Global demand falters as inflation and economic uncertainty take their toll on leading cargo airlines
2023 Sees Slow Recovery for Air Cargo
The air cargo sector faced a challenging year in 2023, with the top 25 cargo carriers experiencing a 1.7% decline in global demand, measured in cargo tonne-kilometers (CTKs). This downturn reflects the broader economic pressures, including inflation and reduced consumer spending, which have significantly impacted the industry.
FedEx Maintains Top Position Amid Declines
Federal Express (FedEx) retained its position as the leading cargo carrier but reported an 8.3% drop in volume to 17.9 billion CTK. The decrease is attributed to a 5.7% decline in overall cargo demand in North America, driven by inflation and cost-cutting measures. FedEx implemented several strategies to mitigate the impact, including fleet retirements and network reductions. The company’s annual report highlighted the effects of macroeconomic conditions and outlined efforts to improve efficiency and yield despite reduced volumes.
Qatar Airways Climbs to Second Place
Qatar Airways ascended to second place with a modest 1% increase in cargo traffic, reaching 14.4 billion CTK. The airline capitalized on the gradual lifting of Covid-19 restrictions and a surge in e-commerce demand. Qatar Airways expanded its freighter network and continued to invest in fleet modernization, including new Boeing 777F aircraft and 777-8s on order.
UPS Faces Challenges, Slips to Third
United Parcel Service (UPS) fell to third place with a 10.4% decline in cargo volume to 14.2 billion CTK. The company struggled with economic challenges and labor disputes, leading to a downturn in its domestic, international, and supply chain solutions segments. UPS’s annual report noted declines in volume and revenue across all business areas and outlined the impact of inflation, labor negotiations, and geopolitical tensions on its performance.
Cathay Pacific and Lufthansa Show Improvement
Cathay Pacific Airways moved up five places, benefiting from eased pandemic restrictions and increased capacity. The airline experienced improved volumes in the latter part of the year, driven by e-commerce and perishables demand. Lufthansa also saw a positive shift, climbing three places as its e-commerce-driven network expanded and passenger services ramped up.
China Airlines and All Nippon Airways drop four places
China Airlines and All Nippon Airways faced setbacks, dropping four places each. China Airlines noted a recovery in demand in the latter half of the year, though it did not prevent its ranking decline. All Nippon Airways experienced a drop in demand from key industries and a sluggish Japanese economy.
Market Dynamics and Regional Performance
Despite a strong end-of-year rebound, with December CTKs up 10.8% year-on-year, the overall 2023 figures remained below the previous year’s levels. Capacity growth outpaced demand throughout most of the year, with global cargo demand down 1.7% compared to 2022 and 3.6% below pre-pandemic levels.
Regionally, Latin American airlines led with a 2% increase, while the Middle East saw a 1.6% rise. Asia Pacific’s growth was more modest at 0.9%, and Africa experienced a 1.8% decrease. Europe faced the most significant decline at 3.9%, heavily impacted by geopolitical tensions and the war in Ukraine. North America saw the largest drop at 5.7%, with domestic demand particularly weak.
Outlook and Industry Challenges
IATA Director General Willie Walsh noted that despite a recovery in the latter part of 2023, air cargo markets faced significant challenges. Falling freight rates, increased belly-hold capacity, and competition from maritime cargo have put downward pressure on yields. Walsh highlighted that cargo revenue was estimated to be down by a third, emphasizing the need for continued adaptation in the face of evolving market conditions.
The top 25 cargo carriers faced a tough year, but regional variations and strategic responses provided some resilience amid a challenging global landscape.
