Air cargo capacity set to come under pressure in 2025
18 / 11 / 2024
Ryan Keyrouse. Source: Rotate
Next year could see a lack of air cargo capacity as passenger aircraft additions ease, additional freighters are in short supply and e-commerce demand remains strong.
Speaking at the Tiaca Air Cargo Forum last week, Rotate chief executive Ryan Keyrouse highlighted some of the issues the industry could face of the supply side.
He pointed out that belly capacity growth is slowing down, there are delays to aircraft production and the high demand being experienced on the passenger side of the market was affecting the amount of feedstock that is available to be converted into cargo aircraft.
Keyrouse said that aircraft utilisation was at its highest level in the past five years meaning it was unlikely that more capacity could be squeezed out of the current global fleet.
He said that if e-commerce demand growth out of Asia continues to rise at around 20% next year it could result in capacity being shifted to the region from other markets on top of ongoing capacity shortages.
“We are almost at maximum utilisation so the aircraft can’t fly more and next year we see a maximum of 4.4% capacity growth, if you look at deliveries and conversions,” Keyrouse said.
“We haven’t factored in retirements so it will only be lower if we retire a few aircraft.
“If you have a 4.4% capacity growth and a 20% demand growth [from China], it can only come from one place – moving capacity from Africa and Latin America into these markets.
“You have to wonder how far can that go, but that is really only the lever that you have for increasing capacity for this demand.”
Longer term, there are also delays to the new widebody freighter programmes from Airbus and Boeing, while the average age of the fleet continues to rise.
“Every carrier will be trying to extend the life of their aircraft as much as possible which makes a lot of sense, but you will see disruptions to services and you will see decreased utilisation because they will fly less due to their age.”
On the demand side, he said there were risks to e-commerce demand next year but volumes would likely remain strong.
Explaining further, he said the US as well as other countries were looking to make regulatory changes that would likely impede the import of e-commerce products.
Meanwhile, the number of downloads of shopping apps such as Temu and Shein were slowing down.
However, he added that while shopping app download growth had slowed, they were still growing overall and these companies would continue to use airfreight.
He suggested that stricter e-commerce regulations may see the likes of Temu and Shein focus growth on markets with lower penetration.
“Southeast Asia consumes 1.4kg of e-commerce per person but if you look at markets in North America it is 3.3kgs, Europe 2.7kg, so if you added 1kg per person to Southeast Asia, you will be adding a lot of e-commerce.
“So I think there is a lot of growth potential in these markets and also Latin America serves as an alternative.
“You can still fly the transpacific, get it to Miami, get it to Latin America and you can skip the import duties just by going down.
“I think part of what we will see in 2025, some of the carriers and industry players will be thinking how do we mitigate the US by finding new markets for e-commerce.”
On the potential impact of trade tariffs, which US president-elect Donald Trump has threatened, Keyrouse said that there would likely be a rush in demand ahead of their implementation and then a drop off.
However, other markets would then start to see a pick up in exports as production is shifted. He pointed out that when tariffs were introduced in 2018 and 2019 there followed a 90% increase in volumes out of Vietnam, although he conceded that it was not a simple process to move a factory.
He added that in the short term, there may be an impact, but in the longer term trade would likely continue to grow as it has since the 2018-2019 China-US tariff war.
Air cargo’s “wait and see” approach to US tariffs and positive demand outlook for 2025
