Overview of Current Market Conditions

The air cargo market is currently navigating a unique and transitional phase. Traditionally marked by a well-defined peak season in Q4, the market in late 2024 has seen relatively steady activity levels without the dramatic surges typically expected at the year's end. This shift is largely attributed to businesses frontloading inventory earlier in the year, ongoing ocean freight constraints, and the increasing dominance of e-commerce platforms such as Amazon, Temu, Shein or Alibaba securing dedicated freighter capacity.

Rate trends across key routes, such as Shanghai-North America (BAI82) and Shanghai-Europe (BAI81), highlight the steady yet constrained market conditions. For instance, rates from Shanghai to North America have hovered between $6.03 and $6.79 per kilogram throughout November and early December, reflecting consistent demand despite global challenges like geopolitical tensions, tariff uncertainties, and manufacturing slowdowns.

Rate trends across key routes, such as Shanghai-North America (BAI82) and Shanghai-Europe (BAI81), highlight the steady yet constrained market conditions. For instance, rates from Shanghai to North America have hovered between $6.03 and $6.79 per kilogram throughout November and early December, reflecting consistent demand despite global challenges like geopolitical tensions, tariff uncertainties, and manufacturing slowdowns. Similarly, rates on intra-Asia routes, such as Hong Kong to Southeast Asia (BAI33), remain modest, ranging between $1.32 and $1.55 per kilogram, demonstrating competitive pricing in this high-frequency trade lane.

 

Key Drivers of Market Dynamics

  • E-Commerce and Changing Consumer Behavior

Booming e-commerce remains a central pillar of demand, especially as direct-to-consumer models from Asia to North America and Europe grow. Platforms like Temu and Shein have significantly contributed to the consumption of air freight capacity, leading to premium rates on many routes. With e-commerce demand continuing to rise globally, especially in regions with low de minimis thresholds, air freight will likely remain robust through much of 2025. However, the US review of de minimis rules may create temporary disruptions or pricing shifts, particularly for Chinese-origin goods.

  • Tariff Pressures and Trade Policy Shifts

The anticipated implementation of US tariffs on Chinese imports in early 2025 is prompting a pre-tariff rush, leading to heightened demand in Q1 as businesses seek to stockpile goods. This rush is expected to place additional pressure on logistics networks, tightening air cargo capacity and pushing rates higher.
The anticipated implementation of US tariffs on Chinese imports in early 2025 is prompting a pre-tariff rush, leading to heightened demand in Q1 as businesses seek to stockpile goods. This rush is expected to place additional pressure on logistics networks, tightening air cargo capacity and pushing rates higher. Concurrently, the longer-term trend of relocating manufacturing to Southeast Asia is reshaping trade routes and demand patterns, further influencing capacity allocation and pricing strategies.
  1. Manufacturing and PMI Trends

Global manufacturing showed mild growth in late 2024, with the PMI rising to 50.9 in October, signaling expansion. However, new export orders have remained in contraction territory for five consecutive months, reflecting continued uncertainty in international trade. This divergence suggests that while domestic production is stabilising, the export-oriented segment of air cargo remains under pressure. In the United States, rising PPI levels (up 0.5% in October) could dampen production volumes in the short term, reducing export-driven air cargo demand.

  1. Capacity Growth and Challenges

Air cargo capacity has seen record-breaking growth in 2024, with international belly-hold capacity growing slowly and dedicated freighter volumes consistently expanding. However, capacity challenges persist, particularly in markets like Transpacific where demand is outpacing supply. Freighter retirements and slower regulatory certifications for conversions are contributing to tighter capacity, while fuel price fluctuations add to operational cost uncertainties.

Regional and Route-Specific Insights

  • Asia-North America: As the largest air cargo trade lane, this route grew by 8.6% year-on-year in late 2024. Rates have remained relatively high, reflecting strong e-commerce demand and the limited availability of ocean freight alternatives. However, tariff pressures and changing consumer patterns could moderate growth in the medium term.
  • Europe-Asia: Sustaining 20 consecutive months of growth, this trade lane benefits from robust industrial activity and cross-border trade. Rates from Shanghai to Europe (BAI81) climbed to $5.07 per kilogram in early December, underscoring the route's resilience despite broader economic uncertainties in Europe.
  • Intra-Asia: Intra-Asia routes, such as Singapore to Southeast Asia (BAI63) and Hong Kong to Southeast Asia (BAI33), remain competitive, with rates below $2 per kilogram. These lanes are supported by regional trade agreements and the relocation of manufacturing hubs to Southeast Asia.
  • Transatlantic: Capacity reductions on transatlantic routes have stimulated rates, with North America-Europe (BAI51) rates up 50% since October. This reflects the impact of reduced belly-hold capacity due to winter passenger schedules and the redeployment of freighters to Asia.

 

2025 Outlook: Challenges and Opportunities

  1. Supply-Demand Imbalance

The air cargo market in 2025 is likely to be characterised by an ongoing supply-demand imbalance. While capacity growth is expected to continue, slower conversion rates and freighter retirements will limit the available supply of suitable aircraft. Combined with sustained e-commerce growth and geopolitical uncertainties, this tight environment will keep upward pressure on rates, particularly on high-demand routes like Asia-North America and Europe-North America.

The air cargo market in 2025 is likely to be characterised by an ongoing supply-demand imbalance. While capacity growth is expected to continue, slower conversion rates and freighter retirements will limit the available supply of suitable aircraft. Combined with sustained e-commerce growth and geopolitical uncertainties, this tight environment will keep upward pressure on rates, particularly on high-demand routes like Asia-North America and Europe-North America.

  1. E-Commerce Resilience

E-commerce will remain a dominant force in the air cargo market. Despite potential regulatory changes in the United States, the global nature of e-commerce ensures continued demand. Markets with lower tax-free thresholds, such as parts of Europe and Asia, will play an increasingly prominent role in sustaining air cargo volumes.

  1. Economic and Policy Risks

Rising inflation in the United States and Japan, coupled with deflationary trends in China and the EU, will create divergent regional dynamics. In the US, higher production costs could suppress export-driven air cargo, while China's deflationary environment may boost its competitiveness in global trade. Tariff implementations, such as those expected in Q1 2025, will create short-term spikes in demand, but the longer-term impact may shift trade flows and capacity utilisation.

  1. Technological and Sustainability Developments

Airlines and logistics providers are increasingly focusing on technological advancements and sustainability initiatives to address cost pressures and regulatory requirements. The adoption of biofuels, electric aircraft, and digital cargo management systems will shape the industry's competitive landscape in the coming years. However, the cost of these initiatives remains a barrier for widespread adoption.

 

Conclusion

The air cargo industry is headed into 2025 with optimism for moderate growth and stability, even as traditional peak season dynamics continue to evolve. Sustained high activity levels, fueled by the strength of e-commerce and pre-tariff inventory stockpiling, provide a strong foundation for the year ahead. While capacity constraints and geopolitical risks remain, growing demand on key routes suggest opportunities for incremental growth. Economic pressures and policy changes will require flexibility. With a focus on adaptability and innovation, the air cargo industry is well-positioned to navigate challenges and capitalise on emerging opportunities in 2025.

About Cargo Facts Consulting

Founded in 1978, Cargo Facts Consulting (www.cargofactsconsulting.com) is a leading air cargo consultancy and data provider. Through our specialised services in digital innovation, strategic planning, and growth management and data solutions, Cargo Facts Consulting helps its clients navigate the complexities of the air logistics industry.