Navigating the Mysteries of Air Cargo Peak Season

IEEPA Refund Calculator Investor Relationship Financial Overview Company Overview Financial Overview Corporate Governance Overview Board of Directors Committees Internal Audit Regulations Shareholder’s Insights Shareholder’s Insights Shareholder’s Report Investor Contact Investor FAQ Contact MyDimerco English繁中简中 Home » Navigating the Mysteries of Air Cargo Peak SeasonNavigating the Mysteries of Air Cargo Peak Season by Dimerco | Oct 11, 2023 The Freight Buyers’ Club podcast, presented by Dimerco, offers a wealth of insights and discussions within the logistics and supply chain industry. In the most recent episode, “Wherefore Art Thou (Air Cargo) Peak Season?” host Michael King explores the intricacies of global and US air cargo markets. Joining him in this engaging conversation were Eric Kulisch, Supply Chain and Air Cargo Editor at FreightWaves, and Niall van de Wouw, Chief Airfreight Officer at Xeneta. Exploring the Mystery of Peak Season The podcast kicked off with the question, “what’s happened to the shipping peak season?” King explains that this year’s traditional peak season has been irregular due to several factors. These include China’s economic challenges, the combination of inflation and economic stagnation in Europe, and a significant increase in inventories. These elements have left the industry contemplating the future of the peak season, which has historically been a significant driver of air cargo. Kulisch explains that most logistics professionals have realized that there won’t be much of a peak season. He notes that forwarders are skeptical of any significant shipping activity, and he mentions a recent uptick in volumes tied to specific events: “some of the strong activity out of China is South China focused and tied to e-commerce demand… so there’s some optimism out there.” However, the situation is far from uniform, and he adds, “the rest of the world is quite muted… it’s case by case.” Van de Wouw also comments on the situation, stating, “we’ve been quite bearish this year on our expectations of demand growth,” and emphasizes that it’s a complex scenario. He noted some recent fluctuations in rates in August and September but cautioned that these were not necessarily indicative of a lasting peak season. Unpacking the Demand Outlook The discussion swiftly transitioned to the demand outlook. Kulisch highlighted, “even though the economy looks different and there’s some seasonal buying going on by retailers, there’s no sign of a demand push.” He pointed out that the consumers have been relatively sluggish in the US, and the industry is experiencing a lag between the Federal Reserve’s interest rate hikes and its impact on businesses. Van de Wouw, echoed these sentiments, expressing doubts about the immediate emergence of a peak season. He believes that various factors, including inflation and the threat of a government shutdown, contribute to the uncertainty. The Ever-Changing Landscape with China When discussing China and the recent trend of relocating supply chains away from the country, Van de Wouw suggests that the story is more complex, he points out that even if some shippers are considering moving parts of their production out of China, many essential components may still come from there. He adds, “China’s manufacturing capabilities are second to none in many areas.” Excess Air Freight Capacity Prompts Freighter Order Cancellations This year, the industry witnessed a series of freighter order cancellations, highlighting the challenges brought about by excess capacity. Kulisch noted that the oversupply situation was largely due to the rush of conversions from passenger aircraft to freighters during the pandemic. “The lessors and investors probably got a little exuberant trying to get a return on investment out of their passenger aircraft during the pandemic when airlines weren’t flying.” Despite these challenges, the long-term demand for cargo is rising, driven by factors such as e-commerce, emerging markets, and the growth of single-aisle extended-range passenger jets. Kulisch points out that while new orders have slowed down, there’s still a backlog of orders from previous years. Greener Initiatives and Airport Strategies The conversation took an environmentally conscious turn as the experts discussed greener initiatives. Kulisch underscored the significance of Sustainable Aviation Fuel (SAF) as a powerful tool for reducing carbon emissions. He emphasized that “the air cargo sector is a little bit of a tough spot,” as it depends on airlines and manufacturers to produce cleaner aircraft. The air cargo industry is making efforts, however, it’s essential to await the development of SAF infrastructure, including hydrogen and other emerging technologies, in the decades to come. Van de Wouw highlighted that SAF currently accounts for only 0.1–0.2% of the global aviation fuel supply. If anyone was to “buy all the available SAF, we could fly for less than two weeks, and that’s just for one airline.” This statistic underscores the scarcity of SAF and the industry’s monumental task in increasing its adoption. While greener fuels and practices are making their way into the industry, airports are also playing a role in this transformation. Airports close to densely populated areas have been facing scrutiny due to noise pollution concerns. Van de Wouw acknowledged this trend, stating, “it’s society, demanding that there are limits to pollution and noise around airports.” The challenge is prompting some airports to push air cargo operations to secondary locations, which are typically farther from residential areas. Kulisch emphasized the challenges associated with these airport strategies, stating that “the current dilemma is airport-wide, where the government and the slot coordinating agency have decided to implement flight caps.” He explained that this move involves reducing annual flight caps from 500,000 takeoffs and landings per year to about 460,000, starting in the upcoming summer season in 2024. This decision has faced opposition from airlines and the air logistics sector, as they argue that it lacks a balanced approach. The industry is at a juncture where it needs to balance efficiency, capacity, and environmental responsibility. As The Freight Buyer’s Club podcast continues to discuss the complexities of the logistics and supply chain world, be sure to stay engaged for a steady stream of insights, lively discussions, and expert perspectives. Join us Mike King as he uncovers a multitude of logistical trends, address industry challenges, and so much more in the episodes to come! Post Tags: Air Freight | Asia Pacific | Economic Challenges | Environmental Sustainability. | Podcast Episode | Supply Chain Solutions | Sustainable Aviation Fuel We use cookies on our website to give you the most relevant experience by remembering your preferences and repeat visits. 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