**London**: The air cargo sector is navigating significant transformations driven by market volatility, e-commerce growth, and geopolitical tensions. Experts warn of potential disruptions but highlight opportunities for resilience through innovation and adaptation in logistics practices to meet evolving demands.
The air cargo industry is currently experiencing significant changes, influenced by unpredictable market conditions, evolving trade policies, and shifting dynamics within global supply chains. Despite these challenges, the sector shows resilience, as it adapts to emerging trends and harnesses new technologies to maintain its competitive edge.
In a recent discussion about the state of air logistics, Dr. Ludwig Hausmann, Senior Partner and Leader of the Logistics Practice at McKinsey and Company, provided insights into the various factors driving transformation within the industry. He noted that the traditional model characterised by stable, linear growth is being replaced by a scenario of rapid fluctuations and volatility.
“We live in an era of high volatility and uncertainty,” Dr. Hausmann explained to Air Cargo Week. “This is not necessarily negative—air cargo is uniquely positioned to help supply chains navigate unpredictable disruptions.”
A significant driver sustaining demand for air cargo is the burgeoning cross-border e-commerce market, particularly between China and the United States. Currently, nearly 50 per cent of air cargo volumes along key trade lanes can be attributed to e-commerce shipments. However, this trend could face hurdles, as the US government is contemplating changes to de minimis rules, which currently permit duty-free entry of imports valued at under US$800. Dr. Hausmann warned that any alterations to these rules could have substantial implications: “Eliminating or modifying de minimis could disrupt a key driver of air freight demand,” he stated.
Such changes could lead to shifts in trade flows towards alternative hubs such as Vietnam, India, or other regions in Southeast Asia. Concurrently, while demand in the air cargo sector remains robust, providers are grappling with supply-side challenges. Dr. Hausmann highlighted two major issues: the slow recovery of belly capacity and the ageing freighter fleets. Although global passenger traffic has rebounded, belly cargo capacity is still 13 per cent lower than pre-pandemic levels in 2019, posing further pressure on dedicated freighter operations. Additionally, nearly 30 per cent of freighter aircraft worldwide are over 30 years old, and with delays in new aircraft production, only an estimated 12 per cent of the fleet is expected to be replaced by 2030. “Freight yields increased by 11 per cent on average in 2024 due to supply constraints,” Dr. Hausmann added, highlighting the pricing pressures resulting from limited capacity.
Geopolitical instability presents another significant challenge for the air cargo industry. McKinsey’s research indicates that approximately 20 per cent of global trade takes place between nations facing substantial geopolitical tensions. The ongoing US-China trade disputes, along with sanctions and changing tariff policies, could undermine air cargo demand further. Dr. Hausmann cautioned that if additional trade restrictions were to materialise, logistics providers might need to reassess their routing strategies to ensure supply chain continuity.
Looking ahead, several long-term trends are expected to reshape the air cargo landscape. The pressure for sustainability will increase as airlines face more stringent environmental regulations by 2030, thus necessitating the adoption of sustainable aviation fuels (SAF) and lower-emission operational practices. The industry must also address its lag in technology adoption; advancements in digitalisation and automation—including real-time tracking, AI-driven logistics, and predictive analytics—are poised to become essential components of modern air cargo operations.
Furthermore, shifts in inventory cycles and demand patterns could lead to a stabilisation of inventory levels, which may temper short-term air cargo growth; nevertheless, fluctuations in the economy could still trigger demand spikes. Despite the ongoing challenges, the air cargo industry demonstrates resilience.
Businesses within the supply chain that can swiftly adjust, embrace digital transformation, and optimise their networks in response to changing trade patterns are likely to spearhead the next phase of growth. “Companies that remain agile, embrace innovation, and prepare for geopolitical shifts will be best positioned to succeed in the evolving air logistics market,” Dr. Hausmann concluded.
Source: Noah Wire Services
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