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Air cargo rates slump but some corporations see long-term strength

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The fee of shipping air freight around the globe is slumping, but some corporations say the world’s shift to flying goods around the globe will keep the market attractive for years.

“I do not think it is going to give back share to other types of transportation,” Boeing CEO Dave Calhoun told reporters at an industry conference in Washington, D.C., last month. “I feel that it’ll get back to its earlier pace of growth.”

Air freight is a tiny a part of the general cargo market, but supply chain problems, travel restrictions and voracious consumer spending pushed the area of interest to the forefront through the pandemic.

Boeing and Airbus are each selling freighter versions of their newest wide-body planes, that are more fuel-efficient than older cargo jets, and demand to convert older passenger planes into freighters has been so strong some slots are booked up for years.

Traditional ocean freight corporations like Maersk have recently gotten into the air cargo market. And passenger airlines have reaped the rewards of strong cargo demand through the Covid pandemic to complement traditional revenue streams.

 Belly cargo is unloaded from an American Airlines Boeing 787 Dreamliner at Philadelphia International Airport.

Leslie Josephs | CNBC

Air freight’s recent cost declines are a departure from a 12 months ago when frantic corporations around the globe drove air freight rates to record highs ahead of the year-end holidays as they paid as much as fly and avoid chaos in ocean shipping like clogged ports.

Now concerns concerning the economy, shifts in consumer pandemic spending habits — e-commerce binges this summer gave way as a substitute to a stampede of vacation travel — and a rise in capability are pushing air freight rates downward.

Belly cargo carried in passenger planes has added to the world’s capability as travel demand, particularly long-haul international, has returned.

FedEx last month shocked investors by pulling its guidance and announcing major cost cuts, including removing air capability. Its CEO forecast a worldwide recession.

“The most important single expected contributor in fiscal ’23 will probably be the changes we’re making to our express air network as we cut global flight hours,” FedEx CEO Raj Subramaniam said on an analyst call in September.

Consumers could have eased off of their cooped-up shopping frenzy through the height of the pandemic, but they are not more likely to turn into much less demanding.

“For those who have a look at the e-commerce segment of air cargo, that has grown significantly and that is probably not going to cycle back because we have all learned to amass things another way,” said Rob Morris, global head of consultancy at Ascend by Cirium, an aviation data firm.

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