Episode Transcript
[00:00:03] Speaker A: Hello, I'm Mike King, this is the Freight Buyers Club and we're coming to you live from Lima, Peru, where the IATA World Cargo Symposium is taking place this week. This content is brought to you by Demerco Express Group, your ideal freight forwarding partner for the Trans Pacific, Asia and beyond. Now, as I'm sure you can all imagine, everybody down here in Lima is talking about one thing and one thing only. That's the chaos that's come to supply chains because of war in the Middle east and the many, many, many ramifications this is having for global air cargo markets. And I'm delighted to say to analyze this. I'm joined today by Ray Zidoff, who's the Commercial Director of rotafe. Welcome Ray.
[00:00:52] Speaker B: Thanks Mike. Thanks for having me. It's beautiful to be in Lima today.
Not only my first time in South America, but also my first time recording a podcast on air cargo. So I'm excited to be here.
[00:01:03] Speaker A: We're excited to have you, Ray. We, we met at TPM Long beach as, as this war was breaking out on the 28th of February. Let's rewind back to that point and can you tell me how this war and the implications for air cargo looked, how that rolled out for you personally and how Rotate was analyzing this in the first early days?
[00:01:29] Speaker B: Certainly, yeah. So personally for me, eight days ago, so I, I live in Dallas Fort Worth, so eight days ago I was on my way to Los Angeles for the TPM show and as the aircraft was taking off it, it actually clicked for me how big of a problem this was. I noticed two Qatar and two Emirate wide body aircraft just stranded on the parking pad at DFW is at that point I realized these aircraft are all over the world parked with crews displaced, passengers displaced. This is when I really understood the severity of what was happening.
Now whilst I was in air, our consulting and data teams at ROTATE were already knee deep into the data, understanding the implications of what was transpiring. So a couple interesting statistics here.
So think of the Gulf carriers who operate out of the Middle East, Qatar, Emirates, several others.
They account for 13% of global air cargo capacity. When planes are up and running due to their aircraft being grounded, as well as other airlines not being able to serve the Middle east, we saw about 18% of global air cargo capacity just simply Vanish within a 48 hour period.
[00:02:53] Speaker A: We're talking on the 9th of March. Just to timestamp this for everybody watching or listening, what's the situation now in terms of that capacity? As much of it Come back. As far as I understand, Emirates certainly Etihad has got some flights in the air, Qatar less so. But we're not entirely sure how much cargo is flying on those flights. But what's the global situation at the moment, Ray?
[00:03:18] Speaker B: Sure, yeah. So as of a couple hours ago, our rotate data showed that from the 18% decline we were in about seven or eight days ago, we're now only down to about 12% of global air capacity being parked.
[00:03:33] Speaker A: Still hugely substantial.
[00:03:35] Speaker B: It is, yeah. I mean, that's certainly a lot of capacity just to disappear in such a short amount of time. Now, I agree with your point on, yes, aircraft are flying, passenger flying, passengers are flying, which is ultimately the most important. But the uncertainty there is how much cargo is actually being loaded onto those aircraft right now.
[00:03:55] Speaker A: Can you say maybe break it down slightly in terms of what this looks like on trade lanes? So we know how much Gulf capacity is tied up, but how is that affecting, say, Asia, Europe, or how is it affecting the Trans Pacific?
[00:04:07] Speaker B: So on Asia to Europe, we've seen a couple of interesting developments. First is with the integrators.
Prior to the crisis, the integrators really relied heavily on their Middle Eastern hubs.
Today we see the integrators are bypassing those hubs and flying directly from Asia into Europe. So no longer are they connecting over Bahrain or Dubai or Riyadh. The good news is goods are still flowing.
However, the bad news is those carriers are likely seeing higher payload restrictions due to the increased stage length.
When you look at all of the capacity flowing from Asia to Europe, we are about 70% recovered from the lowest of loads. But again, on those passenger networks, it's a little, there's, there's a little bit of uncertainty as to are the, are the bellies of those aircraft full of cargo or is the focus primarily on relocating passengers?
[00:05:04] Speaker A: And as the flow of traffic changed at all, we've seen some of the integrators certainly going direct from Asia into Europe, haven't we? Are they flying from elsewhere as well?
[00:05:13] Speaker B: Certainly. So we've seen increase of capacity on the Trans Pacific as well. Also on the transatlantic sectors as well. We've seen freighter capacity get redeployed. It's certainly better to be flying than just having those aircraft parked.
[00:05:26] Speaker A: I want to come back in a moment to look at how this is going to play out now through the, through the rest of 2026, depending on different scenarios. But let's rewind slightly if we may, because all of this isn't taking place on a blank canvas 2025 was, I say, rather disrupted in its own, in its own way. Can you walk us through 2025 and how you guys are rotate saw that year?
[00:05:52] Speaker B: Yeah. So coming into 2025, there were certainly some reasons to be optimistic and certainly some reasons to be pessimistic. I think one of the biggest Unknowns coming into 2025 was the, the new administration at the White House. In the United States, shortly after the presidential inauguration, policies began to change and it started right up with tariffs. Right. This was the big topic in really all of, all of 2025.
Countless times tariffs were announced, pulled back, negotiated, renegotiated. Again, regardless of what role you played in the supply chain last year it was quite a frantic time. There were shocks on both the demand side of things, driven by tariffs and de minimis. But also on the supply side, we had aircraft operators announce the delay of production lines for freighter aircraft that the market really needs at the moment. And also the Red Sea crisis certainly didn't get better in 2025.
