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The global air cargo market is expected to grow by 4% to 6% in 2025
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This amid cautious optimism “tempered by its susceptibility to geopolitical tensions, a subdued manufacturing outlook, and political interventions in an increasingly volatile world,” said Niall van de Wouw, chief airfreight officer of air freight intelligence platform Xeneta
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The growth will continue to outpace global cargo capacity supply growth of 3% to 4%
The global air cargo market is expected to grow by 4% to 6% in 2025 amid cautious optimism “tempered by its susceptibility to geopolitical tensions, a subdued manufacturing outlook, and political interventions in an increasingly volatile world,” said Niall van de Wouw, chief airfreight officer of air freight intelligence platform Xeneta.
The growth will continue to outpace global cargo capacity supply growth of 3% to 4%.
A resurgence in the traditional air cargo market, disruptions in ocean supply chains, and the rise of e-commerce are seen to contribute to demand growth in 2025, according to the Xeneta 2025 Air Freight Outlook authored by de Wouw and Wenwen Zhang, Xeneta Air Freight analyst.
Demand growth is also further supported by sustained global gross domestic product growth, the report added. The International Monetary Fund has projected global GDP growth to remain stable at 3.2% in 2025, on par with 2024.
The report said a rebound of the traditional air freight market will be supported by demand for semiconductors related to generative artificial intelligence and advanced computer processing.
Semiconductor industry association SEMI have estimated global shipments of silicon wafers – a fundamental material in the manufacture of most semiconductors and associated electronic devices – will grow around 10% in 2025, following an estimated 2% decline in 2024.
With the majority of semiconductor materials shipped by air freight, the Air Freight Outlook said this will fuel the growth of air cargo demand, particularly on corridors out of Asia.
“The AI wave will lift the recently-stagnant B2B (business-to-business) airfreight market. But this will not have as dramatic an impact on global demand when compared to factors in 2024 such as Red Sea Crisis and the rise of e-commerce,” the report said.
“Shippers on corridors with lower demand growth are still at risk if airlines remove capacity from secondary trades to meet the increasing demand out of Asia.”
The air cargo market was off to a good start in 2025 following 14 consecutive months of double-digit growth in demand. Volumes jumped 11% year-on-year in December and average spot rates were up 15% to $2.99 per kilogram, albeit the most sluggish growth in the last seven months when compared against the high-rate level in December 2023.
The 2024 year-end peak season ended with a more moderate spot rate increase of 11% between September and December, contrasting sharply with the 21% surge in the same period of 2023, according to the Air Freight Outlook.
Van de Wouw noted that the “rebalancing of the air cargo market from the extreme volatilities seen in 2023 is a clear reflection of the preparedness and maturity seen across the market in 2024. The efforts made by industry stakeholders ranging from strategic capacity allocation by airlines, securing capacity ahead of ‘hot’ e-commerce corridors by freight forwarders, and locking-in longer-term contracts by shippers, all contributed to a healthier industry based on longer-term relationships instead of a push for short-term gains.”
Impact of e-commerce
Van de Wouw underscored the continued dependence of the market on e-commerce. “We can put a ribbon around 2024. It was quite some year for air cargo. But this remains a market that is increasingly reliant on e-commerce volumes, while the general freight market, the bellwether of the global economy, remains muted. The signals from the manufacturing industry, particularly in Europe, are concerning but e-commerce continues to take up this slack and is projected to grow at +14% annually to 2026,” he said.
The International Trade Administration of the US Department of Commerce estimates global B2C (business-to-consumer) and B2B e-commerce to grow 14% annually until 2026, with South Asia and Southeast Asia to experience the fastest growth.
Increasing regulatory scrutiny, however, could impact e-commerce growth, according to the Air Freight Outlook. For example, the European Union is investigating Chinese e-commerce platform Temu for a potential breach of the Digital Service Act which could result in fines as much as 6% of its global turnover.
Indonesia, Southern Asia’s largest economy, has gone further by banning Temu over fears it is hurting local small and medium enterprises.
The US is also increasing scrutiny by tightening customs and border checks on vaguely described shipments. It is proposing new de minimis legislation, which is seen as a loophole that allows large volumes of e-commerce goods from China to enter the US without incurring import duties.
US President-elect Donald Trump’s earlier pronouncement to impose higher tariffs on imports from China (and the rest of the world) will also inevitably put e-commerce into sharper focus.
Given the US represents a quarter of China’s cross border e-commerce volumes and occupies more than half of air freight capacity between these nations, any efforts by Trump to put up blocks to this type of trade will have significant implications, the Air Freight Outlook noted.
“If political intervention dampens growth in e-commerce volumes from China to the US, airlines would need to recalibrate the capacity and demand balance on this fronthaul corridor,” the report said.
Political uncertainties, on the other hand, could create opportunities for other sectors. For example, airlines and freight forwarders may find reassurance in those shippers in the traditional air freight market if there are increasing uncertainties around e-commerce regulations, the report said.
“So, the overall outlook for air cargo remains one of growth. But reports of countries aiming to crack down on the Chinese e-commerce platforms, for example, if this was to happen, would have a sizeable impact in markets around the world because what’s going to take the place of these volumes?” van de Wouw said.
