The Catalysts Behind Rising Rates

• • Capacity Attrition: Prolonged operational stress has accelerated carrier exits. Slower fleet growth and a leaner supply backdrop mean fewer trucks are actively competing for freight.
  • Regulatory Pressures: Heightened regulatory enforcement and stricter commercial driver’s license (CDL) eligibility requirements have structurally tightened driver availability. This labor constraint continues to exert upward pressure on operating costs.
  • Volatile Operating Expenditures: Spikes in diesel fuel costs have significantly impacted the bottom line. Spot rates—which absorb these costs directly—have subsequently hit multi-year highs across all major equipment types.

What This Means for Shippers

The Shift to Expedited Shipping

• • Guaranteed Dedicated Capacity: We match shipments directly to dedicated sprinter vans or box trucks. Because your cargo is the only freight onboard, you eliminate the risk of transit delays or terminal bottlenecks.
  • Rapid Dispatch Capabilities: With national coverage that allows for on-demand pickups typically within two hours, we prevent costly production line shutdowns or missed distribution deadlines.
  • Intermodal Flexibility: When ground capacity faces extreme bottlenecks, TEC seamlessly coordinates time-critical air freight and air charter services, providing a reliable safety valve for high-value or highly urgent shipments.

The domestic air freight industry is facing immediate disruption following the FAA’s decision to ground all McDonnell Douglas MD-11 cargo aircraft after the fatal UPS crash in Louisville, Kentucky. The grounding has already created pressure throughout overnight freight, next day air cargo, and domestic air freight networks as carriers race to adjust capacity during an already strained shipping environment.

For companies that rely on air freight services, air freight shipping, and overnight air cargo services, the sudden removal of MD-11 aircraft from operation raises concerns about tighter capacity, shipping delays, and rising air freight rates across the United States.

The Importance of the MD-11 in Domestic Air Freight

While the MD-11 may appear to be an aging aircraft platform to those outside logistics, the aircraft has remained a major workhorse within domestic air freight operations for decades. UPS and FedEx both utilize MD-11 aircraft heavily for overnight air freight shipping between major hubs and regional cargo markets nationwide.

The aircraft is especially valuable for moving heavier freight pallets, industrial cargo, high volume overnight shipments, and time sensitive freight that smaller aircraft cannot efficiently absorb. Within the air cargo services sector, the MD-11 continues to play a significant role despite ongoing fleet modernization efforts.

The FAA grounding followed reports that the left engine detached from a UPS MD-11 during takeoff from Louisville Muhammad Ali International Airport, leading to a catastrophic crash that killed 14 people. Following Boeing’s recommendation, UPS and FedEx voluntarily grounded their MD-11 fleets before the FAA formally suspended operations pending inspection and engineering review.

Impact on UPS and Overnight Air Freight Services

UPS is expected to feel the strongest operational impact because the carrier historically relied heavily on MD-11 aircraft throughout its overnight freight network. Louisville Worldport is one of the largest domestic air freight hubs in the world and processes enormous freight volume every night.

The removal of widebody cargo aircraft from the network creates immediate scheduling challenges and tighter overnight capacity. This could potentially affect delivery schedules, aircraft routing, and available space for heavier air freight shipping throughout the UPS system.

For shippers utilizing air freight services for critical production freight, automotive parts, medical shipments, aerospace cargo, or industrial materials, even a small reduction in aircraft availability can significantly impact transportation planning.

Pressure on FedEx Air Services and Air Freight Rates

FedEx Air Services is also expected to experience additional pressure as displaced freight moves throughout the broader domestic air freight network. Although FedEx operates a more diversified widebody fleet, the loss of MD-11 aircraft still removes meaningful lift capacity from the market.

As available cargo space tightens, many analysts expect air freight rates to increase, particularly for overnight air freight delivery and next day air cargo shipments. Capacity constraints often create higher pricing pressure as shippers compete for fewer pallet positions and aircraft departures.

The impact could become especially noticeable during peak shipping periods, weather disruptions, or high volume manufacturing cycles when domestic air freight networks already operate near capacity.