[00:06:57] Speaker A: Yeah, very interesting. So, yeah, the big tariff announcement of course was Liberation Day. I think it was April 2nd.
Those reciprocal tariffs, the IPA tariffs, have now been rolled back by the Supreme Court, which is causing even more chaos in the US what hasn't been obviously rolled back is the end of de minimis exemptions in the U.S. but through all of this, demand held up quite well, didn't it?
[00:07:20] Speaker B: Yeah. So in 2025 overall we saw demand grow about 4% on 5% capacity growth.
Now what surprises me the most about 2025 is, is just how strong it was given the volatility in the market.
December 2025 marked the 29th consecutive month of year on year growth for air cargo, which is simply tremendous given how up and down things were.
[00:07:49] Speaker A: We, we've got a lot of US shippers who, who watch this podcast. There was this expectation from analysts that these tariff on tariff off policy, but all particularly the de minimis end of de minimis exemptions was really going to kill that US market. Didn't quite pan out like that, did it? Certainly for air cargo globally, but also on that US lane, there was some transference to general cargo, but we saw those E Commerce volumes going elsewhere as well, certainly.
[00:08:16] Speaker B: Yeah. So there were really to me two major things that drove the strong demand in 2025.
First was the strong consumer spending we saw in the United States coupled with that front loading of goods into the United States prior to the the tariffs being implemented. So that was one tailwind for demand in 2025.
The other thing that we saw was the emergence of AI and the need to bring technology and semiconductor goods into the United States to support the construction of data centers in the United States. Now, those goods were no longer coming in from China due to the elevated tariffs. But what we did see in 2025 was very strong demand between Vietnam and the United States for these high tech goods that I, that I just mentioned.
[00:09:12] Speaker A: There was, there was a big impasse between, well, impasse, maybe a big gap between demand and supply out of Vietnam. Has that been closing this year?
[00:09:21] Speaker B: It has been. So there aren't many carriers that fly direct from Vietnam to the United States. So a lot of that demand was satisfied via connecting hubs in Northeast Asia. But even through the first two months of this year, in 2026, we've seen international capacity growth exiting Vietnam grow about 30% compared to the first two months of 2025.
So that gap is closing from our perspective.
[00:09:49] Speaker A: Ray, thank you for that. We're going to come back and have a look at 2026 in a moment, but bear with us. We'll just take a quick break.
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Ray, looking forward to 2026. Prior to the outbreak of war in the Middle East, Rotate was pretty optimistic about the air cargo market. How do things look now?
[00:10:23] Speaker B: So I think that there are two things that have significantly changed recently that will have some pretty large implications on how the rest of the year develops for air cargo. First is going to be the fuel price.
So when the markets opened this morning on the Monday, we saw the. The average barrel price of oil in excess of $100. That's really going to have an impact on all of the players in the supply chain. Whether you are air versus ocean or whether you are carrier forwarder or shipper. That, that's, that's really going to be a burden for everybody. The other thing that was on our minds prior to this, the outbreak of this crisis was how strong ocean reliability had been in recent months.
Now obviously that is a different story coming out of the crisis. There are going to be a lot of ocean shippers looking for lift via air to get out of these congested ports in the Middle east and Asia.
[00:11:24] Speaker A: Yeah, I mean just for a bit of background, we covered a lot of this in tpm. We had weird how disrupted things are. There's hundreds of thousands of TEUs stranded in ports and it becomes instantly almost the shifter's responsibility.
So a lot of them are going to have no choice but to turn to air cargo. I mean this is also a big opportunity for people in this, in this industry.
[00:11:48] Speaker B: It is, yes. I mean in the short term things are still quite volatile. Day by day it's really uncertain which carriers will be operating which routes.
But the good thing about this industry is that it, it to me it's, it remains a people business at its core and I've seen great communication between parties in, in all parts of the air cargo community these past couple of weeks just ensuring that everybody has what they need to really get, get through to tomorrow.
[00:12:18] Speaker A: We're down here in, in South America. Bearing in mind all the things that we've just discussed, how do you think this plays out for shippers here, for players in the market down here? What should they be looking out for?
[00:12:31] Speaker B: So obviously South America is quite strong in exporting perishable goods to all around the world.
This isn't always a high margin business for perishable shippers. So again, bringing back in the fuel conversation, this is really something that forwarders and shippers in South America need to be cognizant of and have a strategy behind.
Capacity is certainly one part of the plan and ensuring that you have capacity to the right parts of the world at the right time of the year to meet your seasonal demands.
But the financial implications of the next few months are going to be crucial for shippers in this part of the world.
[00:13:16] Speaker A: Presumably some of those things are going to be true for shippers everywhere. Higher prices, whether you're talking about ocean, whether you're talking about air, tighter market,
[00:13:23] Speaker B: higher fuel costs, expect surcharges, certainly, yes. I mean the combination of increased jet fuel prices with certain parts of the world being cut off from capacity in the short term, we hope, as well as that crunch on ocean capacity, I mean this likely is going to drive prices one way and that will be up.
[00:13:46] Speaker A: Ray Zof, Commercial Director at Rotate thanks for joining me today on the Freight Buyers Club.
[00:13:51] Speaker B: Thanks Mike.
[00:13:51] Speaker A: Thank you all for listening. Big thanks to Jamerico Express Group of course for supporting independent journalism. We'll be back soon from iata. Well Cargo symposium with lots more content for you. Please like subscribe and follow. Thank you.
