News / Airfreight peak season fails to deliver, as consumers tighten purse strings

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The looming peak season for airfreight, which should roar to life after the hiatus of the Golden Week holiday in China, looks set to limp along, more or less at the pace of recent months.

Forwarders report no significant rise in activity among cargo owners and no sign of a volume surge, let alone capacity challenges or peak season surcharges.

“This peak season doesn’t seem too peak,” quipped Bob Imbriani, SVP international of Team Worldwide. “We haven’t seen a significant increase in activity and volumes.”

Demand among US importers is lacklustre.

“Most customer contacts are indicating that they do not intend to make any significant increases in their shipping volumes for Q4,” reported Matt Sanders, public relations manager of AIT Logistics.

According to most observers, consumers appear unlikely to maintain their spending habits of the past years, as inflation has undermined their financial reserves and economic uncertainty is prompting more caution.

Earlier in the year, there were predictions of blockbuster product releases lighting up peak season, but Apple’s new iPhone, one of the potential candidates, has not taken off like wildfire, said Mr Imbriani.

The trajectory of the airfreight peak season looks set to follow the curve of the peak for ocean traffic, which was tepid this year. Recently there were reports of some strengthening of airfreight traffic. Mr Imbriani reckons this is due to increased use by the e-commerce sector and possible changes in retailers’ import patterns. They may not have filled their warehouses in anticipation of sales and now need to bring in more product, or they may have waited longer to place orders, hoping for clearer signals on future demand.

Despite the slack demand, managing ocean flows has been challenging because of the schedule changes and rolled sailing implemented by the container lines to mange the balance of demand and capacity, Mr Imbriani remarked. He does not expect such tactics to affect the air cargo market, as capacity growth there has been driven largely by increases in passenger flights bringing more bellyhold capacity.

“Capacity is plentiful. We don’t expect to experience difficulty booking on any mode in any lane,” Mr Sanders commented.

“There’s ample capacity in the market to meet this mild peak season, with a few exceptions. We’re seeing a capacity shortage out of origins like Hanoi, Vietnam, but as soon as cargo reaches main transit hubs in Europe or the US, things run relatively smoothly,” reported Neel Shah, SVP air strategy & carrier development at Flexport.

With capacity readily available, forwarders have seen scant need for cargo charters. Mr Sanders said: “Charters have been and continue to be readily available. We have been booking charters on occasion to handle out-of-gauge/project cargo, but as far as I know we’ve had no reason to use charter capacity as a supplement over typical tradelanes.”

Traditionally, forwarders have stepped up their block space agreements (BSAs) and allocations for this time of the year, but in the current market, Mr Imbriani said, BSAs have been available but the airlines have shown little inclination to promote them.

“They are moving more and more to capacity pricing,” he added, referring to online pricing on carrier websites and portals that offer different rates for different flights on a given route.

Currently, flexible ad hoc pricing may well look more enticing to carriers for most freight moving to the US and Europe for the peak retail season. According to WorldACD, total chargeable weight flown in the first eight months of this year was down 7%, with the biggest declines in general cargo,  down 12%, compared with a 3% drop in special cargo. Likewise, general cargo pricing was down 38% from the same period in 2022, whereas pricing for special cargo sank 30%.

Under these circumstances, peak season surcharges – which used to be an integral element of the season – are not much of a factor this year.

“We’ve seen a couple of ocean carriers try this, but they were not successful,” Mr Imbriani observed.

Mr Shah, however, is upbeat on prospects for the market, pointing to signals from various retail sectors that companies are finally selling inventory they had stockpiled and an increase in purchase orders.

“Looking beyond peak season and into 2024, we foresee the market returning to equilibrium, as there’s a slew of outdated, old freighters that’ll be forced into retirement,” he said. “That’ll pull dedicated capacity out of the market, and we could see rates go up as a result.”