If you had to pick only one word to describe the airfreight industry in 2020, “fragile” would be a good choice.
Air freight’s interdependency on passenger flights to move freight means that it has faced opposing demand shocks this year. Passenger demand plummeted as nations closed their borders and airlines grounded hundreds of aircraft. At the same time, demand for time-critical personal protective equipment (PPE) for first responders surged.
Overall demand for air cargo declined by 20% in June, but capacity dropped by 34%.1 The result was drastic price increases for cargos that absolutely had to move, such as medical supplies to combat the pandemic. The monthly TAC Airfreight Rate Index (Figure 1) reported a 45% increase in May over the previous 5-year high, which occurred prior to 2019 tariff implementations. Anecdotally, a few of my clients reported rates in excess of $10/kg on individual shipments from China to the United States. I’d be surprised if this weren’t reflective of a broader trend.
Replacing these aircraft are more modern widebodies, like the 787 and A350 XWB. While the order book remains several years deep, airlines have cancelled over 800 orders for 2020 through June, or roughly 15% of Boeing’s total logbook. Almost 90% of the aircraft deliveries this year, however, have been widebody models. Depending on the configuration, the passenger and cargo capacities of the new planes are similar to the aircraft they are replacing. The impact on capacity in the market, however, will depend on the level of acceleration of retirements relative to new deliveries.
Meanwhile the pandemic disruption has impacted key airfreight routes throughout the globe. Shippers have reported circuitous routing for their shipments through new gateways. This has introduced longer transit times, both due to longer routes themselves and due to delays related to clearance of cargo passing through new customs jurisdictions. The shutdown of passenger flights has temporarily made Anchorage, Alaska, the world’s busiest cargo airport, rising from sixth to first place on the Air Cargo News’ “Top 20 Cargo Airports” list.
Another change worth noting is a general awakening to the value of resiliency in the design of a global supply chain. This will impact the use of air freight in several ways in the near term. First, the strategic importance of air freight as a safety valve has been proven during the first half of 2020. Few shippers with a global footprint will risk going without a robust air contingency capability in place. Second, Kearney’s 2020 U.S. Reshoring Index report, “Trade War Spurs Sharp Reversal in 2019 Reshoring Index, Foreshadowing COVID-19 Test of Supply Chain Resilience,” found a renewed focus on reshoring away from China to other low-cost countries (LCC), principally Vietnam. Because Vietnam has much slower ocean transit times than China (Maersk publishes a 22-day transit time to Los Angeles, California, versus 11-day service from Shanghai), the air option will be increasingly important contingency for Vietnam-manufactured goods.2
One trend that remains on pace is the adoption of digital freight platforms for bookings. After a short blip down during the peak of COVID-19 airfreight demand, Freightos’ Webcargo marketplace saw e-booking orders grow by over 700% in June 2020 with up to 15% of global airfreight capacity available on digital marketplaces.3 The principal features that made e-booking attractive before COVID-19, namely the convenience and transparency into rate and capacity, have even stronger appeal in a constrained market. Similar to other types of e-commerce platforms, digital airfreight marketplaces have reached a level of adoption in 2020 that was not expected to be achieved until years from now.
Volatility ahead
Given all the change and disruption happening in the industry, the big question on shippers’ minds is when we will get back to some semblance of normalcy. Many shippers have postponed airfreight negotiations with their forwarders, and many of our clients are asking us when they should follow through with their annual air tenders.
The short answer is we’re unlikely to see stabilization through the end of the year. COVID-19 continues to spread across much of the U.S., and many Americans will be reluctant to fly anytime soon. Both of these issues will factor into passenger demand and the reintroduction of widebody belly space into the market. The International Air Transport Association’s (IATA’s) own forecast is that passenger volumes will not return to 2019 levels until 2024.
If that’s the case, then we can expect quite a bit more volatility ahead. Shippers—recognizing the need for air freight as an expensive (but necessary) lever to enhance the resiliency of their global network—will need to be nimble to deploy it at a reasonable cost. However, the adoption of tools like digital marketplaces can provide more transparency to enable better decision making. Even the largest users of air freight are facing the same issues, so those shippers that make the best of the current situation will be those leveraging all the tools available.
New Jersey is home to the most congested freight bottleneck in the country for the seventh straight year, according to research from the American Transportation Research Institute (ATRI), released today.
