As the holiday season approaches and demand increases are anticipated, carriers are shifting cargo capacity to more lucrative routes, particularly between the Asia Pacific and North America.
According to forecasts, US consumer spending for the holiday period is expected to increase 3.5% on 2023, while eCommerce sales are projected to rise by 9% reflecting the strength of the US economy, supported by a healthy job market and wage growth, with economists optimistic about strong spending through the end of the year.
Airlines have been quick to adjust their operations to take advantage of this seasonal demand. Over the past week, capacity from Asia Pacific to North America has grown by 6%, while capacity to Europe increased by 4%. The largest jumps were seen on routes from Shanghai to North America, where capacity rose by 17%, and from Hong Kong to North America, which saw a 12% increase.
Strong demand is driven by eCommerce, hi-tech, and electronic goods from China, Southeast Asia, and India, as well as perishable goods from the Pacific and Americas, with cargo volumes up compared to last year and year-to-date.
Despite the increase in capacity, air freight rates have not significantly declined. Market analysts measured spot rates out of Hong Kong rising by almost 2% week on week, while those out of Shanghai saw a 3.5% increase. This suggests that demand is strong enough to support current pricing, even with the added capacity.
However, their are warnings that any new US tariffs could dampen consumer spending. Existing import tariffs are already costing US households significantly, and further increases could see those costs rise even more, potentially reaching over $4,000 per household under certain scenarios.
As the holiday season progresses, airlines are expected to continue prioritising routes with the highest demand, particularly as eCommerce continues to drive air cargo volumes. Maintaining flexibility and capacity in the face of fluctuating demand will be crucial for carriers looking to maximise revenue during this peak period.
Key points
- Increased capacity: Carriers have increased capacity by 6% to North America and 4% to Europe, with notable jumps from Shanghai (17%) and Hong Kong (12%).
- Strong demand: Driven by eCommerce and electronics from Asia, alongside perishables from the Pacific and Americas, with year-on-year cargo volumes up.
- Rates steady: Despite the capacity increase, rates have risen slightly, indicating strong demand holding prices.
- Tariff concerns: Potential new US tariffs could dampen consumer spending and increase household costs.
- Carrier focus: Airlines are prioritising high-demand routes, balancing capacity to maximise revenue during the peak season.
We maintain long-term deals with our primary carriers, to block space and provide dependable options for different eventualities.
We would encourage you to contact us, if you have forthcoming time-sensitive consignments.
EMAIL Andy Costara, for insights, prices and guidance.
