In the midst of the worst airline industry crisis ever, some cargo airlines are thriving during the COVID-19 pandemic. U.S. cargo airlines UPS and Atlas are reporting the greatest results while FedEx’s results are somewhat disappointing.
While their passenger-focused counterparts are knocked out from the coronavirus the cargo airline business could be viewed as a “COVID-19 proof” business.
Passenger airline cargo business flowing to the air cargo carriers
Grounded passenger jets worldwide have meant additional demand for the services of the all-cargo carriers.
Passenger planes typically carry mail, fresh food and pharmaceuticals in their cargo bins. With most of the world’s passenger jets parked, awaiting the recovery of travel cargo carriers are cashing in.
Some passenger airlines are smartly utilizing their planes for cargo flights, to help offset losses from lack of passengers. One airline successfully doing so is United Airlines.
Still, a passenger airline cannot match the performance of the already established cargo airlines, such as UPS, FedEx, and Atlas.
The cargo airline results are a strong contrast to the four biggest U.S. passenger airlines. U.S. travel demand has dropped more than 90%, with sporadic attempts by the airlines to increase flying with a “wait and see results” -attitude.
UPS, FedEx, and Atlas Air
We are looking at three major cargo airlines UPS, FedEx and Atlas, to see how their operations during the COVID-19 pandemic have worked out:
UPS (United Parcel Service)
UPS, in its 2020 second-quarter results, announced a record daily volume growth of 20.9%.
- The airline’s consolidated revenue increased to $20.5 billion, which is a 13.4% increase from the second quarter of 2019.
- UPS’s net income amounted to $1.8 billion for the quarter; adjusted net income was $1.9 billion, 8.8% above the same period in 2019.
- Operating profit was $2.2 billion, and adjusted operating profit was $2.3 billion, up 7.4% compared to the second quarter of 2019.
Carol Tomé, UPS chief executive officer said,
“Our results were better than we expected, driven in part by the changes in demand that emerged from the pandemic, including a surge in residential volume, COVID-19 related healthcare shipments and strong outbound demand from Asia. UPSers are keeping the world moving during this time of need.”
Why is FedEx not performing better when other cargo airlines are thriving during the COVID-19 crisis?
Alan B. Graf Jr., the FedEx CFO, in addressing its Q2 results said,
‘We are here at the bottom, but we can see a way out’
FedEx Corporation’s results for the second quarter were:
- $17.3 billion in revenue, versus $17.8 billion in revenue during the 2019 Q2.
- Operating income amounted to $684 million, compared to $1.33 billion during the same quarter last year.
- Net income was $660 million versus $1.08 billion during the second quarter of 2019.
The airline cited the following reasons for its current lackluster performance:
- Weak global economic conditions.
- Increased expenses at FedEx Ground — due to expanded services.
- The loss of Amazon as a customer. (FedEx decided not to renew its contract with Amazon in August of 2019).
Atlas Air has emerged as a star among the cargo airlines. It has experienced great gains during the COVID-19 crisis.
Its 2020 Q2 results reflected on strong air freight demand and a resilient business model.
The airline reported a net income of $78.9 million, and it expects third-quarter and full-year 2020 earnings growth.
“To serve this increased demand, we reactivated three of our 747-400 converted freighters and operationalized a 777 freighter from our Dry Leasing business,”
said Chief Executive Officer John W. Dietrich.
Dietrich pointed out that revenue and earnings in the second quarter continued to exceed expectations.
The positive results were primarily driven by the team capitalizing on strong demand and higher yields in the airline’s commercial charter and South American businesses. Atlas continued to provide the U.S. military with essential services.
What is Atlas Air?
Atlas Air Worldwide Holdings consists of Atlas Air, Inc., Southern Air, Inc., Polar Air Cargo, and Titan Aviation Leasing.
Cargo airlines and its operations during the COVID-19 pandemic
The thriving trend of cargo airlines to continue profiting while the passenger airline world is in dire needs appear to continue for the duration of the pandemic.
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Featured Image: UPS MD-11 in Kansas City. UPS.