Over-capacity (finally) looms on the horizon for the air freight market. This is after years of us banging the same ‘more demand than capacity’ drum - and a progressive loosening of capacity constraints with the return of belly capacity following the resurgence of passenger traffic. Meanwhile, a lot of the shocks from last year (primarily events proceeding the Russian invasion of Ukraine) have been baked into the market price, which has been declining (BAI down 33.5% since last January). Freight modes are generally being crushed (woe to the container freight market especially), largely linked with a fairly persistent inflation/ recession outlook for the core European and North American economies. The main potential support for freight rates could actually come from volatility in the fuel prices. However, these have also come off over the past few months.

Freight modes are generally being crushed (woe to the container freight market especially), largely linked with a fairly persistent inflation/ recession outlook for the core European and North American economies. The main potential support for freight rates could actually come from volatility in the fuel prices. However, these have also come off over the past few months.

Despite the spectre of over-capacity, stalwarts in the industry have been sticking with air freight chartering. Any recent push prior during Chinese New Year does, however, mask the true nature of the air freight market for 2023. From our perspective it’s more important to look even further forward than the second half of 2023. As we mentioned, freight rates on other modes are bleak but appear to be bouncing along the bottom with characteristic volatility more akin to 2019. This actually shifts the perspective to more bullish than bearish. One thing the COVID period proved was the potential and rapid upside in rates which are possible given some jarring event (one recalls those who said that we would never see an air freight market like we did during the winter peak of 2017). 

About Peter Stallion, Head of Air and Containers, Freight Investor Services

Peter Stallion heads up the Air and Container Freight desks at FFA brokerage Freight Investor Services. He started his career in air freight chartering, and has a passion for emerging risk management markets and the logistics industry.