Detailed analysis of the US domestic air cargo market

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Revenues for participants in the US domestic air freight and express industry totaled $26.07 billion in 2010, reflecting just a 2.9% increase from the year-earlier total of $25.33 billion in the recession year of 2009. This result indicates that the sharp boost in demand for global air freight services that accompanied the economic recovery in 2010 did not provide any meaningful benefit in the US domestic segment. These conclusions come from Air Cargo Management Group’s new US Domestic Air Freight and Express Industry Performance Analysis 2011 (eighteenth edition), which provides a detailed assessment of the US air cargo/express industry and the companies that compete in this market. (To order the report,  click here.)

Not surprisingly, the US market remains dominated by the express carriers, led by the near duopoly of FedEx and UPS. In combination the express total, which in ACMG’s analysis also includes small contributions from BAX Global and the US Postal Service’s Express Mail operation, accounted for more than 88% of the stated 2010 revenue figure.


During the growth period in the mid-1990s there were as many as nine networks of freighter aircraft operating across the US; but today just three remain providing intra-US service: FedEx, UPS and BAX Global (DB Schenker). However, a further reduction is now taking place, as DB Schenker has announced it will shut down the BAX Global network by the end of 2011, dropping the number of freighter networks to just two.

Earlier, systems run by Kitty Hawk and Roadway Global Air closed down, the US Postal Service shifted its business to FedEx, Menlo/Emery was merged into UPS, and the separate Airborne Express and DHL Airways operations morphed into a combined network for DHL until it dropped out of the US domestic air and ground delivery business early in 2009. Of course DHL retains a small network in the US, using freighters operated by ABX Air and ASTAR Air Cargo to transport the German express company’s international shipments within the US.

The industry-wide 2010 revenue of $26.07 billion is well off the record for the US segment, which peaked at $32.8 billion in 2007. With the exception of 2009, the 2010 figure is the lowest revenue total for the US air freight industry in the past decade. 

Full-year air cargo traffic volume for all the participants in the intra-US market was 12.28 billion revenue ton miles (RTMs) in 2010, up 4.1% over 2009, and the number of shipments moving through the major express networks in the fourth quarter of 2010 was estimated at 5.392 million per day, up 1.1% versus 4Q09. The changes in both metrics were positive, but unimpressive, especially in comparison to the 20% rise IATA reported in international freight traffic in 2010 and the 12.4% rise in international express shipment counts noted by ACMG in its companion report on the international air freight and express industry released earlier in the year.

After several years of unimpressive results, including sharp drops in RTM traffic and the daily express shipment totals in 2001, 2008 and 2009, the industry has retreated to levels for these metrics that are no higher than performance achieved in the mid-1990s. In other words, this industry, once characterized by its rapid growth, has gone through roughly 15 years with no net expansion. Part-year data for 2011 shows flat traffic versus 2010, so the chance of any significant rebound this year appears remote.

FedEx remains the leader in the US domestic express market, with a 49.8% share of daily shipments in 4Q10, followed closely by UPS with a 46.1% share. The two have a virtual duopoly, with the USPS Express Mail a distant third with just a 3.1% share. Yet despite their increasing dominance of the US domestic air express sector, this market has become less important for both companies. Revenue from US domestic express operations represented just 18% of total corporate revenue at UPS in 2010 and just 34% of corporate revenue at FedEx in FY11. Both companies have expanded in other areas, including ground delivery, international operations, and logistics, in response to stagnant conditions in the US air cargo sector.

The express companies as a group generated $23.07 billion in 2010, accounting for 88.5% of the industry’s total revenue. Domestic freight handled by all-cargo and combination carriers in conjunction with freight forwarders amounted to a $2.77 billion business last year (10.6% of the total revenue amount), and domestic mail – exclusive of the major USPS-FedEx contract – generated just $228 million (0.9% of the total).

In the scheduled freight segment, the legacy passenger carriers play a relatively minor role as suppliers of cargo lift in the domestic US market today, due in part to the fact that their domestic operations mostly consist of narrowbody aircraft that have little belly space for freight. In fact, since a year 2000 peak, ACMG finds that US domestic cargo traffic reported by the major combination carrier group is down a staggering 64% over a 10-year period. During that time, the freight traffic for these carriers dropped over 50%, and the mail traffic dropped more than 80%.  Accordingly, scheduled freight service (outside the express company networks) now holds only about a 15% share of the total US air cargo market in ton-mile terms.

As a group, the legacy passenger carriers took in roughly $811 million in revenue from the carriage of freight in the US domestic market in 2010. That figure may sound impressive, but it was down 20% from 2009, and it loses much of its luster when you consider that the same group of airlines took in over $2.7 billion in US domestic baggage fees last year.

The ACMG report also provides coverage of more than two dozen specialist all-cargo airlines based in the US, such as Atlas Air, Kalitta Air, Southern Air, Amerijet, National Airlines and Evergreen, which operate transport-sized freighter aircraft. As a group these airlines operate 224 transport-category freighters (approximately 14% of the global freighter fleet), and they generated nearly $6.7 billion in system-wide revenues in 2010, up 17% for the year. Niche operators such as these play an important role in the air freight business. Despite the improved economic conditions, one in five of these carriers reported a loss for the year.

The complete 150-page study, which addresses a wide range of topics including developments in freighter fleets, an update on new security regulations, and a review of fuel prices, is available for purchase from ACMG, Cargo Facts’ parent company. To order a full copy of the report,  click here.

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