SUPPLEMENT
Regional Demand Disparities and Capacity Strains While global demand expanded, so did the strain on air cargo capacity. Capacity grew by 8% this year, driven by passenger belly growth and the deployment of additional freighters. This growth could not keep pace with demand, particularly on the critical trade lanes to and from Asia. Freighter profitability grew steadily, with yields rising by 12% as fuel prices dropped by 30%, offering airlines a welcome margin boost.
“Looking
Profitability was imbalanced between trade lanes. Profitability surged out of China driven by the e-commerce demand surge – and to some extent the cancellation of passenger flights to China by European airlines – leading to a shift of freighters to China.
ahead, the industry remains
cautiously
optimistic about e-commerce’s role in driving demand”
As capacity increased to the USA, load factors and yields dropped on the return flights to China and led to increasingly negative profitability on these legs, with many flights struggling to cover incremental operating costs and airlines preferring to fly empty.
E-Commerce: Bright spot and downside Looking ahead, the industry remains cautiously optimistic about e-commerce’s role in driving demand. E-commerce has firmly established itself as a segment, and platforms like TEMU and SHEIN have experienced steady growth, despite a slight dip in app downloads. With 750 million active users and 50 million new sign-ups monthly, there are clear indications that the sector remains vibrant. Southeast Asia and Latin America are emerging as new areas of growth for e-commerce, and the platforms remain bullish as they sign long-term ACMI contracts to secure capacity. There are reasons for caution. The e-commerce logistics model is at risk of regulatory changes and concerns about quality, security and
sustainability. The recent re-election of Donald Trump in the US could bring new regulations, tariffs, or trade restrictions that impact the flow of goods.
A capacity crunch The optimism surrounding e-commerce growth, however, faces a significant bottleneck: capacity. In 2025, global air cargo capacity will grow just 2.5% after retirements – a bit more if fuel prices remain low and airlines push overdue retirements. Flights out of China are full today and utilisation is at the highest levels since COVID. Feedstock for conversions is also tight, as passenger demand limits the availability of aircraft. Airlines could continue to shift to freighters to China – but there is also a limit to this. This will likely lead to a situation where demand continues to outpace supply.
What this means for the industry Demand next year will remain strong, while e-commerce must navigate both capacity constraints and changing regulatory landscapes. We believe the industry should anticipate and de-risk e-commerce and tariffs – ready to deploy alternatives and closely follow the general air cargo market trends. Supply and demand points to sustained high yields next, with forwarders and shippers increasingly shopping for reliable capacity solutions. Order books suggest a longer-term capacity crunch. Carriers should maintain and extend the life of large freighters as fleets age and
fewer new aircraft are delivered. Operators should increase agility, ensuring they can adjust to the shifting dynamics of trade lanes, and leverage data to stay on top of market trends and improve commercial decisions and planning.
This market outlook was written by Keyrouse and van Leeuwen, leveraging Rotate’s capacity and demand data products. Rotate’s strategy consulting team works with airlines, airports, forwarders, lessors and OEMS to seize opportunities from a rapidly evolving market – and to develop their strategy.
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