U.S. Airlines Experience Decline in Cargo Revenue Amid Travel Recovery

Delta, United, and American Airlines have reported significant year-over-year declines in their second-quarter cargo revenue, each experiencing around 40% decreases. For the first half of 2023, Delta’s cargo business generated $381 million, American’s cargo unit brought in $420 million, and United recorded $760 million in cargo revenue. These figures are notably lower compared to the first half of 2022, when Delta’s cargo revenue amounted to $561 million, American’s to $692 million, and United’s to $1.2 billion.

Despite the slump in cargo revenue, airlines are witnessing record overall revenue due to the surge in travel demand during the recovery. This trend has diminished the significance of cargo as a revenue booster for airlines, which relied on it during the pandemic travel slump.

Cargo revenue constituted a much smaller portion of the airlines’ total revenue in 2023 compared to 2020. At United, cargo revenue for the first half of 2023 represented less than 3% of the carrier’s year-to-date revenue, whereas it made up over 10% of sales in 2020. For Delta and American, cargo revenue constituted 1.3% and 1.6% of overall revenue in 2023, a significant decline from 3.5% and 12% in 2020, respectively.

However, despite the decline in cargo revenue, there is positive news for the airline industry. During the pandemic, cargo revenue provided a lifeline for passenger carriers, compensating for the lack of bookings and travel restrictions. The reduced cargo capacity in passenger planes drove shipping rates to record highs, bolstered by strong e-commerce demand, supply chain issues, and port congestion.

As travel demand recovers, airlines have been adding back service, particularly for international flights. This increase in passenger capacity has led to more available space for air cargo, coinciding with a decline in demand for air freight. The Baltic Air Freight Index, which tracks global air cargo rates, is down by 47% from the previous year.

As airlines plan to expand flights to meet strong international travel demand, the trend is likely to further impact cargo revenue. The competition for cargo space amidst waning demand may continue to drive down air cargo rates.