In 2023, shippers may benefit from the competition among carriers due to decreased air cargo demand. This decrease in demand for air cargo and increase in availability could make airfreight a popular and potentially more affordable option for shipping household goods in 2023.
Shipping rates in 2021 reached some of the highest levels in history, but as demand softened and capacity increased in 2022, prices began to stabilize. During the last three months of 2022, the airfreight industry experienced a decrease in demand compared to 2021. November was especially slow, with shippers making fewer bookings than usual.
The recent decrease in demand comes after months of supply chain chaos. The pandemic saw an increase in businesses relying on airfreight to avoid delays caused by congested ports. However, now that ocean congestion has cleared, the demand for costlier air cargo services has decreased.
The need for air cargo is forecasted to decline further in 2023. According to the International Air Transport Association (IATA), an airline trade group, global sales are projected to reach $149.4 billion. This is a decrease of $52 billion from 2022 but still higher than 2019's figure of $48.6 billion.
According to IATA's December forecast, the worldwide air cargo industry will experience a decrease in volumes, yields, load factor, and revenues by 2023. Predictions from the organization forecast that air cargo volumes will drop by 8% this year and another 4% the following year.
External factors have had a significant impact on air cargo.
“Things that are exerting a bit of a drag in terms of cargo volumes include the conflict between Russia and Ukraine, global [economic] growth slowdown, higher inflation, higher interest rates, and the higher cost of living," said Andrew Matters, IATA’s head of policy analysis.
In addition to political factors, the global economy also impacts the air cargo industry. In 2023, the International Monetary Fund estimates that global growth will decelerate to 2.7% from its sizable 6% recorded in 2021 and 3.2% in 2022. The World Trade Organization predicts that international commerce will dramatically decrease to 1% in 2023 due to the numerous hindrances present in the global economy.
The decrease in global growth and international commerce is expected to have an impact on the air cargo industry. With lower demand for goods being shipped, there may be a surplus of cargo space available on flights. This surplus can result in increased competition among air cargo carriers, leading to lower prices for shipping.
The International Air Cargo Association (TIACA) predicts that e-commerce activity will remain a substantial driver of growth for air cargo services in the year 2023. This year, IATA expects cross-border e-commerce sales to surge by 13% year-over-year, reaching an astonishing $2.1 trillion. IATA has revealed that 80% of international online sales are delivered via air shipping and e-commerce makes up 18-20% of all air cargo.
Despite this positive forecast, the Commerce Department announced late last month that consumer spending fell in both November and December. The strong job market resulted in rising incomes; however, instead of spending the additional funds, Americans opted to save more. This behavior suggests a growing caution among the population due to concerns about layoffs and the possibility of an upcoming recession.
Overall, the slower pace of global growth and decreased demand for goods being shipped may lead to a more favorable environment for businesses looking to ship goods via air cargo. These geopolitical and economic factors are expected to continue to influence air cargo into the new year.
Air cargo’s popularity and costs are impacted by many factors that can change at any moment. The forecast for 2023 is filled with potential “risks" that might have a positive impact on the industry. For example, if the Russia-Ukraine conflict were to be resolved, consumer and business morale could increase dramatically. This could spark a rebound in economic activity, consumption, and global commerce. Ultimately, it would be a tremendous advantage for the cargo industry in terms of volume.
The increase in availability might make air cargo an attractive—and slightly less expensive—option for relocating employees. With airfreight rates at an unexpected low, businesses might opt to choose air cargo over other methods of transportation. With decreased demand and increased capacity, the power to negotiate prices has shifted back to the advantage of shippers.