Air freight markets are expected to have a successful end of the year, the only drawback being the prospect of capacity bottlenecks as peak season approaches.
Big companies, such as Panalpina and DHL Global Forwarding have been preparing the ground in anticipation of a strong finish to a year. They have negotiated peak capacity with carriers, increased their block space agreements (BSA), secured capacity through alternative airports. They have also been working intensively with customers on their planning and forecasting needs. Some of them like Bollore Logistics have contracted charter flights ex-China to avoid capacity bottlenecks.
The air freight growth in 2017 is driven by flourishing engineering and manufacturing, consumer goods and chemicals as a result of a robust global economy. Other factors contributing to the increased demand are the surge in global e-commerce and tighter capacity management in ocean freight.
The demand exceeding capacity scenario in 2017 has seen airlines pushing up rates, increases that forwarders have struggled to pass on to shippers because they are locked into fixed-term contractual agreements. The shippers’ attitudes are changing as well. They are not focusing only on pure rate negotiations but securing capacity and looking to optimise the flows has become the priority. They are prepared to pay higher rates in return for quality service.
Carriers are also facing challenges. With the cost of fuel much higher than a year ago, they are scrutinising and rationalising their cargo routes to ensure they are profitable.