How the Air Cargo Services Market Could Change

The grounding may also accelerate long term changes within the air cargo services industry. Both UPS and FedEx have already been transitioning toward newer Boeing 767 and 777 freighter aircraft as older MD-11 fleets age.

However, replacing widebody cargo aircraft is not a quick process. Aircraft manufacturing timelines, freighter conversions, pilot training, and operational scheduling limitations mean replacement capacity cannot appear overnight.

This situation could force carriers to prioritize higher revenue freight while pushing some shipments toward alternative transportation methods including expedited trucking, sprinter van services, straight trucks, and team driver operations.

Domestic Air Freight Shippers May Need More Flexible Solutions

For companies that regularly depend on overnight freight shipments and domestic air freight services, flexibility may become increasingly important in the weeks ahead.

Shippers may need to evaluate multiple transportation options including:

• Same day commercial airline services
• Heavy scheduled overnight air freight
• Expedited trucking solutions
• Dedicated sprinter van transportation
• Straight truck expedited freight
• Linehaul and economy freight alternatives

The current disruption highlights how interconnected the national supply chain has become. A grounding affecting one aircraft type can quickly ripple throughout air freight shipping, overnight freight delivery, and domestic air cargo services nationwide.

The Domestic Air Freight Industry Watches Closely

Over the coming weeks, the freight industry will closely monitor FAA findings, aircraft inspections, and Boeing engineering reviews to determine how long the grounding may remain in effect.

In the meantime, shippers utilizing air freight services should expect tighter capacity, potential routing adjustments, and continued pressure on air freight rates as UPS, FedEx, and the broader domestic air freight industry work to stabilize operations.

For businesses with urgent freight needs, proactive planning and flexible transportation solutions may become more important than ever as the air cargo services market adjusts to this significant disruption.

For businesses relying on ltl shipping, expedited freight, overnight freight, and air freight services, the current environment feels less like a clear recovery and more like a mixed, evolving landscape.

LTL Freight: Recovery or Just Stabilization?

There’s no question that ltl freight has shown signs of life. Pricing has edged upward in many lanes, and capacity discipline has improved. But does that automatically mean a full recovery? Not necessarily.

In many markets, ltl freight shipments remain inconsistent. Some regions are busier, others are still quiet. And while rates are rising modestly, they are doing so after a prolonged period of softness. That could just as easily indicate correction rather than expansion. What we have seen are very erratic and dynamic prices being a constant.

It raises a fair question: are we seeing true growth, or simply a market finding its footing after a downturn?

Expedited Freight and Overnight Shipping: A Different Story

One area that hasn’t followed the same pattern is expedited freight and overnight freight. Demand here has remained relatively steady, even during slower periods. April, for example, was significantly the busiest month of the year for us. That’s because urgency doesn’t wait for market cycles.

• Overnight freight shipments still move when production lines are at risk
• Expedited freight continues to support time-critical operations
• Air freight services remain essential when speed is non-negotiable

In that sense, expedited logistics can be a more reliable indicator of real-world demand. And while it hasn’t surged dramatically, it also hasn’t dropped off in the same way as some other modes.

Air Freight Services: Holding Value, Not Exploding

The same cautious trend applies to air freight services, including next flight out freight and overnight air shipping.

These services continue to perform their role of moving urgent freight quickly but they haven’t necessarily seen a dramatic spike that would signal a broad economic rebound. Again, the jury is out. Instead, activity appears steady and situational. When businesses need speed, they use it. When they don’t, they look for lower-cost alternatives.

So again, the question becomes: is stability being mistaken for recovery?

Rates Are Moving… But Why?

There’s also been noticeable movement in pricing this year, especially in ltl shipping. Rates have increased in many areas but the reasons aren’t entirely straightforward.

• Carriers have reduced excess capacity
• Operating costs remain elevated
• Pricing discipline has improved

And one factor that cannot be ignored is fuel.

Fuel costs have risen significantly compared to recent lows, and that increase flows directly into freight pricing. Higher diesel prices impact trucking rates through fuel surcharges, while rising jet fuel costs influence air freight services and overnight air shipping. Even modest increases in fuel can ripple across the supply chain quickly. Proactive pricing (which is proving to have been correct) was instantaneous following recent developments in the Middle East.