ATRI’s annual list of the Top 100 Truck Bottlenecks aims to highlight the nation’s most congested highways and help local, state, and federal governments target funding to areas most in need of relief. The data show ways to reduce chokepoints, lower emissions, and drive economic growth, according to the researchers.
The 2025 Top Truck Bottleneck List measures the level of truck-involved congestion at more than 325 locations on the national highway system. The analysis is based on an extensive database of freight truck GPS data and uses several customized software applications and analysis methods, along with terabytes of data from trucking operations, to produce a congestion impact ranking for each location. The bottleneck locations detailed in the latest ATRI list represent the top 100 congested locations, although ATRI continuously monitors more than 325 freight-critical locations, the group said.
For the seventh straight year, the intersection of I-95 and State Route 4 near the George Washington Bridge in Fort Lee, New Jersey, is the top freight bottleneck in the country. The remaining top 10 bottlenecks include: Chicago, I-294 at I-290/I-88; Houston, I-45 at I-69/US 59; Atlanta, I-285 at I-85 (North); Nashville: I-24/I-40 at I-440 (East); Atlanta: I-75 at I-285 (North); Los Angeles, SR 60 at SR 57; Cincinnati, I-71 at I-75; Houston, I-10 at I-45; and Atlanta, I-20 at I-285 (West).
ATRI’s analysis, which utilized data from 2024, found that traffic conditions continue to deteriorate from recent years, partly due to work zones resulting from increased infrastructure investment. Average rush hour truck speeds were 34.2 miles per hour (MPH), down 3% from the previous year. Among the top 10 locations, average rush hour truck speeds were 29.7 MPH.
In addition to squandering time and money, these delays also waste fuel—with trucks burning an estimated 6.4 billion gallons of diesel fuel and producing more than 65 million metric tons of additional carbon emissions while stuck in traffic jams, according to ATRI.
On a positive note, ATRI said its analysis helps quantify the value of infrastructure investment, pointing to improvements at Chicago’s Jane Byrne Interchange as an example. Once the number one truck bottleneck in the country for three years in a row, the recently constructed interchange saw rush hour truck speeds improve by nearly 25% after construction was completed, according to the report.
“Delays inflicted on truckers by congestion are the equivalent of 436,000 drivers sitting idle for an entire year,” ATRI President and COO Rebecca Brewster said in a statement announcing the findings. “These metrics are getting worse, but the good news is that states do not need to accept the status quo. Illinois was once home to the top bottleneck in the country, but following a sustained effort to expand capacity, the Jane Byrne Interchange in Chicago no longer ranks in the top 10. This data gives policymakers a road map to reduce chokepoints, lower emissions, and drive economic growth.”
It’s getting a little easier to find warehouse space in the U.S., as the frantic construction pace of recent years declined to pre-pandemic levels in the fourth quarter of 2024, in line with rising vacancies, according to a report from real estate firm Colliers.
Those trends played out as the gap between new building supply and tenants’ demand narrowed during 2024, the firm said in its “U.S. Industrial Market Outlook Report / Q4 2024.” By the numbers, developers delivered 400 million square feet for the year, 34% below the record 607 million square feet completed in 2023. And net absorption, a key measure of demand, declined by 27%, to 168 million square feet.
Consequently, the U.S. industrial vacancy rate rose by 126 basis points, to 6.8%, as construction activity normalized at year-end to pre-pandemic levels of below 300 million square feet. With supply and demand nearing equilibrium in 2025, the vacancy rate is expected to peak at around 7% before starting to fall again.
Thanks to those market conditions, renters of warehouse space should begin to see some relief from the steep rent hikes they’re seen in recent years. According to Colliers, rent growth decelerated in 2024 after nine consecutive quarters of year-over-year increases surpassing 10%. Average warehouse and distribution rents rose by 5% to $10.12/SF triple net, and rents in some markets actually declined following a period of unprecedented growth when increases often exceeded 25% year-over-year. As the market adjusts, rents are projected to stabilize in 2025, rising between 2% and 5%, in line with historical averages.
In 2024, there were 125 new occupancies of 500,000 square feet or more, led by third-party logistics (3PL) providers, followed by manufacturing companies. Demand peaked in the fourth quarter at 53 million square feet, while the first quarter had the lowest activity at 28 million square feet — the lowest quarterly tally since 2012.
