Demand for airfreight rapidly rose during the COVID-19 pandemic as PPE, medical equipment and other just-in-time global supply chains relied on the service for quick and reliable transport.
During this time, multimodal third party logistics service providers (3PL), like CH Robinson, saw a lot of airlines convert passenger planes into freighters to increase capacity which typically relies on belly space in passenger aircraft, which had abruptly slowed.
“Fast forward to 2023, airfreight demand is now at historic lows as many shippers have turned their heads to ocean shipping to save costs after years of expensive supply chain disruptions and delays,” Matt Castle, VP of global forwarding at C.H. Robinson, explained.
“Cheaper alternatives, a slump in consumer spending, and stockpiles of retail inventory have all contributed to declines in airfreight demand,” he continued. “Now, the industry is seeing some increases in demand as shippers look to avoid other supply chain disruptions and capitalise on the speed of airfreight.”
Challenging recovery
In 2022, ocean shipments were delayed at the ports for weeks due to labour issues on the west coast of America. Because of these disruptions, inventory forecasting suffered, and many retailers found themselves ordering inventory significantly earlier than normal to mitigate disruption from delays. Once wait times returned to normal, shippers had backlogs of inventory and had to delay new orders from their suppliers.
“Paired with volatile economic conditions causing low consumer spending and rising fuel costs impacting rates, capacity has been high across modes, specifically air as consumer travel schedules and belly space increased dramatically in the summer,” Castle stated.
“Nearshoring, reshoring or friend-shoring has also impacted the evolving freight landscape. As businesses have moved manufacturing operations across the globe to mitigate varying geopolitical risks to their supply chains and further diversify, their shipping volumes have moved with them,” he continued.
In many instances, new manufacturing locations are closer to their final destinations, allowing shippers to potentially rely on rail or truck versus air and ocean. But the transition isn’t always as smooth.
As businesses adjust to a completely new supply chain, air is used frequently to keep up with inventory as moving supplier components can be more difficult than just relocating manufacturing facilities. Also, even with moving closer to their end consumer, many shippers still need to import raw materials via air or ocean to support their new or growing manufacturing locations.
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Trends and just-in-time deliveries
When major tech is launched and despatched out of Asia around the holidays, like the newest phone or consumer gadget, the sector tends to see a rapid increase in demand for air.
The tech itself typically utilises charters that are planned months in advance, so the increase in demand is primarily driven by the accessories, like phone cases and new charging cords.
“This demand spike mirrors what we would see back in 2019 before the pandemic and continues for months after launch,” Castle explained.
The automotive industry has historically relied on just-in-time inventory management to keep up with production schedules and increase efficiency. When supply chain disruption occurs, suppliers, and original equipment manufacturers (OEMs) are put in a bind as delayed cargo can create a domino effect of issues down the supply chain.
“While just-in-time delivery can be reliable, disruption is unfortunately common and airfreight allows them to quickly pivot to keep goods moving and prevent a line-down situation,” Castle said.
Disputes and delays
While notably more expensive, airfreight has always been a critical tool for shippers looking to move goods fast and pivot amidst disruption in other modes.
Specific industries have also leveraged airfreight more than others due to the nature of the mode. For example, medical equipment, electronics and trend-driven retail goods leverage airfreight as they cannot afford major delays in the supply chain.
While disruption, whether from labour disputes, geopolitical conflicts, or natural disasters, has impacted various routes and modes, air has remained reliable for shippers that need to quickly pivot.
“We’re seeing upticks in airfreight compared to the first half of the year, and we see that continuing as shippers build contingency plans to adapt to a volatile global environment in 2024 and beyond,” Castle outlined.
Several factors at the US-Mexico border caused delays at the end of September and throughout October. Technology issues at customs, increased border security, and crossing closures created congestion and a backlog of shipments.
“We worked with our customers to shift freight as needed. This includes air solutions, like charters, or rerouting trucks to other ports like Nogales or Laredo depending on final destination in the US,” Castle highlighted. “Events like these are perfect examples as to why we help shippers prioritise contingency and agility across modes when planning.”
With congestion at the border happening at the same time as the 2023 United Auto Workers strike, many automotive suppliers shifted freight to air to mitigate risks and avoid production line-down situations then and when the strike ends.
“For many of our automotive customers, we’ve been able to secure air charters within hours to meet their needs and keep inventory moving from Mexico into the US,” Castle said.
Additionally, fast fashion or trendy retail stores are leveraging air to ensure their goods can reach stores before any specific fad has passed. As some ocean carriers use blank sailings to combat lower demand, many shippers cannot risk delays and pivot to air for a quicker, reliable option.
Heading into the holiday season
Many things currently impacting the airfreight market are consistent with historical trends. With electronic launches, it is normal to see demand elevated for the months following.
Specifically, around the holidays, it’s not unexpected to see many surprises there as those are planned months in advance and therefore don’t typically impact day-to-day capacity. Overall, economic conditions and consumer spending tend to impact demand across modes. When consumer spending does increase, C.H. Robinson predicts that airfreight will play an even larger role than it is currently.
“While we’re seeing air continue to play an important and continual role in tech freight and other industries, we’re starting to see air once again rise as a solution for shippers looking to mitigate the disruptions entering the market, like the role air played during the pandemic,” Castle said.
“In August, we saw the first growth in air cargo demand since February of 2022. Many predicted that we wouldn’t have a peak holiday season in 2023, and while it is mellow compared to the last few years, it is forecasting similarly to what we experienced before the pandemic.”
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Bumps and bright spots
It’s taken the airfreight market a year to recalibrate, but the industry seems to be on the upswing from rock-bottom demand. As seasonality returns to normal, predictability and forecasting are more reliable for planning.
“High demand for passenger travel will also continue in and out of Europe, leaving ample capacity for shippers preparing for the holidays. While forecasting is critical to the modern shipper, it can be costly. The pricing advantage may shift away from the shipper in Q4,” Castle predicted.
It’s important for shippers to build agility into their supply chains. As the global shipping environment grows increasingly complex, planning with disruption in mind is crucial to building a stronger supply chain long-term.
“Strategies like supplier diversification, shifting ports, and optimising shipments across modes can maximise efficiencies and lessen the risk for disruption. Shippers should stay abreast of the evolving market conditions to understand the long and short-term impacts on their freight,” Castle suggested.
