Air freight demand begins to waver amid rising global inflation

THE strong air cargo demand that has helped passenger-deprived airlines stay afloat over the past two years is showing signs of softening amid decades-high inflation that is pushing up costs.


The Baltic Air Freight Index, which shows weekly transactional rates for general cargo, fell 8.7 per cent last week, while the airlines group IATA recently predicted that freight revenue generated by carriers this year would fall by 6.4 per cent, reports Reuters.


"There will be a downturn in business, and when there is a downturn in business, people don't buy stuff that we normally carry as cargo," Qatar Airways Chief Executive Akbar Al Baker told reporters at a recent airline industry meeting in Doha.


With capacity able to meet current demand, a drop in bookings will create downward pressure on yields when the recession starts, he said.


The freight market - both air and ocean - has recorded sky-rocketing rates since the pandemic, in part due to deep capacity cuts that have left limited space for shippers.


But with Russia's invasion of Ukraine compounding the economic damage from the pandemic, a vaulting US dollar and decades-high inflation tightening financial conditions, the global economy is now heading towards slowdown.


The World Bank this month slashed its global growth forecast by 1.2 percentage points to 2.9 per cent for 2022 and warned many countries were likely to face recessions.


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Air freight demand begins to waver amid rising global inflation
Air freight demand begins to waver amid rising global inflation