Airline cargo revenue declines are actually good news

Airline freight revenues are declining. This is a sign of good news for recovery travel.

DeltaAnd united And American This month, each company reported a 40% annual decline in freight revenue in the second quarter.

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

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

Freight revenue at United, which generates the most from this business of the three largest US airlines, in the first half of 2023 represents a slice of less than 3% of the company’s $25.6 billion in year-to-date revenue.

That’s a much smaller part of 2020, when freight revenue made up more than 10% of United’s sales.

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

But it’s not all bad news.

Flying cargo around the world has been a lifeline for passenger carriers during the pandemic when bookings dried up and travel restrictions forced airlines to reduce services abroad.

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

But demand for travel has picked up again, especially for international trips, as customers scramble for vacations abroad that they’ve postponed in recent years.

The renewed demand prompted airlines to add service again. Flights between the US and Europe alone are expected to be the highest in five years.

The additional passenger capacity also boosts the global supply of space for cargo, at the same time that demand for air freight is waning.

The Baltic Air Freight Index, which tracks air freight rates worldwide, was down 47% from a year earlier. In May, the most recent available data, the International Air Travel Association, said air cargo capacity rose nearly 15% from the same month in 2022 while demand fell 5%.

Airlines plan to expand flights this year as well to take advantage of strong demand for international travel, a trend that could further reduce freight revenues.