Domestic flight activity for express air parcel companies, led by FedEx, inched up in August, with the group performing better than normal for the time of year, according to research by transport analysts at Morgan Stanley. But the express carriers are still flying less than they were a year ago because of weak shipping demand.
Market reporting agency WorldACD said on Saturday that express shipments were down 17% from January to August versus the same period in 2022.
The reports underscore how private air fleets of express delivery companies are coping with a yearlong downturn in parcel volumes amid a broader freight recession that is also hurting airlines that carry general cargo. The decline in flights appears to be near the bottom of the cycle after dropping 30% at FedEx (NYSE: FDX) and 20% at UPS (NYSE: UPS) at the start of the year.
FedEx flight utilization, on a sequential basis, jumped 17% in August following a 9% drop the prior month, while the year-over-year comparison improved to minus 7% versus down 14% in July, according to Morgan Stanley’s Parcel Tracker report. FedEx reported that a decline in domestic parcel volumes flattened out in the first quarter of the 2024 fiscal year ended Aug. 31, suggesting a potentially greater need for flights than in recent months. The carrier also appears to have benefited from UPS freight diverted by shippers that feared a potential strike by drivers and warehouse workers leading up to an agreement on a new labor contract.
The summer is generally a slower period for air cargo traffic.
UPS flight counts increased 12% month over month in August, a noticeable improvement from minus 14% in July from June. It was the first time in months that UPS recorded a sequential increase in flights. Compared to August 2022, UPS flight activity fell 14% — one point worse than the July comparison.
“If September flight activity were to follow typical seasonality, UPS would have the lowest quarterly flight count since Q1 2019,” the report said.
Meanwhile, Amazon Air’s (NASDAQ: AMZN) flight count sequentially ticked up 1% versus a 2% decline last month. While FedEx and UPS have been in negative territory all year, Amazon has continued to expand airline operations — but at a much slower pace than in recent years. FedEx and UPS have sharply reduced domestic and international flight hours since last fall by flying less frequently on certain routes, parking a portion of their fleets, retiring older aircraft and pushing more packages to cheaper ground transportation. UPS has also offered early retirement to senior pilots in an effort to cut costs.
Amazon’s fleet took to the skies 3% more in August than the prior year following a 16% year-over-year gain in July. August represented the slowest growth in flight activity for Amazon since the second quarter of 2018, Morgan Stanley said.
It’s worth noting that Amazon has a much smaller fleet and airport network than FedEx and UPS.
Meanwhile, the integrated logistics companies, including DHL, had 36% more global air capacity for the first half of the year than the same period in 2019, but 3% less than a year, according to data presented by Accenture on IAG Cargo’s latest video presentation on LinkedIn.