Charter sector remains cautiously optimistic

Singapore freight forwarders – Star Concord

2023 has been a year of normalisation from what had been exceptionally high levels of demand experienced during and immediately following the pandemic. 

Demand in 2023 has continued to reduce in many industry areas and traditional peaks have been less pronounced. However, demand in some sectors, where air cargo provides the unique fast and secure transport, has maintained and even grown – for example, the e-commerce industry, oil & gas and automotive, where speed of delivery has become a key requirement. 

Capacity has also significantly increased by 12.2% YoY (IATA) as belly cargo capacity has continued to come back online and additional cargo conversions have been delivered. This has put pressure on already squeezed pricing. There are however signs of improvement in recent months and the last few months will be important to see where the market and demand levels balance out.

“Segment-wise, the higher demand has been seen in many of the traditional markets of automotive, oil & gas, electronics and e-commerce,” Glenn Hogben, Chief Executive of the Air Charter Association (ACA) said. “Routes have very different current positions with many areas depressed but the Asia to Europe routes have been growing in recent months.”

READ: 5 things to be considered to provide effective urgent air cargo charters

Challenges and trends

As a body, the ACA works closely with its members, holding regular events and conference sessions to share the latest developments in the charter sector, fostering discussion to promote engagement in industry issues and challenges.

Over the past 12 months, the focus has been on a number of areas: Balancing demand and capacity, maintaining sensible pricing in a buyers’ market and the reduction in outsize capacity aircraft as a result of the conflict in Ukraine.

“The charter broking and operator market is fairly disjointed and so we see a variety of priorities with some businesses looking to technologies to increase efficiencies whereas others focus on the traditional personal service,” Hogben explained.

Green shift

Sustainability will certainly play a key part in business strategies in the coming years but at the moment financial considerations and delivery concerns are still the key decision drivers. This is however a key issue for the whole industry and will continue to be important and with a growing impact. 

“We are already seeing a natural improvement as older aircraft, which are more expensive to operate, are retired and replaced with more modern and fuel efficient aircraft,” Hogben stated. “This has been prompted by market conditions where demand has reduced and as a result the overcapacity of aircraft are parked up and put into storage.” 

In addition, as technology continues to advance with alternative fuels and zero emission aircraft this will flow into the air cargo market.

“We anticipate further regulation which will force the changes and catalyse the business focus and move to more sustainable aviation,” Hogben added.

READ: Air Charter Service invests further in Asia as it opens its doors in Thailand

Optimism amid challenges

There are plenty of hurdles in the world today that are impacting air cargo levels, from the global financial slowdown and inflation to Ukraine and Middle East conflicts and fuel price volatility. 

“All these impact on consumer confidence which subsequently impacts on air cargo demand. As these areas reach more stabilisation there is a good opportunity for air cargo levels to grow but it is impossible to predict when the shift will take place,” Hogben highlighted.

After a turbulent few years, as a result of the pandemic and conflicts, businesses are looking to see stabilisation in the market and a period of ‘business as usual’ to return to the market, even if that is a new normal.

“The feedback we have received from members is that they are cautiously optimistic about 2024. The market demand levels appear to have normalised and everyone is looking to see some growth expected to be in Q2 onwards,” he added.

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Author: Edward Hardy