The Good News for Airlines
The International Air Transport Association (IATA) released the full-year 2017 data for global air freight markets showing that demand grew by 9.0% freight ton kilometers (FTKs). This is almost triple the 3.6% annual growth recorded in 2016.
Freight capacity rose by 3.0% available freight ton kilometers (AFTKs) in 2017. This was the slowest annual capacity growth seen since 2012. Demand growth outpaced capacity growth by a factor of three.
The Bad News For Customers
Airlines are not adding extra capacity for air cargo, directly impacting rates. The market is experiencing day to day fluctuations based on demand and, in many cases, resorting to auction style, where space goes to the highest bidder. Traditionally blocked space agreements (BSAs) have been utilized to mitigate lack of capacity. However, some airlines are choosing not to honor blocked space agreements in lieu of super-premium rates that they can charge. Standard shipments are being delayed due to priority or express shipments that move with a higher rate than the BSAs.
- Keep your strong relationships. Make sure you are partnering with the right companies that maintain sufficient leverage with the airlines and, in doing so, maintain strong supplier relationships to honor contractual agreements during peak demand.
- Seek alternatives and/or develop new relationships to enhance capacity.
- Increase focus on forecasting and planning to build lead time into your supply chain so that ocean can be utilized.
Contract with a major global provider that has significant volume thus leverage and resources. Contact us today to find out more about air freight logistics!