Middle East premium fades – but AI boom keeps air freight rates aloft

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VW: THE IMPACT VW: MASSIVE JOB CUTS CONFIRMEDEXPD: BULLISHCHRW: POSITIONING AHEAD OF EARNINGSAMZN: IN THE NUMBERSAMZN: PEOPLE MATTER UNTILVW: THE LAST CUT IS THE DEEPESTJBHT: GEARING UP VW: BUYING TIMER: BIG VOTE OF CONFIDENCEAAPL: BEARISH HEDGEYE AAPL: THE BEAR CASEFDX: LIFE SCIENCES ORG UNVEILEDWTC: UPS AND DOWNSWTC: ASX ANNOUNCEMENT REGARDING DSV PARTNERSHIP VW: D-DAY
Air freight markets appear to be settling, with capacity largely returned to the Gulf, fuel prices easing, and freight rates gradually drifting lower.
Yet rates remain stubbornly high by historical standards, despite widespread expectations that the market would cool significantly in the second half.
A changing mix in demand, with AI-related shipments increasingly replacing ecommerce as air cargo’s primary growth engine, are adding to rate strength.
Meanwhile, the picture has become more nuanced following the collapse of the ceasefire. Renewed drone attacks have again raised concerns over the region, but so far airlines appear to have made relatively few operational changes, allowing capacity to continue recovering.
WorldACD figures for the week ending 5 July show worldwide average air cargo rates falling a further 1% week on week, to $3.13 per kg, following a 2% decline the previous week. Average spot rates slipped 2%, to $3.62 per kg.
Xeneta’s June market update points in the same direction. Global spot rates remained 38% higher than a year earlier, averaging $3.40 per kg, but the pace of growth slowed from 41% in May as capacity returned through the Middle East and jet fuel prices retreated.
“The air freight market has kept on moving and showing its ability to navigate uncertainty,” said Xeneta chief airfreight officer Niall van de Wouw. “As we have said before, air freight is not in control of its own destiny, but no one can deny its ability to respond and pivot when challenges come along.”
Freightos data tells a similar story. Its global air freight index peaked in late May, during the height of Middle East disruption, before steadily easing through June and into July. However, rates remain well above the levels seen at the start of the year, suggesting the market has found a higher floor rather than returning to pre-crisis pricing.
Ordinarily, the recovery in capacity would push down rates, but demand has remained strong.
According to WorldACD, total worldwide air cargo capacity is now slightly above its level before the conflict began, while the capacity deficit to and from the Middle East and South Asia has narrowed to 10%, from around 30% in early June.
And demand continues apace. WorldACD recorded worldwide chargeable weight 4% above last year’s level, while Xeneta said global demand grew 7% year on year in June, comfortably outpacing capacity growth of 3%. That imbalance pushed Xeneta’s dynamic load factor three percentage points higher, to 62%.
The biggest change is where that demand emanates. For much of the past three years, cross-border ecommerce has been the dominant force behind air cargo growth – a picture now changing rapidly, with ecommerce in decline.
Xeneta added that “part of the apparent decline may reflect a shift rather than a disappearance of volumes as individual B2C parcels are being moved into bulk, consolidated air freight shipments that fall outside the ecommerce parcel data. But the underlying trend is clear. After years as air freight’s single biggest growth pillar, the B2C e-commerce engine has stalled.”
WorldACD recorded a 12% week-on-week fall in Hong Kong-Europe tonnages following the EU’s decision to abolish its de minimis exemption for imports valued below €150 on 1 July. Combined with declines over the previous fortnight, Hong Kong-Europe traffic has fallen by around 20% in three weeks, returning to levels last seen at the end of March.
By contrast, Taiwan-Europe volumes have surged around 20% over the same period, reflecting growing shipments of AI-related computer equipment.
“The scale of AI’s impact is easy to underestimate because it sits inside a small slice of total air cargo volume,” said Mr van de Wouw.
“But the facts that confirm its role as the main driver of air cargo growth are undeniable.”
He pointed to global semiconductor sales, which more than doubled year on year in April, alongside Taiwan’s fastest economic growth in almost five decades, driven by demand for advanced chips and AI infrastructure.
That argument received further support today from Taiwan Semiconductor Manufacturing, the world’s largest contract chipmaker, which reported record June revenue of NT$442.7bn ($15bn), up 67.9% year on year and 6.2% on May. The figures exceeded market expectations and underline the continuing strength of global investment in AI infrastructure, much of which relies on time-sensitive air freight.
The shift in demand is already beginning to influence network planning. DHL Global Forwarding has launched a new thrice-weekly Bangkok-Cincinnati freighter service as part of its TransPac Connect offering, providing up to 100 tonnes of capacity per flight. The product also incorporates traffic from Hanoi and Taipei into Cincinnati and Chicago, reflecting South-east Asia’s growing role as a manufacturing base and the need for dedicated capacity into North America.
Meanwhile, UAE cargo airline SolitAir has expanded its China network with a Tianjin service, following earlier launches to Hong Kong and Urumqi, further strengthening links between Chinese manufacturing centres and the Middle East.
The result is a market proving far more resilient than many expected at the start of the year. Ecommerce is clearly losing momentum, but AI appears to be taking its place.
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Facts Only

