Numerous risk factors threatening to slow robust air cargo demand

Global air freight is headed for another year of tight capacity and elevated rate levels, but a series of economic, geopolitical and regulatory risks are stacking up to cloud the outlook, the head of The International Air Cargo Association (TIACA) says.

Glyn Hughes, TIACA’s director-general, warned that the widespread risks posed a threat to the industry forecast of 5% growth in air cargo demand this year that was based on expected global GDP growth of 3.2%.

“We see trade tensions as an elevated risk as tariffs are being weaponized in the political forum,” Hughes told a media briefing Wednesday. “We believe international trade and the integration of economies is a way for global prosperity, and anything impacting that could have a negative impact on our industry.”

Hughes highlighted a number of risks, including moves in the US and Europe to remove the so-called de minimis exemption for low-value imports from China, declining consumer confidence in the US, tariffs and retaliatory measures, low backhaul load factors, Red Sea diversions and an uncertain outcome of peace talks in Ukraine. All those factors were leaving air cargo in “a fragile situation,” he said.

Willie Walsh, director-general of the International Air Transport Association (IATA), was more positive in his monthly air cargo update on Thursday, pointing to external factors such as trade growth, declining fuel costs and expanding e-commerce that were bullish for air cargo.

But he, too, warned that global trade was facing disruption that could change market conditions.

“In particular, the wild card is the potential for tariff-driven trade policies from the US Trump administration,” Walsh said.

President Donald Trump on Thursday posted a social media message saying he intends to add another 10% levy on Chinese imports, citing what he says is that country’s role in the illegal drug trade. Those tariffs, which go into effect March 4, would be on top of an initial 10% tariff on Chinese goods that Trump announced at the start of February.

Air cargo is coming off a record 2024 that saw 12% growth in global volume, but both demand and rates were starting to fall, according to IATA.

“January marked 18 consecutive months of growth for air cargo, but the month’s 3.2% year-on-year growth is a moderation from double-digit peaks in 2024,” Walsh said in his update. “Similarly, yields, while still above January 2024 levels, saw a 9.9% decline from December as cargo load factors also declined by an average of 1.5 percentage points.”

Bracing for de minimis clampdown

Strong e-commerce demand last year filled all available capacity out of China and kept the industry in peak season mode, and Hughes said the expectation was for online demand to remain robust. However, US moves to clamp down on low-value Chinese imports would impact that demand.

“We continue to focus on e-commerce expansion but because of certain policy changes there is an elevated risk associated with this,” he said.

In the US, China accounted for two-thirds of the 1.36 billion de minimis imports last year. De minimis regulations in the US allow one shipment of less than $800 in value to move between a single shipper and single consignee per day duty free.

Last year, 4.6 billion consignments with a value below the European Union’s de minimis threshold of €150 ($155) entered the EU market duty free, mostly from China.

Removing low-value products from de minimis exemptions will mean all those millions of daily parcels will need to go through customs checks, a process that would immediately overwhelm the system in both the EU and the US. It is for that reason that soon after the Trump administration removed Chinese low-value products from de minimis rules earlier this month, the exemption was restored.

“US Customs and Border Patrol weren’t able and capable of handling the inspections, and they weren’t capable and able to handle the levy and the collection of the applicable duties and tariffs,” Hughes said. “We anticipate it being at least two or three months before they can look at implementing the appropriate systems.”

Another issue outside the control of airlines was the closing of Russian airspace to western carriers, which continues to add significant costs and flying time for airlines on routes between Asia and Europe. And Hughes said a Ukraine peace deal currently being negotiated between the US and Russia would not automatically translate into an opening of Russian skies.

“Russian restrictions were imposed as a retaliatory measure to sanctions from certain states so there will be several other measures that will need to take place before we see completely reopened air space,” Hughes said.

Yet another challenge was the growing cargo imbalance between Asia and major destination markets. Despite freighters flying full on routes from Asia to the US, Europe and the Middle East in January ahead of Lunar New Year, cargo volume on the backhaul routes was low, with airlines having to price the weak return legs into the freight costs.

“The inequality we see in air cargo transport is evident and is becoming even more fragmented and diverse as we go forward,” Hughes said. He noted that the backhaul Europe-to-Asia dynamic load factor in January was 36%, Middle East-to-Asia was 29% and North America-to-North Asia was 43%.

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