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The decline in air freight revenues is actually good news

The decline in air freight revenues is actually good news

An American Airlines 777 loaded with cargo at Philadelphia International Airport.

Leslie Josephs/CNBC

Air freight revenues are declining. This is a sign of good news for your healing journey.

This month, Delta, US and North America, reported a 40% year-over-year decline in freight revenue in the second quarter.

In the first half of 2023, Delta’s freight business brought in $381 million, up from $561 million in the first half of 2022, while the US freight unit brought in $420 million, up from $692 million in the first six months of last year. United has brought in $760 million in merchandise so far this year, up from $1.2 billion a year earlier.

Meanwhile, airlines posted record revenues, if not profits, thanks to the growing demand for travel. That means the business impact of cargo, which previously helped boost airline revenues during the pandemic travel downturn, has faded.

United, which generates the most of this business among the three largest US airlines, will account for less than 3% of the company’s annual revenue of $25.6 billion in the first half of 2023.

That’s down from 2020, when freight revenue accounted for more than 10% of United’s sales.

Through June, freight revenue accounted for 1.3% and 1.6% of total revenue for Delta and American, respectively, compared to 3.5% and 12% in 2020.

But it’s not all bad news.

Worldwide shipments have been a lifeline for passenger carriers during the pandemic, when bookings dried up and travel restrictions forced airlines to cut international flights.

Nearly half of the world’s cargo comes from flies in the stomachs of passenger planes. Decreased freight capacity during the pandemic helped drive freight rates to new highs, along with strong e-commerce demand, supply chain issues and port congestion.

However, travel demand has picked up again, especially for international trips, as customers scramble for holidays abroad that have been postponed in recent years.

The renewed demand has prompted airlines to expand their services again. Flights between the US and Europe alone are expected to be the highest in five years.

The increasing passenger capacity also increases the global space supply for freight transportation, while at the same time the demand for air freight transportation decreases.

The Baltic Air Freight Index, which tracks air freight rates worldwide, was down 47% compared to the previous year. In May, the latest data available, according to the International Air Travel Association, air cargo capacity increased by about 15% compared to the same month in 2022, while demand decreased by 5%.

The airline is expanding its flights again this year to take advantage of strong demand for international travel, which could further reduce cargo revenue.

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