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Home Shipping & Logistics Air Freight

Top Air Freight Trends to Watch in 2021

With air freight capacity becoming more difficult to secure and freight rates rising, the shippers that plan ahead and explore alternate options will be able to ride out the current challenges while preparing for the post-COVID transportation environment.

May 4, 2021
Top Air Freight Trends to Watch in 2021
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This post is also available in: Spanish Portuguese (Brazil)

Coming off the worst year for air cargo demand since the International Air Transport Association (IATA) began tracking such trends in 1990, the commercial air freight industry is slowing beginning to emerge from the debacle that was 2020 and find its way in the “new normal” operating environment.

Hit hard by global lockdowns, limitations on travel, labor shortages, and other problems that surfaced as the COVID-19 pandemic impacted countries around the world, the air cargo sector saw volume decrease by 10.6% in 2020 compared to 2019. Other key developments included:

  • Global capacity, measured in available cargo tonne-kilometers (ACTKs), shrank by 23.3% in 2020 (‑1% for international operations) compared to 2019.
  • Due to the lack of available capacity, cargo load factors rose 7.7% in 2020. IATA says this contributed to increased yields and revenues, providing support to airlines and some long-haul passenger services in the face of collapsed passenger revenues.
  • In December, global demand was 0.5% below previous-year levels (-2.3% for international operations) and global capacity was 17.7% below previous-year levels (‑6% for international operations). “That is much deeper than the contraction in demand, indicating the continuing and severe capacity crunch,” IATA points out. “With the stalling of the recovery in passenger markets, there is no end in sight for the capacity crunch.”

Cautiously Optimistic

In assessing the current air freight environment, IATA says economic conditions were “picking up” as of early-February and that the cargo sector is “surviving the crisis in better shape than the passenger side of the business.”

“For many airlines, 2020 saw air cargo become a vital source of revenues, despite weakened demand. But with much of the passenger fleet grounded, meeting demand without belly capacity continues to be an enormous challenge,” IATA’s Alexandre de Juniac said in a press release.

“And, as countries strengthen travel restrictions in the face of new coronavirus variants, it is difficult to see improvements in passenger demand or the capacity crunch,” de Juniac continued. “2021 will be another tough year.”

Rates are Rising

According to Supply Chain Dive, the lack of capacity along with continued demand pushed air freight rates above 2019 levels. “Rates more than doubled year-over-year from China to the U.S. to reach $7.57 per kilogram in the last week of December,” it points out, “but pricing has already fallen to reach $6.19 per kilogram in the first half of January.”

These fluctuations will likely continue as 2021 progresses, which means shippers will have to plan for uncertainty when securing their air freight capacity in the coming months. “Accurate forecasting by shippers will be crucial to manage their shipping requirements – and costs – efficiently, as air freight rates look set to remain high this year,” The Loadstar points out.

The Baltic Air Freight Index saw a 100% year-on-year increase this week, it adds, while the past few weeks have seen the highest readings since the second quarter (2020) capacity shortage. However, forwarders in Asia have noted a softening market ex-China, in part due to lockdowns, although e-commerce remains strong.

“Air freight wise, spot rates reduced after new year, but it was not a plunge,” one Southeast Asian freight forwarder told The Loadstar. “Air freight [rates] in general might not drop significantly for the next six months at least. After all, major passenger belly capacity will still be absent for a while.”

Preparing Ahead

With capacity shortages continuing to put pressure on air freight rates—in part due to the booming e-commerce market—shippers should also be prepared to deal with uncertain seasonal trends. The ongoing demand for PPE, significant weather events, and the worldwide vaccine rollout will also impact air freight capacity this year and into 2022.

To address these and other air freight issues effectively, shippers should put more time into good forecasting and demand planning, and then share that data with their logistics providers.

“To the extent possible, greater collaboration with partners is critical – communication with intermediaries and carriers and integration of data and technological tools,” The Loadstar advises. “The bottom line is rates are likely to remain elevated and volatile for some time, and those looking for reprieve in 2021 may have to be patient.”

Given expected ongoing tightness in air cargo, Inbound Logistics also tells shippers to continue evaluating other modes of transportation and leverage technology that allows them to efficiently manage and book freight, and compare rates, lanes, and modes. By adopting a flexible approach and working closely with a reputable logistics provider that has established relationships with carriers, companies can work through the current challenges while also preparing for the post-COVID business environment.

Tags: Air FreightFeatured
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