IBA forecasts rise in air cargo capacity and demand in 2024

2nd July 2024: IBA, the leading aviation market intelligence and advisory company, has revealed indicators that both air cargo demand and capacity will rise in 2024 compared to 2023. 

In its latest webinar on the freighter market, IBA highlighted data from its aviation intelligence platform, IBA Insight, that forecasts air cargo demand will grow modestly by 5% to 258.1 billion cargo tonne kilometres. However, this will be outstripped by 8% growth in air cargo capacity to 600.3 billion air cargo tonne kilometres. This will see cargo load factors continue to fall from a pandemic high of 56% in 2021 to a forecast 43% this year.

IBA forecast that, in 2024, average air cargo yields are expected to decline by approximately 18% year-over-year due to plentiful capacity but generally subdued demand. This projection is an improvement from earlier forecasts for the year, which had anticipated a 20% year-over-year decline in yields.

Data from IBA Insight also revealed that the active freighter fleet stood at 75% in June 2024, down from 85% before the pandemic in May 2019. Despite the increase in air cargo demand, freighter aircraft have not significantly benefitted due to growing passenger aircraft belly hold capacity, leading to a greater number of freighters being parked or stored.

IBA’s intelligence highlighted that narrowbody aircraft are the primary drivers of the cargo market's conversion activity. From January 2024 to mid-June 2024, there have been a total of 45 narrowbody conversions, compared to 126 conversions throughout the entirety of 2023. IBA forecast narrowbody conversion levels to normalise in 2024, aligning closer to the 80 total conversions seen in 2021 and 89 in 2022.

The 737-800 and A321-200 lead the narrowbody conversion sector for Passenger-to-Freighter (P2F) conversions. From January to mid-June 2024, there were 27 737-800 conversions and 12 A321-200 conversions, comprising 87% of total narrowbody conversions in that period. IBA forecast these models will maintain their market dominance due to their efficiency and adaptability. A321-200 P2Fs are expected to become increasingly common in future years once feedstock is available. 

Meanwhile, in the widebody market, the 767-300ER has long dominated, primarily through P2F programs offered by Boeing and IAI. However, IBA expects to see a shift toward the A330 P2F programs on the horizon. This is evidenced as from January to mid-June 2024, there were 5 A330-300 conversions and 15 767-300ER conversions, compared to 6 A330-300 conversions and 44 767-300ER conversions throughout the entirety of 2023, representing a major Airbus uptick.

The large widebody market faces evolution with an array of new offerings. Currently, three 777-300ER conversion programs are underway by IAI, KMC, and Mammoth, alongside a 777-200LR P2F program in development by Mammoth. Both Airbus and Boeing are also developing new production freighters, with the A350F forecast to enter service before the 777-8F.

Turning to value performance, high feedstock prices support Market Value retention in the narrowbody market, while Lease Rates generally continue to soften. This trend is exemplified by the Boeing 737-800BCF. In July 2019, a 21-year-old 737-800BCF was valued at US$18 million and as of July 2024, its value has increased slightly to US$19 million. Despite this rise in Market Value, Lease Rates for the same aircraft have decreased from close to US$200,000 per month to between US$170,000 and US$180,000 per month over the same timeframe.

Meanwhile, converted widebody Market Values have stabilised since the beginning of 2024, while Lease Rates have generally decreased due to heightened supply and softened demand. This is demonstrated by the Boeing 767-300ERBDSF, where a 21-year-old converted aircraft was valued at US$24 million in July 2023, slightly increasing to US$25 million by July 2024. During the same period, the Lease Rate for a 767-300ERBDSF of the same age dropped by 2.4% from almost US$300,000 per month to below US$290,000.