Air Cargo Market Weakens As Capacity Floods Into Service on Major Trades

Air cargo capacity continues to flood into service as airlines reactivate passenger flights and freighter operators launch new services between the major markets of Asia, the US, and Europe.

In addition to long-haul passenger aircraft with significant belly freight capacity coming back into service to capture growing travel business, several airlines — including the air freight arms of carriers Maersk, CMA CGM, and Mediterranean Shipping Co. — are adding freighters to the major trade lanes.

Maersk Air Cargo on Monday launched a scheduled service between Billund in Denmark and Hangzhou in China in response to increasing customer demand. The carrier’s internal airline will operate three flights a week using a recently converted Boeing 767-300 freighter and focus on high-value and time-sensitive cargo between Scandinavia, Northern Europe, and Asia-Pacific.

“Air freight with scheduled flights and controlled capacity represents a crucial part of our customers´ end-to-end logistics needs,” Michel Pozas Lucic, global head of air at A.P. Møller-Maersk, said in a statement.

CMA CGM Air Cargo this quarter increased its air freight operations to 15 scheduled flights per week that connect Europe, Asia, and the US, while MSC began its round-the-world service after taking delivery of the first of four Boeing 777-200 freighters earlier this year. MSC has expanded its focus beyond China with the service connecting Mexico City, Indianapolis, and Seoul in addition to Xiamen.

But the additional space is hitting the market as demand weakens and amid the sharp decline of ocean freight rates and high inventory levels in the US and Europe. With abundant container shipping space available at very low cost, in the current weak demand environment there is little urgency for Asian imports to take to the air.

DHL Global Forwarding wrote in its latest market update that cargo demand was unable to fill the available capacity on most trade lanes, with reduced load factors in all regions.

“Expect continuing recovery of the China passenger market and consequently additional passenger capacity on the long-haul lanes,” the forwarder wrote.

Air cargo analyst World ACD in its weekly update wrote that global air freight capacity was up 15 percent in March year over year, with double-digit percentage increases across all regions. That has dragged rates down from the record levels recorded at the end of 2021 and in early 2022 despite the effects of higher fuel surcharges. But prices remain far above pre-pandemic 2019 levels.

By: Greg Knowler / JOC