American Airlines saw first-quarter cargo revenue fall 37.8% year over year to $223 million primarily due to lower yield and lower demand, the company reported on Thursday. The company’s cargo revenue was only $5 million more than in 2019, a weak year for cargo and benchmark for a normal business environment following the pandemic.
Nearly every airline is experiencing large double-digit drops in cargo business as consumers pull back due to high inflation and economic uncertainty or shift spending to services, retailers with excess inventories postpone large orders, and ocean shipping has become more reliable again.
Cargo revenue at United Airlines declined 37% in the first quarter. Delta Air Lines’ cargo sales shrank 28% and Hawaiian Airlines on Tuesday said cargo revenue fell 25%.
Freight rates are likely to feel additional downward pressure until the global economy picks up because of extra capacity entering the market as airlines reintroduce passenger services that were canceled during the COVID crisis.
American Airlines (NASDAQ: AAL) said demand in terms of tons multiplied by distance carried fell 21.2% and the average shipping rate fell 22% during the quarter. Cargo revenue in absolute terms was $141 million lower than a year ago.
American achieved a record $1.2 billion in cargo revenue in 2022 even as the slowdown in shipping increased throughout the year.
Overall, American eked out a $10 million profit compared to losses at rivals United and Delta. All three airlines are expected to finish the year strong coming out of the traditionally slow first quarter as travel bookings remain robust. The primary reason for domestic carriers’ lackluster performance in the first quarter was that rising costs for fuel and labor as well as weather delays outpaced decent revenue growth. Labor shortfalls, air traffic control delays and slow manufacturing of new aircraft are crimping capacity, contributing to high fares and revenue momentum for the industry.
American generated record first-quarter revenue of $12.2 billion and said demand continues to show strength, especially in the lucrative international sector.
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