering the EU, which requires advanced digital infrastructure.

Feeport (formerly x7 Trade) CEO Pimentel noted that each EU country and customs authority has its own set of rules, document requirements, and compliance standards, making smooth customs clearance challenging. Exporters face different requirements in different countries, creating hurdles for those wanting to export to the EU.

As peak season approaches, Pimentel believes that data sharing can help exporters decide where to place goods. Additionally, although e-commerce hubs are essential, exporters are increasingly leaning towards direct placement in each country, as hub airports face limitations. Direct placement allows for more efficient, direct delivery to buyers.

A third challenge is the unclear responsibility within the e-commerce supply chain, particularly in the U.S. and Europe. Robert Khachatryan, CEO of California-based freight forwarding company Freight Right Global Logistics, pointed out that there is a gray area in e-commerce transportation, regarding who is responsible for non-compliance or illegal imports. In the U.S., this issue is unclear, with customs brokers in Europe bearing more responsibility than their U.S. counterparts.

Given the rapid growth of e-commerce, U.S. customs may increase enforcement through penalties on brokers, as they are the key pressure point in the customs enforcement chain. Brokers will then push for better data accuracy and screening throughout the supply chain to reduce their risk of penalties.

In Europe, Stefano Mauro, Director of E-commerce Policy and Taxation at the EU, called for shared responsibility among stakeholders. The burden shouldn’t fall too heavily on any one party, but communication should be clear across the chain. It’s essential to clarify who should submit e-commerce freight information—customs authorities or online platforms.

3.Peak Season Approaches: Surge in E-commerce Freight Demand

In the short term, e-commerce has significantly impacted the air cargo market, increasing demand, raising freight rates, and reducing available capacity, prompting stakeholders to reevaluate contract strategies.

Judah Levine, Head of Research at Freightos, noted that the rise of e-commerce has created challenges in other sectors. Air freight rates have remained at peak season levels year-round, with e-commerce platforms like TEMU and SHEIN occupying a large portion of capacity. This has made it difficult for traditional shippers and freight forwarders to secure space, leading to higher costs.

The competition for capacity will intensify, and traditional fourth-quarter peak season is expected to see increased demand from both traditional air cargo shippers and e-commerce. To meet market demand, airlines are increasing capacity, though challenges remain, such as the U.S. and China not yet restoring pre-pandemic daily flight numbers.

Amar More, co-founder and CEO of Kale Logistics Solutions, pointed out that the peak season is no longer confined to a two-month window. The holiday shopping season now spans 4-5 months, offering unique opportunities for air cargo operators to prepare and optimize operations ahead of time.

With the peak season approaching, global air cargo must be ready for both demand and supply, and it’s crucial to focus on improving compliance and standards in the e-commerce supply chain.

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Public Account: Cross-border E-commerce Logistics Baixiaosheng