News / Air cargo: yields and friction up, but demand slowing, as trade 'rebalances'

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Air cargo growth will likely slow this year, but those players that can adapt and help customers navigate the “friction and rebalancing of trade” will win out, according to McKinsey. 

Senior partner Ludwig Hausmann, in a ‘state of the industry’ presentation at the World Cargo Summit in Bruges today, noted “tons of friction, changes, tariffs and a rebalancing of trade” this year.  

He also revealed that there were clues which indicated that 2025 would likely see a decrease in tonnage growth rates.   

One of the main drivers of demand, Dr Hausmann explained, was inventory levels: if inventory grows faster than sales, then shippers are unlikely to restock or import.  

“We have very good data for US inventory-to-sales data, and are right now on an inventory level that doesn’t suggest people would import and order much more. It rather suggests that we will see a bit of a decrease in growth rates,” he said.  

“It looks like we’re still going to have a good year on the yield side. We’re likely not going to have much growth in tonnage; nowhere near the 12% from 2024,” he added, and predicted that growth would likely fall between 0-5%.   

Another factor that could influence demand is tariffs. Dr Hausmann revealed that 20% of cargo airlines’ revenue was generated on lanes inbound to the US, and warned: “We have seen tariff impact on trade volumes before.  

“There was one Trump administration before and in 2018-2019 they introduced quite a significant tariff on certain products coming in from China, and the overall air cargo volume development saw a contraction in 2019.”  

And even if tariffs don’t have a huge impact on ecommerce, due to its low-cost base, Dr Hausmann pointed out that “the de minimis issue could become relevant”.  

He said: “The question is, if the $800 threshold gets eliminated, if more pre-notification is required, what will that do to change this cross-border ecommerce supply chain?”   

Finally, McKinsey data found that 20% of the global goods trade “is happening between countries that are very distant in geopolitics”, shown on a “geopolitical distance scale”, derived by analysing how countries vote at the UN, and trade environments with other countries.  

This scale revealed that the geopolitical distance between the US and Germany, or between China and Russia, “is low”, but between the US and China is “very large”.   

“With a lot of our air trade flying between geographies that are not geopolitically aligned, there will be tons of friction and changes and tariffs and rebalancing of trade, which means if we are agile and help our customers react, we’re going to do business,” Mr Hausmann concluded.   

As John Manners-Bell, CEO of Ti, noted in a white paper published today on the impact of geopolitics on trade and logistics: “Whilst once economics and technology were determining factors in sourcing and off-shoring decisions, manufacturers, retailers, and their logistics service providers now need to navigate through the complex and shifting environment of domestic politics and international relations.”