FedEx, UPS pull back July cargo flights amid weak volumes

The number of package flights operated by FedEx Express and UPS significantly declined month over month in July, underscoring how far the overall air cargo market has sunk since the spring of 2022 and the effect of efficiency initiatives the companies have undertaken in response to lower express volumes.

FedEx (NYSE: FDX) flew 9% fewer domestic flights last month than in June following small sequential gains the prior two months, with year-over-year flight activity down 14%, according to an analysis by investment bank Morgan Stanley. The year-over-year decline in UPS’ flight activity accelerated to 13% from 10% in June. UPS (NYSE: UPS) reduced July flights by 14% from June. Flight activity in May and June, by comparison, was relatively stable.

Morgan Stanley only tracks domestic flights for express carriers, but they have also cut back flight activity on international routes during the past year to save money.

Express air, part of the integrated logistics service both companies provide, underperformed typical seasonal declines, with UPS seeing the second consecutive month of declines worse than seasonality.

FedEx and UPS have previously declared they are reducing flight activity to match lower volumes in parcel shipments, while FedEx is also streamlining its air infrastructure as part of a multiyear effort to take out structural costs and improve profit margins.

FedEx in June said it plans to remove 29 aircraft from its fleet this fiscal year through permanent retirement and temporary storage. It retired 18 older aircraft during the fiscal year ended May 30 and reduced global flight hours by 12% during the final quarter.

UPS reported second-quarter domestic next-day air revenue fell 9.4% on a 12% drop in volume. Management attributed a large chunk of the domestic decline to customers trading down to UPS’ lower-cost ground network. The airline pulled more shipments into its WorldPort hub in Louisville, Kentucky, to help fill up next-day flights and reduce use of second-day flights, resulting in domestic flight hours that were 6.5% lower versus last year, said CFO Brian Newman.

UPS also experienced a large amount of freight diversion to competitors during the summer because customers were worried about a looming strike by delivery drivers and warehouse workers. The Teamsters union on Tuesday ratified a new five-year contract.

UPS’ international volume slipped 6.6% during the quarter. The company said a reduction in aircraft block hours significantly contributed to a $343 million decrease in operating expenses for the international air and ground network.

The express carriers’ reduced flight activity is a manifestation of the wider freight recession gripping the broader air cargo market since last year. Data from Cirium Ascend consultancy shows total freighter hours in July fell 7% year over year. BMO Capital Markets calculated that dedicated freighters flew 5.7% fewer hours in July than a year earlier. 

The Morgan Stanley figures also show the difference in performance at Amazon (NASDAQ: AMZN), which has slowed its private cargo airline’s torrid pace of growth but hasn’t made any large-scale adjustments to the fleet. Flight activity at Amazon Air dipped 2% month over month in July after being flat in June. Compared to last year, Amazon’s flight count actually increased 16%, three points better than in June.

Amazon’s year-over-year flight growth in July was the highest since February 2022. The flight performance aligns with an 11% increase in Amazon’s North American retail sales during the second quarter and a record Prime Day last month.

Sun Country Airlines, which operates Boeing 737-800 converted freighters for Amazon, said it flew more hours during the second quarter than a year earlier. Meanwhile, Cargojet said its Amazon business in Canada has ticked up recently, justifying the addition of an extra flight and the opening of a new base at Vancouver airport.

Amazon has surgically trimmed a handful of flights operated by contract carriers. The retailer parted ways this summer with Silver Airways, a small airline that flew turboprop aircraft on short hops from Amazon’s regional hub in Fort Worth, Texas, that likely were replaced by cheaper truck transport. It also dialed back on flights operated by ASL Airlines in Europe and returned a few aging Boeing 767-200 freighters with expiring leases.

More FreightWaves/American Shipper stories by Eric Kulisch.

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