General air cargo in decline as China-US e-commerce boom slows

Airlines prioritized surging e-commerce shipments on trans-Pacific and Asia-Europe routes over the past few years at the expense of general air freight. But as US tariffs curb low-value imports from China, carriers are finding traditional markets have also declined.

Air cargo posted a record 2024 that saw 12% growth in global volume, with much of the demand generated by e-commerce. But the May 2 elimination of the US’ duty-free exemption for low-value shipments from China under so-called “de minimis” rules has led to a drop in air cargo demand on the trans-Pacific.

Airlines focusing heavily on this sector are now searching for business in the more traditional forwarder-driven markets that have weakened through a range of economic and geopolitical factors, according to Martin Habisreitinger, COO of air freight at Hellmann Worldwide Logistics.

“The surge in e-commerce, particularly during the pandemic, created an unprecedented demand on specific routes, especially trans-Pacific and Asia-Europe,” Habisreitinger told the Journal of Commerce Friday.

“Airlines, facing capacity constraints and driven by yield management strategies, naturally prioritized this high-volume, often higher-paying segment,” he added. “This prioritization, coupled with port congestion and supply chain disruptions, sometimes led to capacity challenges for traditional cargo shippers.”

A source from another global forwarder who did not want to be identified said service providers were largely excluded from the e-commerce business as the main Chinese online marketplaces, Temu, Shein and Tik Tok, contracted their capacity directly from airlines.

Carriers ‘neglected’ traditional markets

While airlines devoted most of their attention to shipping e-commerce out of China, the traditional markets were being weakened by global economic instability that dampened demand for goods traditionally shipped by air, high inflation in destination markets and geopolitical issues that impacted trade flows.

“Air cargo airlines neglected thinking about the long-term picture to chase the cross-border e-commerce business that has been served to them on a silver platter,” said Frederic Horst, managing director of the consultancy Trade and Transport Group.

The Sydney-based analyst told the Journal of Commerce in an interview this week that general air freight traffic peaked in 2018 and has not recovered to pre-pandemic levels.

Data from Trade and Transport Group shows that in the past two years through the end of April on both the trans-Pacific and Asia-Europe routes, higher-value general cargo volume has been declining while lower-value air freight shipments have soared. US trade statistics regard imports valued at $2,000 or less as “de minimis” traffic.

“I don’t think [airlines] realized what was going on in the background where their traditional market was in decline, and now they need to go back to focusing on general air freight,” Horst said. “But the question is, is that traffic still there?”

Habisreitinger emphasized that although the traditional market has declined, it remains a significant part of the air cargo industry.

“We’re seeing signs of stabilization and even some growth in certain sectors,” he said. “The decline isn’t uniform across all industries. Some sectors, like pharmaceuticals and specialized high-value goods, have shown resilience.”

Following trade talks in Geneva between the US and China earlier this month, part of the deal included a reduction of the US’ 120% duty to 54%. An additional per-parcel fee of $100 came into effect on May 14 that was effectively a hammer blow to e-commerce companies making use of the de minimis exemption because of the low value of online products ordered from China.

However, Horst believes transporting low-value products by air was never going to be sustainable, even without the US changes to de minimis rules.

“At some point this traffic was going to disappear because it’s too cheap to move by air,” he said, pointing to Chinese customs data that puts the average value per shipment near $15 per kilogram.

“You can’t be paying air freight rates of $5/kg or $6/kg, plus the ground network distribution cost, for that. It was a pure ‘let’s grow our market share’ play,” Horst added. “The focus is shifting to some other markets now and a lot of volumes may just disappear. It’s also discretionary spending at a time of high inflation. Nobody really needs the stuff they buy on Temu or Shein.”

Freighters shift to more lucrative markets

Since May 2, when the US revoked the duty-free status of low-value imports from China, there has been a drop in air cargo demand on the trans-Pacific.

A clearer view of the market will come with the May data that analysts expect will show the extent of the decline in trans-Pacific demand following the rolling out of the tariffs and the shifting of chartered freighter capacity to other, more lucrative trade lanes.

The first signs of that drop in demand and the shifting of freighters are visible in data from air cargo analyst Rotate, which shows freighter capacity deployed on the eastbound trans-Pacific from May 12–18 fell 8% year over year to 82,000 tons while increasing 19% year over year to 74,000 tons on Asia-Europe.

“It is difficult to put numbers in exact terms because the May data is not yet available, but shippers that are not willing to ship to the US because of the tariffs are getting creative in searching for new markets,” a Rotate spokesperson said.

By the end of April, around 100,000 tons a month of de minimis-type traffic was moving across the Pacific on more than 60 freighters dedicated to carrying e-commerce. The volume of cross-border low-value cargo imports from China in the first quarter grew by 28.5% year over year, Trade and Transport data shows.

“Many freighter operators pulled out of north-south markets like Africa-Europe, Latin America-Europe and Latin America-US to put freighters into the trans-Pacific and to a lesser extent into Asia-Europe,” Horst said. For example, he said freighter operator Cargolux offered 35 destinations in Africa in previous years but now had only two — Johannesburg and Nairobi.

In the rush to move air cargo before May 2, the rate from Hong Kong to the US in mid-April shot up 50% compared with the previous week to $7.95/kg, according to rate benchmarking platform Xeneta. Since then, the rates have been falling, with data from the Baltic Air Index putting the rate from China to North America this week at $4.72/kg.