This raises another important question: are higher rates truly demand-driven, or are they being pushed upward by cost pressures like fuel?

In many cases, it’s likely a combination of both but the distinction matters when evaluating the strength of a recovery. We would say, at present, that things remain stable neither improving nor deteriorating but price changes are definitely a reality.

Reading Between the Lines

It’s tempting to label any positive shift as the end of a downturn. But freight markets are rarely that simple.

Yes, there are encouraging signs:

• Stabilizing ltl freight activity
• Gradual pricing improvements
• Consistent demand for overnight freight and air freight services

But there are also lingering questions:

• Why does demand still feel uneven across regions and industries?
• Why hasn’t expedited volume spiked if the broader economy is accelerating?
• Are rate increases being driven more by fuel and cost control than actual growth?

These are not signs of a fully settled market they’re signs of transition and we think that will remain the case for the remainder of 2026, at the very least.

What This Means for Shippers

For now, flexibility remains the most practical strategy.

• Use ltl freight for cost-effective, non-urgent shipments
• Lean on expedited freight when timing is critical
• Turn to overnight freight and air freight services when speed is essential

Working with a knowledgeable logistics partner such as TEC can help navigate these shifting conditions and identify the right solution for each shipment.

Final Thoughts

So, is the freight recession over? Maybe. More likely is it is just evolving.

Between uneven demand, cautious growth signals, and rising cost pressures like fuel, the market doesn’t point clearly in one direction. What seems certain is that conditions are changing—but whether that change represents a full recovery is still open to interpretation.

For now, the smartest approach is to stay informed, stay flexible, and keep asking questions. In freight, the story is rarely as simple as the headline.

1. Truckload (Full Truckload & Expedited Ground)

Over the past year, U.S. truckload freight costs—both spot and contract rates—show persistent inflation, though with moderation in early 2025.

• Spot rates climbed roughly 11.6% YOY in Q4 2024, according to RXO’s Curve Index, and remain inflated in Q1 2025, though growth has slowed FreightWavesRXOTrucking Dive.

• Contract rates moved from a contraction of –1.5% in Q4 2024 to a modest +1.4% YOY increase in Q1 2025 RXO.

• Arrive Logistics expects spot rates to stay relatively stable through mid‑2025, with moderate YOY growth. Contract rates have reached a floor and are unlikely to fall further Arrive LogisticsThinkFreight.

• Flock Freight’s Q2 outlook sees Q1 ending with only +3% YOY spot rate growth, down from +5.5% in Q4. They project +8–10% YOY growth in Q2, and potentially +20% by year’s end, tempered by uncertain freight demand and tariffs Flock Freight.

Summary: Compared to a year ago, ground freight costs remain elevated but are growing more gradually. The rest of 2025 should see mild to moderate rate increases, especially in spot markets.

2. Expedited Freight (Hot‑Shot, Same‑Day, Ground)

While less frequently broken out separately in data, expedited or hot‑shot freight, which relies on urgency and oversized premiums, tends to mirror spot rate trends—though with added surcharges for speed and shorter notice.

Given overall carrier oversupply and plentiful capacity, expedited costs have softened somewhat. Still, they remain pricier than standard truckload due to immediacy. As spot rates stabilize, expedited premiums may also moderate but remain premium relative to regular linehaul.

3. Domestic Air Freight

Air cargo costs over the past year have exhibited mixed signals—growth in some areas, softening in others.

• IATA reports a modest 3.2% YOY growth in air cargo demand in January 2025—its 18th consecutive month of expansion, but slower than prior years IATA.

• Bertling sees 2024 air freight growth at 11.3%, with a projected +5.8% growth in 2025. However, uncertainties from tariffs, e-commerce rule changes, and trade policy introduce volatility bertling.com.

• Since May 2025, U.S. air cargo shipments from Asia dropped 20–30% compared to a year ago, largely due to elimination of the de minimis exemption and rising tariffs Wall Street JournalReutersFinancial Times+1Financial Times+1.

