When business becomes too good

This week, UPS took delivery of a 747-8F from Boeing. This is the fifth 747-8F Boeing has delivered to UPS in just over six months, considerably boosting the company’s intercontinental capacity. And with twenty-three more of the jumbo freighters on order, all of which will be delivered in the next four years, it looks like UPS will have no difficulty serving the trans-Pacific, trans-Atlantic, and Asia-Europe markets.

But, at home, things are not so rosy. In the US market, demand for UPS’ domestic express service has outstripped capacity to the point that the company has been forced to ACMI-lease considerable freighter lift. Based on data from flight-tracking website flightaware, it appears that Western Global Airlines is currently operating seven MD-11Fs, and 21 Air is operating one 767-200F, in US domestic service for UPS.

While this is an indicator that business is booming for UPS (presumably a good thing), and that Western Global and 21 Air have picked up some good business (also presumably a good thing), it has not made UPS’ pilots happy. The pilots, through their union, the Independent Pilots Association, have expressed the opinion that UPS is violating the terms of its labor contract by outsourcing flying that should be done by UPS pilots.

Not having seen the contract, we cannot comment on the labor issue. But regarding the fleet, Cargo Facts believes that while UPS has been trying to increase its domestic capacity for some time, additional freighters, whether new-build or conversions, have simply been unavailable in any significant quantity.

Had it been able to, UPS would probably have placed a large order with Boeing for 767-300 freighters. It already operates fifty-nine of the type, and adding more would be a logical way to increase capacity in the US market. But Boeing’s 767 line is booked out for years by FedEx and the US Air Force and, if what we have heard is true, UPS was not the only customer wanting, but unable, to place a significant 767 order.

Freighter-converted 767-300ER passenger aircraft would be, if not the first choice, then at least a reasonable alternative. But for several years, 767 conversion slots (and 757 feedstock) had been gobbled up by Atlas and ATSG in their scramble to fulfill their agreements to supply Amazon with twenty 767 freighters each.

UPS was eventually able to find a few conversion slots last year, and early this year was able to place an order for four 767-300Fs with Boeing. However, until those freighters join the UPS fleet, the only source of additional lift is the ACMI market.

While this might seem to be a story about one company’s struggle to find enough capacity to meet demand in the US domestic express market, consider that it may be also be a harbinger of things to come for the entire air freight industry. UPS is hardly the only airline struggling to find widebody freighters, and there is no magic answer that will solve the problem in the short term.

For our views on this problem (and our thoughts on one possible solution) read “The Next Big Freighter.” For the views of top executives from airlines all over the world, join us at Cargo Facts Asia 2018 in Shanghai, April 23-25, where the subject will be explored in several sessions. For more information, or to register, go to CargoFactsAsia.com.