In its economic outlook for the future, Colliers said the U.S. economy remains strong by most measures; with low unemployment, consumer spending surpassing expectations, positive GDP growth, and signs of improvement in manufacturing. However businesses still face challenges including persistent inflation, the lowest hiring rate since 2010, and uncertainties surrounding tariffs, migration, and policies introduced by the new Trump Administration.
As U.S. businesses count down the days until the expiration of the Trump Administration’s monthlong pause of tariffs on Canada and Mexico, a report from Uber Freight says the tariffs will likely be avoided through an extended agreement, since the potential for damaging consequences would be so severe for all parties.
If the tariffs occurred, they could push U.S. inflation higher, adding $1,000 to $1,200 to the average person's cost of living. And relief from interest rates would likely not come to the rescue, since inflation is already above the Fed's target, delaying further rate cuts.
A potential impact of the tariffs in the long run might be to boost domestic freight by giving local manufacturers an edge. However, the magnitude and sudden implementation of these tariffs means we likely won't see such benefits for a while, and the immediate damage will be more significant in the meantime, Uber Freight said in its “2025 Q1 Market update & outlook.”
That market volatility comes even as tough times continue in the freight market. In the U.S. full truckload sector, the cost per loaded mile currently exceeds spot rates significantly, which will likely push rate increases.
However, in the first quarter of 2025, spot rates are now falling, as they usually do in February following the winter peak. According to Uber Freight, this situation arose after truck operating costs rose 2 cents/mile in 2023 despite a 9-cent diesel price decline, thanks to increases in insurance (+13%), truck and trailer costs (+9%), and driver wages (+8%). Costs then fell 2 cents/mile in 2024, resulting in stable costs over the past two years.
Fortunately, Uber Freight predicts that the freight cycle could soon begin to turn, as signs of a recovery are emerging despite weak current demand. A measure of manufacturing growth called the ISM PMI edged up to 50.9 in December, surpassing the expansion threshold for the first time in 26 months.
Accordingly, new orders and production increased while employment stabilized. That means the U.S. manufacturing economy appears to be expanding after a prolonged period of contraction, signaling a positive outlook for freight demand, Uber Freight said.
The surge comes as the U.S. imposed a new 10% tariff on Chinese goods as of February 4, while pausing a more aggressive 25% tariffs on imports from Mexico and Canada until March, Descartes said in its “February Global Shipping Report.”
So far, ports are handling the surge well, with overall port transit time delays not significantly lengthening at the top 10 U.S. ports, despite elevated volumes for a seventh consecutive month. But the future may look more cloudy; businesses with global supply chains are coping with heightened uncertainty as they eye the new U.S. tariffs on China, continuing trade policy tensions, and ongoing geopolitical instability in the Middle East, Descartes said.
“The impact of new and potential tariffs, coupled with a late Chinese Lunar New Year (January 29 – February 12), may have contributed to higher U.S. container imports in January,” Jackson Wood, Director, Industry Strategy at Descartes, said in a release. “These trade policy developments add significant uncertainty to global supply chains, increasing concerns about rising import costs and supply chain disruptions. As trade tensions escalate, businesses and consumers alike may face the risk of higher prices and prolonged market volatility.”
New York-based Cofactr will now integrate Factor.io’s capabilities into its unified platform, a supply chain and logistics management tool that streamlines production, processes, and policies for critical hardware manufacturers. The combined platform will give users complete visibility into the status of every part in their Bill of Materials (BOM), across the end-to-end direct material management process, the firm said.
Those capabilities are particularly crucial for Cofactr’s core customer base, which include manufacturers in high-compliance, highly regulated sectors such as defense, aerospace, robotics, and medtech.
“Whether an organization is supplying U.S. government agencies with critical hardware or working to meet ambitious product goals in an emerging space, they’re all looking for new ways to optimize old processes that stand between them and their need to iterate at breakneck speeds,” Matthew Haber, CEO and Co-founder of Cofactr, said in a release. “Through this acquisition, we’re giving them another way to do that with acute visibility into their full bill of materials across the many suppliers they work with, directly through our platform.”
“Poor data quality in the supply chain has always been a root cause of delays that create unnecessary costs and interfere with an organization’s speed to market. For manufacturers, especially those in regulated industries, manually cross-checking hundreds of supplier communications against ERP information while navigating other complex processes and policies is a recipe for disaster,” Shultz said. “With Cofactr, we’re now working with the best in the industry to scale our ability to eliminate time-consuming tasks and increase process efficiencies so manufacturers can instead focus on building their products.”