Top 25 cargo carriers: Cargo goes slow on growth in 2023

2023 was undoubtedly a tough year for air cargo with global full-year demand, measured in cargo tonne-kilometers (CTKs), for the top 25 airlines down 1.7% compared to 2022 as inflationary pressures put the breaks on consumer spending.

On the other hand, passenger airlines benefitted from the continued rollout of belly capacity as Covid restrictions continued to be eased and there was an unexpected e-commerce-related rise in demand towards the end of the year.

The latest IATA World Air Transport Statistics (WATS) report shows that?Federal Express (FedEx) retained the top spot amongst the top 25 cargo airlines last year, although it suffered an 8.3% drop in volume to 17.9bn CTK.

The decline reflects a 5.7% drop in overall cargo demand for carriers in the North America region due to the inflation-related slowdown in spending and an associated cost-cutting programme.

During the year, the company initiated its DRIVE transformation project, which included parking and retiring aircraft, reducing transpacific and transatlantic flights, closing facilities, cancelling network capacity projects, reducing Sunday operations, aligning staffing levels with volumes handled and completing its workforce reduction plan in Europe.

FedEx said in its annual report: “Our operating results for 2023 were negatively affected by macroeconomic conditions, including inflation well above historical levels, and elevated global interest rates.

“In response to market conditions, we implemented cost reductions and focused on yield improvement to partially mitigate the effect of volume declines.”

As well as retiring aircraft, investing in fleet modernisation for cost efficiency remained a priority for FedEx.

FedEx said in its 2023 annual report that as of May 31, it had a total of 407 trunk aircraft, as opposed to smaller feeder aircraft, compared with 417 a year earlier.

The company recorded 128 Boeing 767-300Fs, up 14 from May 31 2022, and planned to take delivery of 14 in 2024 and a further 10 in 2025.

There were also 53 Boeing 777Fs, two more than in 2022. There are plans to deploy an additional four 777Fs this year and another two during 2025.

The MD-10-30 fleet was retired, plus FedEx accelerated the planned retirement of its MD-11 fleet to the end of 2028, with 11 removed between mid-2022 and mid-2023.

FedEx also retired four Boeing 757-200Fs, with 115 remaining, plus two Airbus A300-600 aircraft, with 65 still active.

Qatar takes second place

Qatar Airways rose one place in the ranks to second with a small but above market rise in cargo traffic of 1% to 14.4bn CTK.

The increase came as the carrier continued to roll out its belly network following the lifting of Covid-related restrictions and it was able to capitalise on a surge in e-commerce demand towards the end of the year.

In its 2023/24 fiscal year report, the Middle East carrier said it benefitted from pharma and charter demand as well as network expansion due to belly capacity continuing to be ramped up.

The carrier again operated more than 1,400 charter shipments and added charter operations to China to better serve e-commerce customers.

New freighter services were launched to Algiers, Bogota, Dallas, Dammam, Miami, Sharjah and Warsaw.

The report also confirmed the airline’s fleet numbers, listing 28 777Fs, although 27 were in the fleet at the end of December. 34 Boeing 777-8s are on order (with options for 16 more).

The carrier also still had two Boeing 747Fs at the end of the year, although these have since been removed.

UPS sheds staff

Like FedEx, UPS also suffered from economic challenges and labour contract disputes in a year that saw it slip into third place with a 10.4% drop to 14.2bn CTK.

Healthcare was a strong vertical, alongside core express and e-commerce business, but the company’s US Domestic, International and Supply Chain Solutions segments all experienced a downturn.

The airline attributed its poor volume performance to soft demand on Asia and Europe trade lanes.

In its 2023 annual report UPS said: “During the year, macroeconomic headwinds, including inflationary pressures and changes in consumer behavior, together with volume diversion resulting from our labor negotiations with the International Brotherhood of Teamsters (“Teamsters”), contributed to volume declines in our US small package business.

“Internationally, the challenging macroeconomic environment, coupled with geopolitical tensions, drove a decline in demand for our small package services in Europe and Asia.

“Our freight forwarding businesses, including truckload brokerage, were negatively impacted by soft demand and market overcapacity.”

The company also rolled out pilot severance packages as it reduced the amount of flying due to the economic conditions.

Chief executive Carol Tomé said in a UPS earnings call for the fourth quarter period ending December 31 last year: “2023 was a unique and, quite candidly, a difficult and disappointing year. “We experienced declines in volume, revenue, and operating profit in all three of our business segments.

