Consultant’s Insight: UPS layoffs impact Ontario, Calif., hub

A combination of automation investments and a sluggish parcel market is leading to job cuts at UPS . The carrier said during its fourth-quarter earnings call in January that it planned to cut 12,000 positions throughout its global network. The impacts have been seen at several sorting facilities and have expanded to sorting facilities supporting UPS’ air operations due to soft international parcel volumes. Last year, UPS eliminated its Friday day shifts at its primary air hub, Worldport, in Louisville, Ky. [caption id="attachment_69752" align="alignright" width="262"] Cathy Roberson, Cargo Facts Consulting senior consultant and Air Cargo Next columnist[/caption] In its latest cut, UPS notified California’s Employment Development Department on March 6 that it plans to eliminate a shift at its regional air hub at Ontario International Airport (ONT) in April. This will result in 333 layoffs at the 75,000-square-foot facility.. ONT plays a major role in UPS’ network, but despite expanding and opening a 400,000-square-foot facility at the airport in 2021, UPS attributes the latest job cuts to a “volume loss in our network,” according to the notice filed by UPS. The Ontario facility is considered one of UPS’s major trans-Pacific lane air hubs. UPS achieved success in volume and revenue growth on this trade lane leading up to the pandemic due to strength in manufacturing, health care and retail. However, the trans-Pacific lane has experienced a volume downturn since then. ONT handled 752,199 tons of freight in 2023, down from its high of 924,160 tons in 2020 and slightly higher than the 751,529 tons it handled in 2018, according to data from the airport UPS has also invested in the San Bernardino International Airport (SBD) in recent years and perhaps shifted some volume away from Ontario to San Bernardino, which is about 30 miles from ONT. UPS reached an agreement with SBD in 2017 to support seasonal demand for air cargo flights in the Inland Empire. UPS Chief Financial Officer Brian Newman told analysts in January, “Asian export average daily volume was down 8.9%, driven by soft demand in the retail and high-tech sectors . But export volume on the China-to-U.S. lane, which is our most profitable lane, increased 2.7%, driven by SMBs, nearly offsetting the decline in Asia.” According to the Bureau of Transportation Statistics , UPS recorded a 12.2% decline in cargo revenue tonnes miles on the trans-Pacific trade lane in 2023, compared to a 3.3% increase in 2022. In comparison, FedEx recorded a 1.8% decline in cargo revenue tonnes miles on the trans-Pacific trade lane in 2023 and a 9.4% decline in 2022. As long as manufacturing remains weak, parcel volumes muted and automation investments continue, UPS will continue to reduce its workforce to match volumes. “In the U.S., the projected small package market growth rate is just under 1%, excluding Amazon,” Newman told analysts in January, “A slight improvement is expected in U.S. manufacturing, and the consumer is expected to remain resilient despite lingering inflationary pressures. We’ve built a plan that reflects the current environment and potential risks that we see.” Register here for Air Cargo Next ’s free webinar, “The Role of Drones in the Future of Air Cargo,” on Tuesday, March 26, at 11 a.m. ET.

Consultant’s Insight: UPS layoffs impact Ontario, Calif., hub

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