News / Gloomy forwarders expect little change in mediocre air cargo market

Little change is expected in air cargo market conditions in the coming months, as soft demand, capacity increases and downward pressure on rates remain dominant, according to two major forwarders.

“We expect these same trends to continue in all markets in the third quarter,” Claude Picciotto, director airfreight at Bolloré Logistics, told The Loadstar.

His counterpart at Geodis, forwarding EVP Martin Neuville, added: “At this stage, there is no indication of a significant recovery in demand. While we should benefit from an upturn during the end-of-year peak, we do not foresee any real return to growth before 2024 at best. ‘Supply’ continues to grow with the spectacular increase in capacity offered by the return of passenger flights.”

As to how markets are performing, in terms of volumes and rates, Mr Picciotto put Asia Pacific to MESA (Middle East South Asia), Asia Pacific to Africa, North America to Africa and North America to MESA as best and Asia Pacific to North America, North America to Asia Pacific and North America to Europe as worst.

Mr Neuville said the transpacific market had been the main beneficiary of the post-Covid rebound in demand and that the current decline was “creating a fairly spectacular collapse effect”.

He added that on the transatlantic, the increase in passenger capacity “has led to a demand-supply imbalance”.

Mr Picciotto noted a 4% increase in healthcare shipments, in contrast to hi-tech goods which were down 15%. E-commerce shipments were up 10%, perishables had fallen by 2% and double-digit declines had been recorded in raw materials (-17%), fashion (-16%) and automotive (-13%).

And with declining demand in traditional retail outlets and improved service quality in ocean freight, “the apparel sector has suffered a near disaster”, added Mr Neuville.

As for rate development, Mr Picciotto claimed yields on the main trades were very close to 2018/19 levels, and sometimes lower, adding: “Yields are likely to decline further as a result of weak demand and increasing capacity.”

Mr Neuville said that after the boom period for rates, linked to the sharp fall in capacity during the pandemic, they were returning to normal levels “perhaps a little faster than expected, given the low demand”.

He added: “We should see a peak season of the type we saw pre-pandemic, with a seasonal increase in strong demand. However, the sluggish levels of demand we are currently seeing, coupled with abundant supply, should not give rise to the severe difficulties we have seen at these times in previous years.”

In a first-half operating statement at the end of last week, parent SNCF said Geodis had boosted profitability – ebitda totalled €589m – despite the challenging international environment. Revenue showed a decrease of 12%, on the same period last year, at almost €6bn – down 20% at constant scope of consolidation and exchange rates.

The global economic slowdown resulted in declining volumes, which affected all Geodis’s activities, said SNCF, an impact particularly marked in forwarding, with air and sea down 19% and 14%, respectively.

Earlier this month, Bolloré Group announced it had agreed to sell 100% of Bolloré Logistics to CMA CGM Group for an estimated €4.65bn. The unit’s results did not appear in Bollore’s H1 operating statement on 21 July.