• Mordor Intelligence forecasts the U.S. air freight market at about $49.85 billion in 2025, with a projected CAGR of 4.33% through 2030 Mordor Intelligence.

Summary: Overall air freight costs peaked during 2024 but are now stabilizing or easing slightly in certain lanes. Policy shifts and reduced demand from Asia are likely to temper rates in late 2025, although domestic and value‑sensitive segments (e.g. pharmaceuticals, e‑commerce) will buoy continued growth.

Forecast for Remainder of 2025

Final Thoughts

• Truckload freight remains costlier than a year ago but will likely slow in growth through mid‑2025. Spot rates may surge in Q2–Q3, while contract rates stay steady.

• Expedited services will continue to command premium pricing, though conditional on spot rate trends and capacity.

• Air freight demand is softening in affected lanes (e.g., Asia to U.S.), but domestic demand remains steady. Expect manageable growth, with selective volatility tied to trade policy.

Why the Denver Cargo Facility Matters

1. Meeting High Demand in a Top-Tier Airport
   Denver ranks among the top three busiest U.S. airports and handled over 77.8 million passengers in 2023 en.wikipedia.org. With Southwest operating over 300 daily flights from DEN, this cargo facility offers the capacity to support time-sensitive shipments alongside passenger travel, adapting to growing demand for urgent domestic freight. 

2. Boosting Domestic Air Freight Services
   The 27,000 sq ft cargo building replaces a smaller 16,000 sq ft facility, offering enhanced warehouse space, loading docks, and dedicated zones for Next‑Flight‑Guaranteed, Fresh‑Fast perishables, and other rapid‑turnaround shipments ship.swacargo.com+9bizjournals.com+9mccarthy.com+9southwest.com. This expansion bolsters Southwest Cargo’s ability to process same‑day and expedited freight within its extensive domestic network.

3. Faster Turnaround for Same‑Day Shipments
   By adding upgraded docks and a front‑office drop‑off area, the new facility is optimized for same‑day air freight, ensuring urgent shipments can be efficiently received, processed, and routed to the next available flight. This meets increasing market demand for emergency logistics, medical supply delivery, e‑commerce, and next‑flight‑guaranteed services.

4. Streamlined Hub-and-Spoke Integration
   As part of Southwest’s broader Denver expansion — including a $90 million provisioning/ground‑support building and a $100 million maintenance hangar — the cargo facility is fully integrated into airport operations ship.swacargo.combizjournals.com+1prnewswire.com+1. This consolidates provisioning, ground‑support equipment (all-electric), maintenance, and freight operations in one campus, creating efficiencies, reducing delays, and supporting reliable domestic air freight day in and day out.

Photo by Owen Lystrup on Unsplash

Key Operational Enhancements

• Dedicated Warehousing
  With ample indoor space, ground staff can consolidate and stage shipments securely inside the facility before flight loading, improving handling speeds and accuracy.

• Loading Dock Efficiency
  Multiple docks enable simultaneous loading and unloading, cutting transfer times for urgent freight items which are often time‑critical.

• Front-Office Support for Shipments
  A new customer-facing space enhances visibility and control for shippers using services like Next Flight Guaranteed, Fresh Fast perishables, and 24/7 expedited cargo flydenver.com+6mccarthy.com+6community.southwest.com+6ship.swacargo.com+2southwest.com+2ship.swacargo.com+2.

• Surrounding Infrastructure Synergies
  Adjacent investments in provisioning and hangar support mean shipments benefit immediately from streamlined delivery pipelines, operational synergy, and hassle-free on‑airport logistics .

The Strategic Benefits – What This Means for You

1. Faster Shipping Times
   Whether it’s medical supplies, fresh produce, electronics, or urgent e‑commerce parcels, shippers can now capitalize on DEN as a high-frequency domestic air-mail gateway with same-day service coverage.

2. Greater Reliability & Visibility
   With improved warehouse and dock architecture, offering Next Flight Guaranteed and Fresh Fast services comes with better tracking, reduced mishandling, and chic service guarantees.