* WorldACD worldwide average air cargo rates fell 1% week-on-week to $3.13 per kg for the week ending July 5.
* Average spot rates slipped 2% to $3.62 per kg.
* Global spot rates remained 38% higher than a year earlier, averaging $3.40 per kg.
* The pace of growth in global spot rates slowed from 41% in May.
* Total worldwide air cargo capacity is slightly above the level before the conflict began.
* The capacity deficit to and from the Middle East and South Asia narrowed to 10%, down from about 30% in early June.
* Worldwide chargeable weight was 4% above last year’s level.
* Global demand grew 7% year on year in June, outpacing capacity growth of 3%.
* Hong Kong-Europe tonnages fell by around 20% in three weeks following the EU's decision on imports.
* Taiwan-Europe volumes surged around 20% over the same period, reflecting AI-related equipment shipments.
* Taiwan Semiconductor Manufacturing reported record June revenue of NT$442.7bn ($15bn), up 67.9% year on year.

Executive Summary

Air freight markets are showing signs of settling, with capacity largely returning to the Gulf, fuel prices easing, and rates gradually declining, though they remain elevated compared to historical standards. Worldwide average air cargo rates fell by 1% week-on-week to $3.13 per kg in the week ending July 5, following a 2% decline the previous week, and spot rates slipped to $3.62 per kg. While global spot rates remained 38% higher than a year earlier, growth in rates slowed from 41% in May as capacity returned through the Middle East and jet fuel prices retreated. Despite this trend, demand remains strong; worldwide chargeable weight was 4% above last year’s level, and global demand grew 7% year on year in June, outpacing capacity growth of 3%. The shift in growth drivers is notable: cross-border e-commerce is declining, while shipments related to AI-related computer equipment are surging.

Full Take

The narrative demonstrates a structural shift in air cargo dynamics, moving from an e-commerce-dominated growth engine to one increasingly driven by high-value technology logistics, specifically Artificial Intelligence infrastructure. The resilience of the market, evidenced by continued demand outpacing capacity recovery and fluctuating rates, suggests that geopolitical volatility has not fully translated into systemic operational shutdowns but rather a reallocation of trade flows. The slowdown in B2C e-commerce volume contrasts sharply with the surge in AI-related shipments, which are demonstrating undeniable growth, supported by sector-specific data like semiconductor sales and major chipmaker revenue reports. This indicates that market strength is being re-anchored not by broad consumer behavior but by strategic, high-margin industrial demand sensitive to technological advancements. The underlying implication is that future air freight stability will depend less on historical volume metrics and more on the capacity for specialized, time-critical logistics flows related to emerging technologies. What determines whether this shift is a temporary market fluctuation or a fundamental structural change hinges on how quickly infrastructure and network planning—as seen in DHL and SolitAir's expansion efforts—can adapt to prioritize these new growth vectors over legacy volume drivers.

Sentinel — Human

Confidence

The article presents a complex analysis connecting shifting air cargo demand—driven by the rise of AI over e-commerce—with macroeconomic factors and geopolitical instability, demonstrating sophisticated synthesis.

Signals Detected

Sentence length variance shows natural variation; flow is complex rather than uniformly rhythmic.

The text successfully weaves disparate data points (freight rates, capacity, AI demand, geopolitical events) into a unified narrative without relying on boilerplate balancing phrases.

Specific data points are cited from named entities (WorldACD, Xeneta, Freightos) and linked to specific market shifts, suggesting deeper source integration than simple aggregation.

The narrative structure hinges on interpreting statistical trends (e.g., AI replacing e-commerce) rather than just stating raw numbers, which is characteristic of analytical writing.

Human Indicators

The text integrates geopolitical context (ceasefire collapse, drone attacks) directly into the market analysis, suggesting a human-driven synthesis rather than purely algorithmic aggregation.

The concluding sections involving expert quotes flow naturally and offer nuanced commentary ('air freight is not in control of its own destiny, but no one can deny its ability to respond').