A vital engine for recent air freight growth and airport development has stalled in recent months, although it may be more a correction due to overambitious or premature expansion triggered at the height of the pandemic. The meteoric rise of e-commerce has lost momentum since last summer and major parcel carriers are scaling back their freighter activities.
FedEx led the retreat with a programme to cut over $2 billion in costs after its earnings in the quarter ended 31 August had fallen off a cliff. On the aviation side, this led to the grounding of five freighters, with 11 more to follow before the coming September.
FedEx management has made it clear that it does not expect its route cuts implemented since last summer to be reversed. Instead, it will lean more on commercial lift, as belly capacity is on the rise.
Amazon shifts into reverse
Recently, Amazon’s fleet growth also shifted into reverse, and leasing firm Air Transport Services Group announced that the e-commerce giant would extend the leases on only four out of 12 B767 freighters that are expiring this year. The lessor intends to scrap three of the remaining planes and noted that Amazon may not renew the leases for the other five.
Although Amazon stands to take delivery of two converted A330 freighters this year, it will end 2023 with fewer planes in its fleet than it currently has.
The news was hardly surprising, as Amazon had already decided to close or cancel completion of 44 warehouses after a $3.8 billion loss in the first quarter of last year. It has also embarked on a significant reduction of its workforce, aiming to eliminate more than 18,000 jobs.
Amazon’s fleet expansion had already slowed through the spring and summer of last year. Amazon Air’s flight activity grew by a comparatively slow 3.8% from March through August, down from double-digit expansion through the preceding 12 months.
The company’s balance sheet for 2022 shows a $2.7 billion deficit for the year, suggesting further cutbacks may well be on the cards. At the same time, consumer demand is forecast to remain muted until later this year, owing to high inflation, slower job growth and the personal savings rate near a record low level.
Despite the broad slowdown, most observers as well as carriers predict e-commerce will remain in expansion mode over the long term, which should fuel growth in freighter activity. However, FedEx observed a shift to slower, less expensive delivery options, which may have a knock-on effect on freighter needs.