3. Expanded Domestic Reach
   Tapping into Southwest’s 90+ nonstop cities network, urgent shippers gain access to coast-to-coast and regional rush delivery options—particularly vital for critical logistics.

4. Sustainability & Scalability
   Ground service equipment in the ecosystem is now fully electric, aligning with Southwest’s sustainability goals while facilitating sustainable, scalable freight handling

Final Thoughts

Southwest Airlines’ new cargo facility at Denver International is more than just a building—it’s a strategic cornerstone marking a new chapter in domestic air freight. By investing in warehouse capacity, loading docks, streamlined logistics, and passenger-support synergy, Southwest is empowering businesses to meet the growing demand for urgent, expedited, and same-day freight shipping. With this investment, Southwest is well-positioned to continually deliver on its promise of relentless reliability, making DEN a powerhouse for domestic air freight logistics for years to come.

At The Expedited Company we regularly work with Southwest for Same Day Air Shipments for lighter cargo (under 200 lbs) in addition to heavier domestic air freight. Call us today at 844-382-5068 to learn how we can assist.

Decline in Air Freight Volumes

The removal of the de minimis exemption has particularly affected e-commerce shipments, which previously accounted for 55% of goods shipped from China to the U.S. by air. Carriers like Cathay Pacific, China Southern, Air China, and Korean Air, which benefited from high-volume shipments from fast fashion retailers such as Shein and Temu, are now facing declining demand. The STAT Trade TimesAir Cargo News+7Reuters+7Reuters+7

The sudden drop in cargo demand for U.S. shipments, coupled with dim prospects for a solid rebound, creates headwinds for airlines in Asia as they grapple with both a fall in passenger air fares and concerns over a global recession. The market remains volatile and thus unpredicatable.  Reuters

Adjustments in Airline Strategies

In response to the decreased demand, major freight operators are adjusting their strategies. Cathay Pacific and Singapore Airlines are redeploying freighters to other markets, such as Latin America, to offset the decline in transpacific volumes. Additionally, some airlines are diversifying into sea shipping to adapt to the changing landscape. Reuters+1Reuters+1

Impact on Air Freight Pricing

The reduced demand has led to a surplus in air freight capacity, exerting downward pressure on pricing. Freightos data suggests that transpacific air freight rates, which averaged $5–$7 per kilogram in 2023, could fall by 30% to approximately $3.65/kg—or even lower. Excess capacity, especially as passenger airlines restore operations and increase belly cargo space, could push rates down further. airsupply+1The STAT Trade Times+1

However, if volumes continue to decline, carriers might reduce their capacity allocations for e-commerce-heavy air routes, which could eventually push rates back up. Supply Chain Dive+7lgi.laufer.com+7Reuters+7

Shifts in Supply Chain Strategies

Anticipating stricter de minimis regulations, Chinese retailers have already invested in U.S. warehouses to transition to a B2B2C fulfillment model. This shift means goods will now be pre-imported, taxed, and stored domestically before delivery, streamlining logistics but also raising costs. These increased costs are likely to be passed on to consumers. airsupply+1Reddit+1

Furthermore, companies are exploring alternative routes and manufacturing locations. Some manufacturers are relocating to Southeast Asian countries like Vietnam, Thailand, and Malaysia, which still qualify for de minimis exemptions. However, these countries face new tariff challenges as well. airsupplyReuters

Conclusion

The suspension of the de minimis exemption has introduced significant volatility into the air freight market, leading to decreased volumes and downward pressure on pricing in the short term. Airlines and freight operators are actively adjusting their strategies, including rerouting capacity and diversifying shipping methods, to navigate this challenging environment. As the industry adapts to these changes, stakeholders will need to remain agile and responsive to evolving trade policies and market dynamics.Air Cargo News+1Kerry Logistics Oceania+1

Domestically

Whether these changes have much or any impact on the domestic air freight market remains to be seen when it is dominated by two major suppliers in UPS and FedEx. Capacities remain open and there is no indication that FedEx or UPS plan to relax pricing domestically, indeed prices are actually increasing which we will write about next time.