As we kick off 2025, the global air cargo market finds itself in a state of flux, shaped by a combination of geopolitical pressures, regulatory disruptions, and shifting trade patterns.

The Baltic Air Freight Index (BAI) highlights the opposing performance across key trade lanes. Rates from Shanghai to North America (BAI82) stand at $5.17/kg, reflecting a $0.12 decline, while Transatlantic demand remains robust, with Frankfurt to the USA (BAI24) increasing to $3.17/kg. Despite some resilience in certain regions, the impact of policy changes in the United States and Southeast Asia’s manufacturing boom is creating volatility and altering capacity dynamics globally.

 

Key Drivers of Market Dynamics

1.      Tariffs and Trade Shifts

The Trump administration’s removal of the de minimis exemption for Chinese imports, combined with new tariffs, has created an immediate shift in the airfreight sector. E-commerce, lately the backbone of Transpacific air cargo, has taken a hit as retailers such as Shein and Temu shift to bulk imports via ocean freight and US-based distribution centers.

The Trump administration’s removal of the de minimis exemption for Chinese imports, combined with new tariffs, has created an immediate shift in the airfreight sector. E-commerce, lately the backbone of Transpacific air cargo, has taken a hit as retailers such as Shein and Temu shift to bulk imports via ocean freight and US-based distribution centers. The decline in B2C airfreight volumes has eased capacity constraints, but it also raises concerns about the potential near-term oversupply on Transpacific routes, putting pressure on freighter operators to redeploy assets or face declining utilisation rates.

 

2.      The Rise of Southeast Asia

Southeast Asia’s position as a global manufacturing hub continues to grow, driven by diversification away from China. In 2024, Vietnam’s exports surged by over 14%, with high-demand goods such as electronics and garments fueling airfreight growth. Intra-regional trade is also expanding, with routes like Hong Kong to Southeast Asia (BAI33) climbing to $2.08/kg in the last month. Investment in logistics infrastructure, particularly at hubs like Singapore Changi Airport, emphasises the region’s significance. However, carriers remain wary of geopolitical uncertainties that could disrupt this growth trajectory, including the potential for US tariffs on Vietnam and Thailand down the road.

 

3.      Aircraft Supply Constraints

The supply of freighter aircraft remains a critical challenge in 2025. Production delays, especially for Boeing 777Fs, and feedstock shortages for narrowbody and widebody conversions are shrinking capacity growth. Additionally, the wave of up to 120 widebody retirements by 2027 could further stress the availability of aircraft. 

The supply of freighter aircraft remains a critical challenge in 2025. Production delays, especially for Boeing 777Fs, and feedstock shortages for narrowbody and widebody conversions are shrinking capacity growth. Additionally, the wave of up to 120 widebody retirements by 2027 could further stress the availability of aircraft. While modern, fuel-efficient freighters like the Airbus A350F are in demand, their delivery schedules are not sufficient to meet current and future growth needs. This imbalance is expected to keep lease rates high for popular models despite a temporary drop of capacity pressures from declining Transpacific demand.

 

Regional and Route-Specific Insights

  • Transpacific Adjustments

Tariff-driven concerns have softened rates on key Transpacific routes. Despite initial pre-tariff surges in January, Shanghai-origin rates like BAI82 ($5.17/kg) and BAI84 ($5.11/kg) now reflect a softening of e-commerce-driven demand. CFC has observed some carriers shifting freighter capacity to intra-Asia routes, capitalising on Southeast Asia’s manufacturing growth, especially across Vietnam, Indonesia, Thailand and the Philippines. These adjustments are helping balance capacity across regions but highlight the need for quick strategic redeployment as demand patterns keep shifting.

  • Robust Transatlantic Demand

European exports to North America remain a bright spot for the air cargo market, which is an unusual situation for this time of the year. High-value industrial shipments are sustaining strong demand, with London Heathrow to North America (BAI42) rising to $1.87/kg.

European exports to North America remain a bright spot for the air cargo market, which is an unusual situation for this time of the year. High-value industrial shipments are sustaining strong demand, with London Heathrow to North America (BAI42) rising to $1.87/kg. This resilience is supported by stable economic activity and the need for reliable delivery channels, particularly for sectors like aerospace and automotive.

  • Southeast Asia’s Growing Influence

Intra-regional trade within Southeast Asia continues to expand, supported by infrastructure investments and strategic carrier deployments. The BAI63 (Singapore to Southeast Asia) held steady at $0.79/kg, reflecting strong regional activity despite a $0.17 decline. Carriers are also turning to narrowbody freighters to meet short-haul demand, while airports like Changi position themselves as critical hubs for regional connectivity.

 

Freighter Market and Supply Challenges

The air cargo market is currently dealing with major capacity challenges, mainly due to limited aircraft supply. Bottlenecks in conversions and delays in widebody deliveries are slowing fleet expansion in the first quarter of 2025, while retirements are making things even trickier. Widebody freighter rates might see some pressure as Transpacific demand cools, but narrowbody freighters are expected to hold steady due to strong regional demand and current oversupply levels. As a result, airlines will need to manage their fleet strategies carefully, balancing immediate capacity needs with plans for future growth.

 

2025 Outlook: Challenges and Opportunities

The year ahead promises a dynamic environment for the air cargo market, shaped by geopolitical risks, capacity challenges, and emerging trade corridors. Tariff policies and regulatory changes will continue to influence demand, while Southeast Asia and Latin America emerge as critical growth regions. Freighter availability remains a pressing concern, requiring carriers to keep shifting to more modern, fuel-efficient aircraft and meet environmental requirements, especially across Europe.

Even with these challenges, key factors driving air cargo growth such as resilient e-commerce, regional manufacturing shifts, and demand for high-value cargo are still strong. Those who stay flexible, diversify their networks, and plan for risks will be in the best spot to handle the complexities of 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.

 

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