Posted BY: Bill | NwoReport
The cargo market is witnessing a sharp decline as shipping giants UPS and FedEx experience a substantial drop in package transit demand. According to Yahoo! Finance, FedEx Express and UPS reported a significant reduction in the number of package flights operated in July. This decline comes amid an overall decrease in the cargo market since the spring of 2022. Both companies have responded to this trend by implementing new efficiency initiatives to lower costs and accommodate smaller express volumes.
Comparing July to June, FedEx saw a 9 percent decrease in domestic flights, with a year-over-year flight activity drop of 14 percent. Meanwhile, UPS experienced an acceleration in year-over-year package volume declines from 10 percent in June to 13 percent in July. Despite relatively stable flight activity in May and June, these companies focus on reducing flight activity and streamlining their air infrastructure to cut structural costs and enhance profit margins. FedEx is also removing 29 aircraft from its fleet through permanent retirement or temporary storage as part of its cost-reduction strategy.
UPS faced additional challenges this summer, as some significant customers diverted their business to FedEx and other competitors due to concerns about a potential strike by UPS delivery drivers and warehouse workers. However, the Teamsters Union ratified a new five-year contract, alleviating this worry. UPS and FedEx have significantly reduced aircraft block hours, leading to a $343 million reduction in operating expenses for their international air and ground networks.
The air cargo sector has been experiencing a broader freight recession since last year, with total freight hours dropping 7 percent year over year in July. Even Amazon, a dominant player in e-commerce, is slowing down the growth rate of its private cargo airline fleet. While Amazon’s flight count increased 16 percent compared to last year, it dipped by 2 percent in July, aligning with an 11 percent increase in North American retail sales during the second quarter.
The declining economy and the normalization of shipping volume following the peak of the COVID-19 pandemic contributed to the decreasing shipping volume and adjustments at both FedEx and UPS. As Amazon continues to gain market share from these companies, the economic downturn poses an additional challenge. The decreasing shipping trends across these major players might indicate the impending economic challenges ahead.