Further restructuring accompanies modest growth in US Domestic Air Cargo

SEATTLE, WASHINGTON (October 2011) -- In a newly-released study, Air Cargo Management Group shows revenues for participants in the US domestic air freight and express industry totaled $26.07 billion in 2010, reflecting a 2.9% increase from the year-earlier total of $25.33 billion in the recession year of 2009. The industry-wide 2010 revenue total is well off the record for the US segment, which peaked at $32.8 billion in 2007.

“The 2010 results were positive,” said Robert Dahl, Managing Director of Seattle-based ACMG, “but they indicate that the sharp boost in demand for global air freight services that accompanied the economic recovery in 2010 did not provide anywhere near the same degree of benefit in the US domestic segment.”

Not surprisingly, the US market remains dominated by the express carriers, led by the near duopoly of FedEx and UPS.  In combination the express total, which in ACMG’s analysis also includes small contributions from BAX Global and the US Postal Service’s Express Mail operation, accounted for more than 88% of the stated 2010 revenue figure.

During the growth period in the mid-1990s there were as many as nine networks of freighter aircraft operating across the US; but today just three remain providing intra-US service: FedEx, UPS and BAX Global (DB Schenker).  “A further reduction is taking place,” noted Dahl, “as DB Schenker has announced it will shut down the BAX Global network by the end of 2011, dropping the number of US freighter networks to just two.”

Full-year air cargo traffic volume for the all participants in the intra-US market was 12.278 billion revenue ton miles (RTMs), up 4.1% year-over-year, and the number of shipments moving through the major express networks in the fourth quarter of 2010 was estimated at 5.392 million per day, up 1.1% versus 4Q09.  The changes in both metrics were positive, but unimpressive in comparison to the 20% rise IATA reported in international air freight traffic in 2010 and the 12.4% rise in international express shipment counts noted by ACMG in its companion report on the international air freight and express industry released earlier in the year.

After several years of lackluster results, including sharp drops in RTM traffic and the daily express shipment totals in 2001, 2008 and 2009, the industry has retreated to levels for these metrics that are no higher than performance achieved in the mid-1990s. In other words, this industry, once characterized by its rapid growth, has gone through roughly 15 years with no net expansion. Part-year data for 2011 shows flat US domestic air freight traffic versus 2010, so the chance of any significant recovery this year appears remote.

FedEx remains the leader in the US domestic express market, with a 49.8% share of daily shipments in 4Q10, followed closely by UPS with a 46.1% share. The two have a virtual duopoly, with the USPS Express Mail a distant third with just a 3.1% share.  Yet despite their increasing dominance of the US domestic air express sector, this market has become less important for both companies. Revenue from US domestic express operations represented just 18% of total corporate revenue at UPS in 2010 and just 34% of corporate revenue at FedEx in FY11. Both companies have expanded in other areas, including ground delivery, international operations, and logistics, in response to stagnant conditions in the US air cargo sector.

These observations, and others discussed below, come from ACMG’s newly-released US Domestic Air Freight and Express Industry Performance Analysis 2011.  ACMG’s report provides the only comprehensive quantitative and qualitative independent analysis of the $26.1 billion U.S. domestic air cargo industry, including:

• Trends in U.S. expedited cargo services
• Statistical analysis of freight, mail, and express package traffic
• Strategic reviews of the major express companies, all-cargo carriers and combination passenger/cargo airlines
• Analysis of freighter aircraft usage, security initiatives, and volatile fuel costs.

In the scheduled freight (non-express) segment, the legacy passenger carriers play a relatively minor role today as suppliers of cargo lift in the domestic US market, due in part to the fact that their domestic operations mostly consist of narrowbody aircraft that have little belly space for freight.  In fact, since a year 2000 peak ACMG finds that US domestic cargo traffic reported by the major combination carrier group is down a staggering 64% over a 10-year period.  Accordingly, scheduled freight operations (outside the express company networks) now hold only about a 15% share of the total US air cargo market in ton-mile terms.  

As a group, the legacy passenger carriers took in roughly $811 million in revenue from the carriage of freight in the US domestic market in 2010. That figure may sound impressive, but it was down 20% from 2009, and it loses much of its luster when you consider that the same group of airlines took in over $2.7 billion in US domestic baggage fees last year.

The ACMG report also provides coverage of more than two dozen specialist all-cargo airlines based in the US, such as Atlas Air, Kalitta Air, Southern Air, Amerijet, National Airlines and Evergreen, which operate transport-sized freighter aircraft. Niche operators such as these play an important role in the air freight business. As a group these airlines operate 224 transport-category freighters (approximately 14% of the global freighter fleet), and they generated nearly $6.7 billion in system-wide revenues in 2010, up 17% for the year.

ABOUT ACMG: Founded in 1978, ACMG is a specialized aviation consulting firm, which focuses on freighter aircraft and all aspects of the worldwide air freight and express industry. ACMG is owned by New York-based Royal Media Group, a leading information services media company. 

To obtain more information about the report, visit www.acmgreports.com or call 1-206-587-6537 ext 108.