While the threat of further US East Coast port strikes are at bay for now, the Air Freight Outlook said shippers will turn to air freight for urgent shipments in case of any disruptions to global ocean freight, causing further spikes in air cargo rates.
READ: ILA, USMX sign tentative labor agreement, averting port strike
The three-day strike at US ports in October caused a +12% rise in air cargo volumes month-on-month from Europe to the US.
The air freight tender season for the new year is also set to be challenging, Xeneta said.
It noted: “Historical trends indicate that, in 2024, shippers demonstrated a growing preference for longer-term air freight contracts, with durations of one year or more. These contracts accounted for 63% of all agreements valid in Q4 2024, marking a 16-percentage point increase compared to the same period in 2023. Meanwhile, during this timeframe, freight forwarders continued to negotiate nearly half of their volumes in the spot market, a strategy that likely has eroded their revenues due to rising airline selling rates.”
Van de Wouw said: “The lesson these market conditions are forcing all stakeholders to learn is that they cannot rely solely on historical trends as a foundation for purchasing decisions.
“Heightened market volatility due to rising global uncertainties will continue to impact air cargo demand and this could force air freight rates to fluctuate significantly. Therefore, embracing more flexible freight rate negotiation methods, such as indexing or transparent pricing, could foster mutual understanding and better collaboration across the industry this year.”
“Without this insight, what lies ahead for air cargo in 2025 may remain a guessing game for many less informed market players. Will January 2025 be the first time in 14 months we won’t see double digit growth? At the start of last year, the answer would most likely have been affirmative, but now the market must wait and see what happens because this year is starting off with a much higher base,” van de Wouw said.
2025 issues
The conflict in the Red Sea, which resulted in a mode shift from ocean to air in 2024, will remain a key theme in air cargo demand in 2025 as there is “little prospect of a large-scale return of container ships transiting the Suez Canal…,” the Air Freight Outlook said.
“That said, the mode shift has already been largely established, so while Red Sea disruptions will continue, it is unlikely to contribute much to air cargo demand growth in 2025,” the report pointed out.
It said this trend is already seen on the Middle East to Europe corridor where year-on-year volume growth has decelerated from more than 40% in the first quarter to 21% in the third quarter, before falling further to 8% in November 2024.
If there is a major change in the geopolitical situation and a large-scale reopening of the Red Sea, there could be a renewed acceleration of mode shift and air cargo demand growth for a few months, the report noted.
This is due to the likely severe congestion and deterioration in schedule reliability if large numbers of ships stop transiting around the Cape of Good Hope and begin arriving at destination ports at the same time.
Capacity
The report said the capacity growth slowdown is in part due to a high base in 2024. Global air cargo capacity growth already recovered to pre-pandemic 2019 levels by early 2023 while it took until 2024 for global demand to recover to its 2019 levels.
“It is unlikely that the tight air freight market of 2024 will ease in 2025. It would be wise to manage the expectations of your internal stakeholders that your transportation spend might be higher next year,” according to the Air Freight Outlook.
If demand growth does outpace supply growth in 2025, the report said it is likely air freight rates will remain elevated. It noted, however, that “it is important to remember that experiences will vary dramatically depending on the region and trade lane.”
Demand and supply growth will not be spread evenly across the world’s air cargo corridors, the report noted.
“If you are a shipper using an ex-Asia corridor you will have to consider very different supply/demand balance shifts compared to a business shipping goods out of South America,” it said.
Slower capacity growth in 2025 also stems from supply chain issues and manufacturing delays for new and converted aircraft.
The report noted that Airbus has pushed back the delivery of its A350 freighter from late 2025 to 2026. Similarly, Boeing has said its 777-9 passenger aircraft wouldn’t be delivered before 2026, while the 777-8 freighter would be delayed until 2028.
Looking further ahead, increasing environmental regulations could impact future growth of global air cargo capacity. For instance, International Civil Aviation Organization aircraft emissions standards on all in-production aircraft are set to take effect in 2028 and will bring an end to the production of Boeing’s current 777 freighter and 767 freighter.
A capacity growth slowdown is also a result of geopolitical issues, according to the Air Freight Outlook. China and the US cargo belly capacity had only recovered to around one third of pre-pandemic 2019 levels in October.
Rising geopolitical tensions have led to increased criminal activities in the air cargo supply chain.
Security concerns due to incendiary devices found in European parcel networks in mid 2024 prompted stricter security measures for air cargo, such as heightened advanced information filing in the US and EU.
With heightened global tensions, the threat of further criminal activity remains, the report said.
“If any similar attempts were to succeed, it would have a profound impact on the aviation safety regulations, causing delays or even restricting certain goods from being transported in passenger belly holds,” it added.
Moreover, weather events will continue to disrupt air cargo supply chains.
Due to climate change, the regularity of severe typhoons and hurricanes witnessed in 2024 is likely to persist – causing delays, cargo backlogs and increased air freight costs.
Rising environmental regulations will further burden those shippers who have deprioritized making the shift from air to ocean due to the ongoing ocean freight disruptions in 2024, the report said. – Roumina Pablo
