Trends and challenges that could shape the airfreight market in 2023

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It has been challenging for many industries around the globe, and the air cargo market has been no exception. With ongoing external issues, the sector has faced challenges across the board.

“The start of 2022 saw sanctions and airspace closures introduced following the Russian invasion of Ukraine. This had serious implications, which included the need for significant re-routing due to no fly zones, as well as the global crude oil price surge reaching a high of $122.71 in June. These higher oil prices not only had a direct effect on the air cargo industry itself, but on the consumers and customers who stood to foot the bill,” Angus Hind, Air & Sea Director (Europa Air & Sea), stated.

Coupled with new Covid outbreaks in the major Chinese export hubs of Shanghai and Shenzhen the virus caused further disruption throughout the last 12 months. Businesses such as Foxconn, one of Apple’s biggest suppliers, suspended operations in Shenzhen as China locked down the technology hub and several other regions to contain the country’s worst Covid outbreak in two years.

The increasing port congestion and strikes across multiple industries has also meant that the shift to airfreight demand has increased. As a result, airfreight rates in 2022 remained relatively high in comparison to the trends we have seen in other freight modes.

“Nevertheless, whilst 2023 looks set for some turbulence along the way, there is hope of a brighter future. So, what’s in the pipeline for the next 12 months? Whilst many of us were hoping that supply chains would see a return to normality by the end of 2022, analysts have predicted that equilibrium is unlikely to return before the end of 2023,” Hind added.

The Outside World

External issues will continue to be one of the key challenges in the airfreight industry come 2023. Strikes across multiple industries will have a knock-on effect within the logistics sector, meaning that businesses need to have rigid contingency plans and policies in place to protect not only themselves, but their customers too.

“The war in Ukraine is still creating uncertainty, and who knows what the real impact of this will be. But with no-fly zones sanctions and increasing costs due to route diversions, the war will present a significant number of obstacles,” Hind said.

The ongoing conversation around energy and oil prices is expected to plateau in H2 of 2023. Like everyone facing cost of living ramifications, a drop in oil and energy prices should positively impact customers as businesses lower fees in correlation with fuel prices.

“As we know, the cost of living is one of the key issues that consumers as well as businesses are having to face. With financial decision makers across all industries looking to tighten their belts, ensuring that the movement of goods and use of freight services remains smooth will be an ongoing issue,” Hind stated.

Read more: Shanghai success for Europa Air & Sea

Air Space Movement

At present, airlines like ANA in Japan and Singapore Airlines are still not back to their pre-Covid flight capacity but hope to be by the end of 2023/2024. After an unstable 2022, coupled with sky high rates, we are gradually going to see prices level off. For the industry, Europa Sea & Air expect to see an increase in the number of air cargo customers airfreight returns as a preferred method of goods transportation. However, despite the encouraging signs, it is likely it will be many years until airfreight volumes return to their pre-Covid levels.

“As the aviation industry continues to steadily open back up, we’re going to witness a market shift as we see capacity increase, driving the supply and demand ratio down,” Hind explained.

Finding The Supply & Demand Balance

The global appetite for cargo is expected to continue to decrease in line with 2022 for H1 of 2023, with the cost of living being one of the key drivers. Coupled with the fact that sea freight rates are down by 85% for the last year, this means that air and sea freight were at comparable levels for a short time, a data set that previously would never have been on par.

“Rates are one of the key drivers that will see the market balance out, and by H2 of 2023 we should start to see costs decrease gradually in line with supply and demand, as the uptake in passenger planes increases. While we will always see spikes in freight consignments around big holidays, such as Chinese New Year and Golden Week, freight volume is still expected to be lower compared to the previous two years, due to worldwide demand not being as high,” Hind said.

Information in Real Time

Although airfreight service’s uptake is still not as high as it was pre-Covid, customer expectations have changed. Thanks to the increased use of technology in the workplace, and reliance on digital tools to improve efficiencies, accessible technologies are the future of the freight industry.

“Operating in a world where we have become so accustomed to having instant access to information at the touch of a button, as we move to 2023, customers will want to have the option to track and locate cargo in real time. Customers will want to access online portals to quote, track and book shipments at origin. This is a trend we will see increase exponentially, as well as one that many businesses including Europa Air & Sea will introduce,” Hind added.

Read more: Europa Air & Sea reveals growth at newly opened Dubai office

Expanding The Footprint

Research has revealed that 80% of UK businesses that trade overseas plan to grow their global footprint in the next five years, an opportunity with huge potential for the airfreight industry. With many major routes not operating daily at present unless it is geographically feasible and financially viable, 2023 could be the year that further afield aviation routes are finally explored.

“We will also start to see logistics businesses expanding their physical office locations to mirror the increasing demand from businesses, with businesses such as Europa Air & Sea opening new offices in Q1 of 2023 in Delhi and Rotterdam, with more to follow,” Hind predicted. “As the last few years have shown, and as we approach 2023, airfreight and logistics businesses need to plan and prepare for any challenge that may lie ahead.”