High inflation, interest rates and energy costs may put global air freight under mounting pressure in 2023 as headwinds continue to affect air cargo demand. A strong dollar affects air cargo and as many costs are denominated in the greenback, the currency’s appreciation adds another layer of cost on top of soaring inflation and high jet fuel prices.Revenues are expected to be $149.4bn, which is $52bn less than 2022 but still $48.6bn stronger than 2019, according to the International Air Transport Association (IATA).With economic uncertainty, cargo volumes are expected to decrease to 57.7mn tonnes, from a peak of 65.6mn tonnes in 2021. As belly capacity grows in line with the recovery in passenger markets, yields are expected to take a significant step back.IATA expects a fall of 22.6% in cargo yields, mostly in the latter part of the year when the impact of inflation-cooling measures are expected to bite. To put the yield decline in context, cargo yields grew by 52.5% in 2020, 24.2% in 2021 and 7.2% in 2022.Even the sizeable and expected decline leaves cargo yields well-above pre-Covid levels.This year, air cargo revenues played a key role in cutting airline industry losses with revenues expected to reach $201.4bn. That is an improvement compared with the June forecast, largely unchanged from 2021, and more than double the $100.8bn earned in 2019."Air cargo continues to demonstrate resilience as headwinds persist. Cargo demand in October - while tracking below the exceptional performance of October 2021- saw a 3.5% increase in demand compared to September. This indicates that the year-end will still bring a traditional peak-season boost despite economic uncertainties. But as 2022 closes out it appears that the current economic uncertainties will follow into the New Year and need continued close monitoring,” noted Willie Walsh, IATA’s director general.The International Air Cargo Association (TIACA) says the current situation is temporary and that later in 2023 central banks are expected to start reducing interest rates when inflation may come under control.Although before things improve, the industry can expect a further slowdown as energy costs are expected to remain high through winter 2022, particularly in Europe.But structurally the industry is in a good place, the association said and noted that towards the second half of 2023 it could see demand picking up compared to this year.TIACA says air cargo has shown quality performance in moving perishables, high tech, pharmaceutical and e-commerce commodities.Current retail inventory levels are high but when consumer spending resumes the industry can expect to see demand across the product range."With Covid restrictions in China starting to relax as the government pulls back from the zero-Covid policy we can expect that production levels, which have been impacted periodically these past two years as manufacturing centres were shut down temporarily, to return to a more normalised situation,” TIACA says.There are many positive things, which the industry can focus on such as innovation, which since early 2020 has been phenomenal, from process innovation to technical innovation to people and skills innovation.One area that the association hopes to see improvement in 2023 is in the regulatory environment as air cargo needs a much more flexible regime to be in place so operators can deploy their equipment where the demand is needed.With giant shipping companies moving into air cargo and coming onshore offering integrated logistics services like forwarders, major forwarders are focusing on consolidation and trying to gain a position."2023 might be unclear and the reality is that we will not know until we lift the lid, but the long-term prognosis for air cargo is solid with trade continuing to outpace the global economy,” TIACA says.Boeing’s 20-year forecast is for trade to grow 2.8% a year, cargo volume to rise 4.1% a year, and the global freighter fleet to grow from 2,240 aircraft in 2021 to 3,610 freighters by 2041.Huge investments are required to meet this demand and if major global players open up their wallets, the air cargo industry’s long-term prognosis will indeed be solid.