How does a shipper move forward in such uncertain times?
The very fact that the Xeneta Mid-Year Outlook paints such a contrasting picture to the 2024 Outlook published in October last year should act as a case in point of how dramatically and rapidly the air freight market can shift.
A new business rival in town
If you are a business who doesn’t consider e-commerce platforms to be a rival in your chosen sector or industry – think again.
When it comes to securing air cargo capacity in the remainder of 2024, they absolutely are a competitor.
Even if your supply chains don’t touch the primary e-commerce corridors out of Asia, you must think beyond your regions of operation because you are not insulated from its impact. This can be seen by carriers attempting to meet this extraordinary e-commerce demand by removing capacity from other trades such as those into South America.
Right data at the right time
The complexities of global supply chains mean shippers must be able to act and think globally, regionally and across transport modes.
If you only use air freight and don’t consider ocean supply chains to be important, 2024 has shown very clearly how interconnected these transport modes are as shippers switch from ocean to air due to the Red Sea conflict.
The only way to manage supply chain resilience and freight spend at a global, regional, trade and modal level is through having access to accurate and robust data.
The smart shippers don’t wait for the next geopolitical incident to hit, they are continuously monitoring risk so they are ready to make the best decisions at the right time for their business.
Four areas to watch
While no-one has a crystal ball, here are the disruptions that could hit the air market next, as well as primary challenges of shippers and freight forwarders in 2024.
1. Geopolitical Risk
For the rest of the year, geopolitical tensions will continue to play a major role. Political unrest in the Middle East and Ukraine, along with potential US East and Gulf Coast strikes, could put upward pressure on cargo rates during the year-end air cargo peak season. Meanwhile, potential weakening consumer demand could put downward pressure on rates.
Separately, the impacts of protectionism would be mixed. An increased chance of a Trump presidency would likely cause a rush in demand from China ahead of new tariffs. However, in the mid-term, this will dampen air cargo demand for the affected corridors until new trade flows are established.
2. Cyber Attacks / IT vulnerabilities
For cybercriminals, the complexity of today’s supply chains makes them an enticing target. Gartner predicts that by 2025, 45% of organizations worldwide will have experienced attacks on their software supply chains, a three-fold increase from 2021.
As well as targeted attacks from bad actors, digitalisation in the air cargo space leaves the industry vulnerable to technology failures. This is especially true when organisations are reliant on third-party software, or when significant parts of the industry rely on the same cloud-based technology to fulfil their daily operations.
As demonstrated by the CrowdStrike/Microsoft IT outage back in July 2024, a single IT failure is capable of grounding airline and airport operations around the world.
Not only does this cause disruption on day zero, it is not uncommon for incidents such as these can take days or even weeks to resolve, depending on the scale of the failure and market conditions at the time. In the case of the CrowdStrike outage, it took nine days for airfreight to return to 'normal levels'.
3. Natural disasters
Natural disasters and climate-related events will continue to pose a major risk to air freight and the global supply chain. Droughts in the Panama Canal have caused slowdowns on major shipping channels, and flash flooding in Dubai was responsible for submerging an international airport.
A potential megaquake in Japan and increased volcanic activity in Iceland cast a shadow on the regional supply chain. We all remember the impact such incidents can have on aviation.
Forecasts for this hurricane/typhoon season (May to November) also suggest a heightened risk of weather-related production outages and air transportation disruptions due to flight delays and cancellations - leading to heightened volatilities in freight rates.
4. Who knows
Back in October 2023, Patrik Berglund warned that the next Black Swan event may only be around the corner. This remains true – especially while the world continues to be in a precarious position geo-politically.
Data and insight are your best way to be ready if/when disruption does happen and make the best decision for your business at the right time.
Stay Ahead
