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Air Cargo Faces Challenges as Volumes Rise and Rates Fall

Air Cargo Faces Challenges as Volumes Rise and Rates Fall
Rising Volumes Amid Declining Freight Rates
Global air cargo volumes experienced an unexpected surge in August, increasing by 5% year-on-year for the second consecutive month, according to industry analysts at Xeneta. Despite this growth in demand, average global spot freight rates have continued to decline, falling for the fourth straight month by 3% to $2.55 per kilogram. This drop occurred even as capacity expanded by a similar margin of 4%, highlighting a disconnect between volume growth and pricing power within the sector.
Industry experts suggest that the falling rates may provide a more accurate reflection of the market’s health than the recent volume increases. Niall van de Wouw, Xeneta’s chief airfreight officer, emphasized that the decline in spot rates could be even more pronounced when adjusted for currency fluctuations, noting that the US dollar has weakened by 4% against other currencies over the past year.
Market Dynamics and Trade Flow Shifts
Several converging factors are exerting pressure on the air cargo industry. Shifts in trade flows are particularly influential, as e-commerce shipments are increasingly redirected from the traditionally high-priced China-US routes, where August rates averaged $4.30 per kilogram, to the China-Europe corridor, which is priced lower at $3.65 per kilogram. This reallocation is partly driven by the expiration of the $800 de minimis exemption and the imposition of new US duties on low-value imports, both of which are contributing to a downward pull on global average rates.
At the same time, a 7% decline in jet-fuel prices has helped airlines manage operational costs, providing some temporary relief against the downward pressure on freight rates. However, the broader market outlook remains uncertain. North American import volumes are forecasted to contract by 2% in 2025 before rebounding in 2026, while global cargo volumes are expected to grow between 2.5% and 3.5% in both years. The sector also faces ongoing challenges from tariff uncertainties and evolving regulatory frameworks, prompting major logistics providers such as UPS to implement peak season surcharges on both air and ground shipments.
Industry Response and Market Segmentation
Despite these headwinds, demand for new freighters and aircraft conversions remains strong, although the pace of narrowbody freighter conversions has slowed due to prevailing market pressures. Van de Wouw cautioned against interpreting the recent uptick in demand as a sign of broader economic recovery. He remarked, “It is often said that airfreight is a bellwether for macroeconomics, but I don’t think it is at the moment. Volumes are certainly not as bad as people feared, but also not as good as people hoped.”
He identified three distinct groups of shippers influencing the market: those who avoid airfreight due to cost considerations, traditional air cargo customers who prioritize speed and value, and a growing segment that alternates between ocean and air freight depending on necessity. According to van de Wouw, it is this latter group that is driving the recent increase in airfreight demand. He explained, “Air cargo’s higher demand remains the result of mode shift we saw in July, with a bit of support from e-commerce. It is not an indicator of increased economic activity. It’s just that airfreight is getting a bigger share.”
As the air cargo industry contends with shifting trade patterns, regulatory changes, and economic uncertainty, analysts warn that the coming months will be critical in testing the resilience of operators and their capacity to adapt to a rapidly evolving market environment.

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