Demand still outpacing capacity as AI traffic bolsters air cargo market

Photo: © Aleksandr Gerasimov Global air cargo demand strengthened again last month, as Middle Eastern hub operations began recovering from the recent geopolitical disruption – although capacity growth continued to lag demand, reinforcing a tighter market and preserving pricing power for airlines. According to the latest IATA data, industry-wide cargo tonne km (CTK) rose 8.5% year on year in June, while international cargo traffic increased 9.6%. North American carriers led the growth overall, but the sharpest improvement came from Middle Eastern airlines, whose international traffic was up 5.6% year on year, as transfer traffic gradually resumed through regional hubs. However, IATA noted that recovery remained uneven, and Europe-Middle East traffic contracted 41.1% year on year, while Middle East-Asia volumes also remained in decline. Demand was largely driven by “urgent inventory movements of AI and semiconductor cargo” – Asia-North America traffic, the largest air cargo corridor, grew 14.7%, extending its run of monthly growth. Those findings mirror observations from Xeneta, whose air freight specialists said during a recent webinar that demand linked to AI infrastructure continued to support elevated freight markets. “The crisis is not over, and it’s also buoyed by the great demand for AI shipments – we’re talking server equipment, everything that you need in the AI boom the world is experiencing right now,” said the intelligence platform. While demand accelerated, IATA data showed available cargo tonne km (ACTK) increased only 4.4%, lifting the industry’s cargo load factor by 1.8 percentage points, to 46.9%. This tighter supply-demand balance has shifted negotiating leverage from shippers, with Xeneta warning that as market conditions tightened, shippers with aggressively priced long-term contracts may struggle to secure the same service levels. For forwarders, the challenge is amplified by greater reliance on spot purchasing. Xeneta said higher spot market participation made it increasingly difficult to support fixed-price annual contracts. “We’ve seen over time that when the airline spot share rises above 40% to 50%, then it becomes not just significant pressure for the forwarder to move and buy their cargo, but also to align their contracts with their customers,” said Xeneta. Matthew Gore, partner at law firm HFW, told The Loadstar m ost of the shipper-freight forwarder air freight agreements he’d overseen typically had a quarterly rather than annual validity. “Some also have a master framework/service order (call-off) structure allowing shippers to contract for different periods at different times, and for different lanes, etc,” he explained. Mark Chadwick, president of the Global Shipper’s Association, suggested air freight contracts could benefit from a similar mechanism to index-linking, but with an index that “indicates a trend at which you trigger a discussion”. He explained: “Like we saw with the China outbound in the ecommerce peak. All of the indices showed rates through the roof; that gave us the kind of openness to have a conversation to talk about that price. “U sing it as a trend is a trigger rather than a lockout, so if it goes up 10%, your rates go up 10%,” Mr Chadwick told The Loadstar . Although air cargo yields eased 1.2% month on month in June – the first sequential decline after two months of increases – IATA noted that yields remained 34% higher than a year ago, while jet fuel prices were still nearly 46% higher. The association said the recent fall in yields should be viewed as ‘easing from a short-term peak’ rather than a return to normal pricing conditions, with aircraft continuing to fill faster than airlines can add capacity.