In recent years, cross-border e-commerce has undoubtedly become the "golden egg" of global air cargo. Without exaggeration, e-commerce is rapidly evolving into the primary cargo type in the air freight industry, surpassing traditional goods. This growth trend is placing pressure on available capacity for other industries, driving up prices across the sector.

By 2024, the surge in online purchases of consumer goods showed no signs of slowing, and this trend is expected to continue into 2025. According to relevant reports, in early 2024, just two Chinese online platforms, TEMU and SHEIN, were transporting 4,000 tons and 5,000 tons of cargo by air per day, respectively. Since then, this volume has only increased, underscoring the massive scale of cross-border e-commerce air cargo.

1. Are freight forwarders being sidelined?

At first glance, the strong growth and sustained demand from cross-border e-commerce have brought "production line" cargo flows across intercontinental routes, benefiting airlines, freight forwarders, and logistics companies alike. During the year-end period, demand for cross-border e-commerce tends to rise further, allowing these companies to reap additional benefits.

However, there’s a downside. Cross-border e-commerce is absorbing a substantial amount of air cargo capacity, causing significant changes in the composition of the logistics chain.

An industry insider estimates that for some airlines operating routes from the Asia-Pacific to the U.S. and Europe, cross-border e-commerce now accounts for up to 80% of their cargo capacity.

This shift is exacerbating tensions between airlines and freight forwarders, with airlines increasingly preferring to work directly with major e-commerce platforms and their logistics partners, signing Block Space Agreements (BSA). This trend is marginalizing traditional freight forwarders. While the extent of this practice across the industry remains unclear, there are examples where airlines offer discounts by bypassing middlemen and dealing directly with shippers.

Ground handling agents (GHA) are also at risk of being excluded from the cross-border e-commerce air freight boom, as most e-commerce platforms prefer to control their supply chains directly, handling pallet assembly themselves and delivering goods directly to airports for loading onto planes.

In this context, freight forwarders and GHAs need to adjust their business models and infrastructure to meet the needs of the e-commerce sector. Failing to do so could result in significant business losses or even threaten their survival.

2. Regulatory changes driving up costs

Increased scrutiny from regulatory authorities on the cross-border e-commerce industry could put pressure on the sector.

Reports of illegal operations, improper declarations, and issues surrounding VAT and other taxes have caught the attention of governments worldwide. In the U.S., the Customs and Border Protection (CBP) launched a crackdown earlier in 2024, not only increasing parcel inspections and introducing changes to data requirements but also proposing to lower the de minimis threshold globally.

Additionally, U.S. President-elect Donald Trump, set to take office in January 2025, stated in November 2024 that he would sign an executive order imposing a 25% tariff on all goods from Mexico and Canada, and a 10% tariff on goods from China, in addition to any other tariffs. To preempt these new tariffs expected in January, many shippers are rushing to transport goods from China to the U.S.

Taiwanese freight forwarder Dimerco Express noted that due to increased demand for electronics, general cargo, and the pre-tariff surge, the air freight market has been unusually busy. From mid-December 2024, air freight volumes surged, especially for consumer electronics. This is unusual because the market usually slows down after December 5th. However, this peak is expected to last until late January 2025, just before the Chinese New Year.

Currently, many shippers are scrambling to air freight their stock from China to the U.S. before the potential tariff increase on January 20th, causing a spike in air freight demand, pushing capacity to critical levels. Rates from China have risen slightly again, particularly for spot rates to the U.S. As this boom continues, e-commerce will remain a key theme for industry growth.

In 2025, the cross-border e-commerce industry may face new regulatory requirements. However, if the sector can quickly adapt to these changes, its growth momentum is unlikely to be significantly affected.

But if stricter regulations lead to higher costs, e-commerce companies will have to confront a fundamental question: Is it still economically viable to ship low-cost goods by air? Will this trigger a shift in the e-commerce model, with sea freight, warehousing, and localized production becoming more mainstream?

Though speculative at this stage, one possible future scenario is that, with the support of AI, e-commerce platforms will become much more precise in predicting consumer habits. A significant portion of orders could be pre-stocked and transported by sea, reducing the reliance on air freight.

3. Growth in traditional sectors

While cross-border e-commerce has attracted almost all the attention, the traditional and main vertical markets of the air freight industry continue to grow.

James Evans, General Manager of Cathay Cargo, said that while the e-commerce sector dominates both air cargo and Cathay's own capacity, there has been an increase in tonnage for specialized cargo solutions, such as semiconductors and pharmaceuticals.

For instance, Cathay Cargo has seen strong demand for pharmaceutical logistics solutions. Its team, certified by the International Air Transport Association (IATA) under the CEIV Pharma standard, successfully used next-generation Ultra Track data loggers on trial flights between Hong Kong and Miami.

 Additionally, Cathay Cargo has partnered with the Hong Kong Airport Authority, giving it a second Pharma.Aero route, with six weekly cargo flights operated by freighters.

The positive growth trends in vertical sectors such as semiconductors, pharmaceuticals, perishables, and live animals demonstrate that cross-border e-commerce has not completely dominated the global air freight industry!

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