The air cargo market’s deceleration this year had a greater impact on third-quarter cargo revenues at American Airlines than its primary rivals, Delta and United Airlines. But the best revenue quarter in company history and a $483 million profit painted a positive financial picture that could be replicated in the final quarter thanks to resilient travel demand.
American Airlines (NASDAQ: AAL), the world’s largest airline by passenger capacity, said cargo revenue dropped 15.9% to $279 million in the quarter ended Sept. 30 versus a year ago, quadruple the negative growth of United Airlines and almost twice the loss rate at Delta Air Lines (NYSE: DAL).
The Fort Worth, Texas-based carrier said in Thursday’s earnings release that lower cargo revenue was primarily due to a 10.3% decrease in yield and a 6.2% decline in cargo ton miles, the metric used to determine shipment charges, as a result of lower demand and increased global air freight capacity.
Relative to 2019, before the COVID-19 crisis, cargo revenue actually was 34% higher.
Air cargo volumes and rates have sequentially fallen each month since March as inflation, a consumer spending shift back to services, the war in Ukraine and COVID lockdowns in China have dampened manufacturing and demand for goods. Globally, average volumes are down about 14% year over year and cargo rates are between 14% to 28% less, depending on the reporting service.
United (NASDAQ: UAL) pulled in $498 million in cargo revenue, while Delta’s sagged 8.4% to $240 million during the third quarter. Compared to 2019, United’s cargo revenue was 76% better, while Delta Cargo improved 27%.
American generated 13.5 billion in revenue, which was 13.2% above the 2019 level and achieved while flying 9.6% less capacity. Higher fares are a big reason for the gain.
Airline executives have recently said the travel boom appears to have legs beyond a transitory surge in pent-up pandemic demand and the summer peak season despite inflationary pressures in the broader economy. United and Delta have pointed to hybrid work now allowing customers to blend leisure and business travel.
“Demand remains strong and it’s clear that customers in the U.S. and other parts of the world continue to value air travel and the ability to reconnect post-pandemic,” American CEO Robert Isom said in a statement. On a call with analysts he said fourth-quarter earnings will exceed analysts expectations.
Alaska Airlines
Meanwhile, Alaska Air Group (NYSE: ALK) said cargo revenue increased 14% to $67 million and was up 19% to $190 for the first three quarters. Overall, the parent of Alaska Airlines posted net income of $40 million and set an all-time record with $2.8 billion in operating revenue.
Alaska runs a primarily domestic network while the major U.S. airlines receive most of their cargo business from international routes. The Alaska line item for cargo also includes “other” revenue, so the actual cargo contribution could be slightly less than $67 million.
Click here for more FreightWaves/American Shipper stories by Eric Kulisch.
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