In an air freight 'race-to-the-bottom', everyone loses

August began with members of the Letzte (Last) Generation climate activist group glueing themselves to taxiways at Leipzig/Halle Airport. The approach took place in the dead of night, when the group knew no passenger aircraft would be taking off. Instead, they were specifically going after the air cargo segment.

Speaking with The Loadstar, Letze Generation’s Lena Johnsen despaired that it was just too easy to ship things via air cargo. Air cargo was just too cheap and convenient. “The faster we can get goods, and transport them, the cheaper it gets.”

Ms Johnsen is not wrong. In practice, air cargo rates have gone up since the mid-2010s. According to the Baltic Exchange Air Freight Index (BAI), air freight from Hong Kong to Europe went from just under $3 per kg in 2015, to $8 highs in 2022, and in 2024, has remained at a level between $4-$5 per kg since.

But these figures do not tell the whole story.  According to Baltic Exchange data, in May, ocean freight rates were sitting at 324% above the same period in 2023. Air cargo rates, likewise, have yet to return to their pre-pandemic levels. They likely will not, so long as the Red Sea disruption remains to stave off the new reality, masking the true impact of new additions to the air cargo fleet.

IATA data have Available Cargo Tonne-Kilometres (ACTKs), the measure that industry uses to determine capacity, closing in on a 16% increase between pre-pandemic levels and the middle of this year. Demand, measured in cargo tonne-kilometres (CTKs) had risen by 11.1% year on year as of May this year. Boeing anticipates an increase in freighter aircraft, to 3,610, by 2041 – from 2,240 in December 2022.

One need not look far to see how this ends. In maritime, busy years pre-2008 saw containership ordering skyrocket. Post-economic crash, overcapacity hung over the industry until 2019. It is hard to overstate how much of a buyer’s market shipping became in the mid-2010s. Daily charter rates below $10,000 were common for an 8,500teu vessel. Dismal balance sheets led to consolidation, with big hitters like CSAV, UASC and Hamburg Süd absorbed by even larger competitors.

Crucially, it also led to a leaning-out of ship operations and a complex adjustment to rock-bottom earnings, to the extent that shipping costs were the cheapest element of any product. It might be hard to maintain perspective when the last five years have been dominated by the twin peaks of pandemic and Houthi, ridiculous charter rates of anything up to $200,000 per day and the war between Israel and Gaza seemingly becoming a war between Israel and the entire Levant. But however it is eventually resolved, the aftermath will be a buyer’s market for both air and sea.

And this is not good news for Earth’s Letzte generation. Planes are roughly 14 times more carbon-heavy than a ship travelling the same distance, according to Hamburg-based environmental consultancy Systain. Ultra-fast fashion, pioneered during the 2010s when shipping cost next to nothing, has since perfected the art of responding instantaneously to micro-trends which can disappear in a fortnight — much like the clothes themselves. Shein, Temu, Zara and others have demonstrated that whatever the spread in cost between ocean cargo and air freight, it will be paid, and profits will be made.

“It is always, more stuff, more transport, faster delivery, more, always growing and exceeding,” said Ms Johnsen. “We need to get off this at some point, right?”

Around 600,000 Shein and Temu parcels arrive every day in the US. All are individually packaged, meaning they can take advantage of the de minimis rule, which allows products to be imported duty-free if the value of the parcel is less than $800 (in practice, most of them would still qualify even if this threshold were lowered to $20).

Though concern for the environment may be secondary to that of punishing China, Germany has thrown its weight behind the revision of the EU version of de minimis threshold, of €150, which would see some two billion annual parcels brought under new regulation. The French government has taken an even more aggressive stance, and in the coming years plans to slap a €10 tax on every Shein and Temu garment sold, doubling the cost of most.

Bizarrely, then, the government of Germany, and its Letzte Generation, could in due course find themselves on the same side.