Market Analysis – 78101502 – International air cargo transport

Executive Summary

The global international air cargo market is currently valued at est. $123.9 billion and is recovering from post-pandemic normalization, with cargo tonne-kilometers (CTKs) showing renewed growth in late 2023. While the historical 3-year CAGR has been volatile due to pandemic effects, the market is projected to stabilize and grow. The most significant near-term threat is the combination of persistent cost inflation, driven by jet fuel prices and labor, and geopolitical instability disrupting key trade routes. Strategic procurement must now shift from securing capacity at any cost to optimizing cost, diversifying risk, and leveraging digitalization for greater transparency.

Market Size & Growth

The global Total Addressable Market (TAM) for international air cargo is projected to grow at a compound annual growth rate (CAGR) of est. 4.5% over the next five years, driven by e-commerce expansion and demand for high-value goods. The market is rebounding from a post-pandemic dip in yields, with volumes now showing positive year-over-year growth [IATA, Feb 2024]. The three largest geographic markets by freight-tonne-kilometers (FTKs) are:

1. Asia-Pacific (est. 33% market share)
2. North America (est. 24% market share)
3. Europe (est. 22% market share)

Key Drivers & Constraints

1. Demand from E-commerce & Specialized Verticals: Cross-border e-commerce continues to be a primary driver, demanding speed and reliability. High-value sectors like pharmaceuticals, semiconductors, and automotive components rely on air freight for supply chain integrity and speed-to-market.
2. Capacity Dynamics: The return of international passenger travel has increased belly-hold capacity, placing downward pressure on rates compared to pandemic-era highs. However, this is offset by freighter fleet adjustments and is highly variable by trade lane.
3. Cost Input Volatility: Jet fuel remains a primary constraint, with prices subject to geopolitical events and refinery capacity. Labor shortages, particularly for pilots and skilled ground-handling staff, are driving up wage costs and impacting operational reliability.
4. Geopolitical & Trade Headwinds: Ongoing conflicts (e.g., Ukraine, Red Sea) force costly route diversions and increase operational risk. Protectionist trade policies and tariffs can abruptly shift cargo flows, creating uncertainty and demand volatility on established lanes.
5. Sustainability & Regulatory Pressure: Increasing ESG scrutiny is driving mandates for Sustainable Aviation Fuel (SAF) adoption (e.g., EU's ReFuelEU) and investment in more fuel-efficient aircraft. These initiatives, while critical, add significant cost and complexity.

Competitive Landscape

Barriers to entry are High, characterized by immense capital intensity (aircraft assets), complex global regulatory hurdles, and the significant network effect of established hubs and routes.

⮕ Tier 1 Leaders * FedEx Express: Differentiates with its world-class, integrated air-and-ground network, offering time-definite, door-to-door service. * UPS Airlines: A major integrator with a large, modern freighter fleet and strong focus on high-yield express and specialized healthcare logistics. * DHL Express (Deutsche Post): Extensive global reach with a strong presence in European and Asian markets, leveraging a multi-hub strategy. * Qatar Airways Cargo: Utilizes its strategic Doha hub to connect major global trade lanes with a young, efficient freighter and passenger fleet.

⮕ Emerging/Niche Players * Flexport: A technology-first digital forwarder offering enhanced visibility, data analytics, and a user-friendly platform. * Cargolux: Europe's largest all-cargo airline, specializing in oversized and non-standard freight. * Atlas Air: A leading ACMI (Aircraft, Crew, Maintenance, and Insurance) lessor, providing flexible capacity to other carriers and shippers. * Maersk Air Cargo: A shipping line vertically integrating into air freight to offer end-to-end, multi-modal logistics solutions.

Pricing Mechanics

Air cargo pricing is typically based on "chargeable weight," which is the greater of the shipment's actual gross weight or its volumetric weight (LxWxH / dimensional weight factor). The final price is a build-up of a base rate per kg and multiple surcharges. The base rate is market-driven, fluctuating with supply/demand dynamics on a specific origin-destination (O-D) pair.

Surcharges are a significant and volatile component of the all-in cost. They are intended to cover costs outside the carrier's direct control. Shippers must demand transparency in these fees, as they can account for 30-50% or more of the total invoice.

The three most volatile cost elements are: 1. Fuel Surcharge (FSC): Directly indexed to jet fuel spot prices. Recent volatility has been high, with indices showing swings of +/- 25% over 6-month periods [Platts, 2023]. 2. Security Surcharge (SSC): Varies by O-D pair and is subject to change based on government mandates and perceived threat levels. 3. Peak Season Surcharge (PSS): Applied during periods of high demand, typically from October to December, and can increase lane costs by $0.50 - $2.00+ per kg.

Recent Trends & Innovation

• Accelerated Digitalization (2022-Present): The industry is rapidly moving away from paper-based processes. The penetration of the electronic Air Waybill (e-AWB) has surpassed 80% globally [IATA, Jan 2024]. Leading carriers are now offering real-time pricing and booking APIs, enabling integration with shipper TMS and digital forwarder platforms.
• Vertical Integration by Ocean Carriers (2022-2023): Major ocean liners, notably Maersk and CMA CGM, have made significant investments in acquiring and launching their own air cargo divisions. This trend aims to provide customers with integrated, end-to-end logistics and capture a larger share of the supply chain wallet.
• Focus on Sustainable Aviation Fuel (SAF) (2023-Present): Carriers are entering into large-scale SAF offtake agreements to meet corporate and regulatory decarbonization targets. While SAF currently represents <1% of global jet fuel use, pressure from shippers and regulators is forcing it onto the agenda, with SAF-inclusive rates now emerging.

Supplier Landscape

Note: Market share by Freight Tonne-Kilometers (FTK) is based on latest available IATA and company reports; integrator shares are estimates of their international air segments.

Regional Focus: North Carolina (USA)

North Carolina presents a robust and growing demand profile for international air cargo. The state's economy, anchored by the Research Triangle Park (RTP) life sciences/pharma cluster, advanced manufacturing, and a major financial center in Charlotte, generates significant volumes of high-value, time-sensitive exports.

Capacity is concentrated at Charlotte Douglas (CLT), a major American Airlines passenger hub providing extensive belly capacity to Europe and Latin America, and Piedmont Triad (GSO), a key domestic hub for FedEx Express. Raleigh-Durham (RDU) is actively expanding its international cargo facilities to directly serve the RTP corridor. While the state offers a favorable business climate, sourcing is subject to the same national labor pressures and cost inflation affecting all US gateways.

Risk Outlook

Actionable Sourcing Recommendations

1. Diversify Carrier Mix & Secure Block Space Agreements (BSAs). Mitigate capacity and geopolitical risk by diversifying 20-30% of annual volume away from your primary carrier. For critical lanes, secure BSAs for 6-12 month terms. This locks in capacity and provides predictable, albeit premium, pricing, insulating your most vital supply chains from spot market volatility during peak seasons or disruptions.

2. Mandate Surcharge Transparency & Implement a Digital Audit Process. Require all carriers to unbundle rates and provide clear logic for all surcharges in RFPs and invoices. Use a freight audit platform to automatically flag discrepancies in fuel, security, and other fees against published indices and contractual terms. This can recover 2-4% of annual spend and provides data to challenge unwarranted fee escalations.