(Editor’s Note: This article was updated at Oct. 20, 2023, 7:30 ET)
United Airlines saw cargo revenue drop 33% year over year in the third quarter to $333 million, as the weak air cargo market continued to take a toll on the top line for freight.
The contraction in cargo sales was hardly noticed by investors on Tuesday as United punched its way to a $1.1 billion profit ($3.65 earnings per share) on record third-quarter revenue of $14.5 billion, beating analysts’ estimates.
There was a disconnect between United Airlines’ (NASDAQ: UAL) cargo revenue and its volumes. Cargo ton miles – a measure of volume times distance flown that helps set pricing – actually increased 4.5% from the year-ago period to 766 million. And a spokesperson said United carried the most tonnage ever for a third quarter. The deterioration in revenue is most likely explained by the plunge in shipping rates across the sector due to abundant capacity and tepid transport demand in the sector.
United Airlines said cargo revenue was $1.1 billion for the nine-month period through September, a drop of 35.7% from the same period a year ago.
United’s cargo performance tracked with that of Delta Air Lines, which saw cargo revenue fall 36%. Delta’s cargo revenue was half as much as generated by United for the first three quarters of the year. American Airlines reports earnings on Thursday and is expected to have results similar to Delta and United.
Cargo revenue was better against the $282 million in the third quarter of 2019, prior to the COVID crisis.
The results are in line with an air cargo market that has seen overall volumes fall by 8% to 10% since March 2022, finally hitting bottom in the late summer. Airfreight shipping prices have been 40% to 50% lower than last year for most of the year. Although the market has stopped declining, there are few signs of year-over-year growth at a time that is normally the busiest shipping season of the year. The market was falling last year in the second half and there was no peak season bump.
United operates the largest widebody passenger fleet of any U.S. passenger carrier, giving it plenty of space to market for cargo.
The company said it continued to experience strong travel demand, which produced record profits for international business. During the quarter, United’s pilots ratified a new four-year labor deal, which will increase pilot wages about 40%. The extra labor costs and higher fuel prices could weigh on earnings in the fourth quarter, as could the suspension of flights to Tel Aviv because of the Israel-Hamas war in Gaza.
More FreightWaves/American Shipper stories by Eric Kulisch.
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