“Some of this performance was due to the macro environment, and some of it was due to the disruption associated with our labour contract negotiation, as well as higher costs associated with the new contract.”

Speaking about the fourth quarter specifically, traditionally the peak period for airfreight, chief financial officer Brian Newman said within the international segment exports had been affected by weak macro conditions in Europe which drove a shift away from express services, while there was soft demand in the retail and high-tech sectors in Asia.

Looking at notable acquisitions, the takeover of Bomi Group in 2022 added weight to UPS’ healthcare logistics business in 2023 throughout Europe and Latin America.

The company also acquired time-critical and temperature sensitive MNX Global Logistics to expand its cold chain capabilities in the last quarter of 2023.

Like others, UPS took steps to address efficiency by reshaping its fleet.

The airline had 563 aircraft at the end of 2023, compared with 586 a year earlier. 269 of these were on charters and leases operated by other carriers, down from 295 in 2022.

Of the aircraft owned and/or operated by UPS, there were 75 Boeing 757-200Fs, unchanged from last year.

There were also 88 767-300Fs, seven more than at the end of 2022. A further 21 are on order.

Additionally, there were 41 Boeing 747Fs, no change from 2022. Two 747-8Fs remain on order from last year.

Finally, there were 36 MD-11s after six were retired. UPS plans to retire an additional nine of these aircraft this year.

Other gains and losses

Cathay Pacific Airways finally reaped the rewards of the post-pandemic operating environment with a rise of five places within the top carriers.

The end of Covid lockdowns and crew quarantine restrictions enabled Hong Kong-headquartered Cathay to re-introduce capacity with increased passenger and freighter flights.

Volumes improved as the year progressed, aided by e-commerce and perishables demand.

Meanwhile, Lufthansa, which benefited from developing its A321F e-commerce-driven intra-European network and the continued roll out of passenger services, said in its 2023 annual report that volumes were “trending upwards” in the second half of the year as it moved up three places.

In comparison, Taiwan-based China Airlines also acknowledged in its 2023 annual report that “inflationary pressures eased” and demand picked up in the second half of the year, but still dropped four places.

All Nippon Airways also dropped four places. The Japanese airline, which is in the process of acquiring Nippon Cargo Airlines (NCA), said that had been affected by the continued decline in demand from major industries such as semiconductors, electronics and automotive-related industries.

The Japanese economy continued to struggle during the year.

Avianca entered the list in 15th place and China Cargo Airlines was also new in 19th place.

Air France dropped out of the list, as did Japan Airlines, which was a new entrant for 2022.

Market climate

The challenges that airlines faced in 2023 aren’t surprising given it wasn’t until the second half of the year that air cargo demand began gaining momentum.

Volume declines narrowed to their lowest level of the year in June then year on year volumes began to pick up in August, the first time in 19 months. Rates also began to improve in August.

However, capacity was still increasing faster than demand and November was the first month that demand outstripped supply.

Though CTKs for December in particular were up 10.8% year on year, the rebound was not enough to push overall figures for the year into positive territory.

As well as for the top 25 airlines, global full-year demand across the industry was also down 1.7% year on year. Demand was also 3.6% behind 2019.

Meanwhile, freighter demand was down 5% for the year and belly capacity was up 3.9%.

“Despite political and economic challenges, 2023 saw air cargo markets regain ground lost in 2022 after the extraordinary Covid peak in 2021,” said IATA director general Willie Walsh in a January press release.

Further commenting on air cargo’s financial performance in IATA’s 2024 annual review, Walsh said that cargo revenue was estimated to be down by a third.

“This downturn was driven mainly by lower demand and falling freight rates.”

He added: “Downward pressure on yields, meanwhile stemmed from increased belly-hold capacity as more passenger aircraft re-entered service and from competition from lower maritime cargo rates.”

Regionally, Latin American airlines were the top performers with a 2% rise, following years of disruption due to restructuring.

The Middle East saw a 1.6% rise, while Asia Pacific, despite the rise of e-commerce shipments, managed a more modest 0.9% rise.

Meanwhile, Africa saw a decrease of 1.8%, but Europe fared worse with a decrease of 3.9%.

“Airlines in the region continued to be most affected by the war in Ukraine,” reflected IATA.

It was North America, however, that experienced the largest decrease. The region was down 5.7% with domestic demand being a pain point.