Drops in airline freight revenues are literally excellent news

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

Leslie Josephs/CNBC

Airline freight revenues are falling. This is good news for the travel industry recovery.

delta, United And American This month, they each reported a roughly 40% year-over-year decline in their second-quarter freight revenues.

In the first half of 2023, Delta’s cargo business generated $381 million, compared to $561 million in the first half of 2022, while American’s cargo division generated $420 million, compared to $692 million in the first six months of the year last year. United has $760 million in revenue from freight so far this year, down from $1.2 billion last year.

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Meanwhile, airlines are reporting record sales, if not profits, thanks to the recovery in travel demand. That means the business impact of cargo, which once helped prop up airline revenues during the Covid pandemic’s slump in travel, has eased.

United’s cargo revenue, which generates most of that business among the top three U.S. airlines, accounted for less than 3% of the airline’s $25.6 billion annual revenue in the first half of 2023.

That’s a significantly smaller share than in 2020, when freight revenue made up more than 10% of United’s revenue.

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

But it’s not all bad news.

Transporting goods around the world has been a lifeline for passenger airlines during the pandemic, as bookings fell and travel restrictions forced airlines to scale back international flights.

Normally, around half of the world’s air freight flies in the belly of passenger planes. Reduced cargo capacity during the pandemic helped shipping rates hit record highs, along with strong e-commerce demand, supply chain issues and port congestion.

But demand for travel has surged again, particularly for international travel, as customers rush to take vacations abroad they’ve been putting off in recent years.

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

The additional passenger capacity also increases the global supply of space for cargo flights, while at the same time the demand for air cargo decreases.

The Baltic Air Freight Index, which records global air freight rates, fell by 47% compared to the previous year. In May, the International Air Transport Association said in the latest available data that air cargo capacity had increased by almost 15% compared to the same month of 2022, while demand had fallen by 5%.

Airlines are also planning to expand flights this year to capitalize on strong international travel demand, a trend that could further reduce freight revenue.

Clarification: This story has been updated to clarify that half of the world’s air cargo flies in the bellies of passenger planes.

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