Consultant Insight: Signs point to a slowdown in the express market

A slowdown in the global air freight market appears to be underway. Global volumes declined 9% in July compared with July 2021 , and demand was also down 9% versus the same month in 2019, according to market intelligence group CLIVE Data Services. “Volumes are subdued, and while air cargo rates are still elevated, they are slowly but surely easing back towards pre-Covid levels," Niall van de Wouw, founder of CLIVE and now chief airfreight officer at Xeneta, CLIVE’s parent company, said in Wednesday’s report. [caption id="attachment_69752" align="alignright" width="423"] Cathy Roberson, Cargo Facts Consulting senior consultant and Air Cargo World columnist[/caption] Indeed, a slowdown was evident in UPS’ and FedEx's latest quarterly earnings. "Our international businesses continue to navigate a dynamic environment,” FedEx Chief Customer Officer Brie Carere told analysts during the company's June 23 earnings call. “Global trade growth has slowed from disruptions related to lockdowns in China and the conflict in Ukraine, limiting the flow of goods and reducing international export volumes. We anticipate supply chain disruptions throughout the fiscal year.” FedEx noted average daily volume declines across its international network during its fiscal fourth-quarter 2022 earnings for the period ending May 31 . Meanwhile UPS noted declines in its international domestic average daily volumes its second quarter, ending June 30 , according to the earnings report. The 13.4% drop represents more than three-fourths of the total decrease in international volume. Total export average daily volume declined 4.4% due to a combination of factors, including high global inflation and COVID-19 lockdowns in Asia, which disrupted manufacturing output . International growth Both companies emphasized steps they took to improve efficiencies across their international networks to maintain strong revenue per package. UPS' international average revenue per package increased 12.6% year over year during Q2, while FedEx Express' export average revenue per package increased 17.1% YoY for its Q4. In addition, the Europe and Asia trade lanes appear top-of-mind for both companies. UPS launched a daily flight from its Cologne (CGN) air hub to Asia to connect "key manufacturing cities in Asia." "This flight speeds up transit times across multiple intra-Asia trade lanes and provides greater connectivity to the UPS global network, including to the U.S. and Europe," said UPS CEO Carol Tome. In June, FedEx Express announced a new flight route connecting Beijing (PEK) to the FedEx Charles de Gaulle Hub (CDG) in Paris with 10 connections per week via Osaka, Japan (KIX). And in July, FedEx announced it would upgrade its FedEx Guangzhou Gateway by establishing a new FedEx South China Operations Center at its Asia Pacific Hub at Guangzhou Baiyun International Airport (CAN). This hub is one of the main FedEx gateways in China, connecting Asian customers to FedEx U.S., the North American network through Anchorage and Memphis, and the European network through Paris and Cologne. H2 outlook UPS and FedEx will continue to focus on Europe through the rest of the year. UPS expects its speed and service advantage in Europe will lead its international division to higher volume growth rates than in the year's first half. FedEx is also hoping for big things in Europe now that it has completed its TNT integration. Perhaps there was a hint of urgency from Carere when she noted that "belly capacity on passenger airlines is expected to remain constrained in fiscal year 2023, resulting in a pricing environment still favorable to FedEx if a little less than before." As more capacity enters the market, rates will likely become more competitive. And as air cargo rates become more competitive or ease, surcharges appear to be following. UPS recently lowered peak demand surcharges on its UPS Worldwide Express Freight and UPS Worldwide Express Freight Midday services from China, Hong Kong and Macau, Australia, New Zealand and other Asia origins to the U.S.

Consultant Insight: Signs point to a slowdown in the express market

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