American Airlines And United Look To Bigger Roles In Air Cargo
By Ted Reed
The pandemic caused an economic disaster for the airline industry, which has lost an estimated $200 billion as a result, but it was a different story for the air cargo sector.
Not only did cargo operations generate revenues and sector profits for nearly grounded passenger carriers but also air cargo played a substantial role and visible role as the world sought to recover. In fact, the final session at the International Air Transport Association annual meeting in Boston was entitled: “What’s Next for Air Cargo After its Heroic Performance in the Covid-19 Crisis?” The event, which attracted about 600 from the airline industry and media, concluded last week. During the final session, the CEO of FedEx Express recalled the widespread exhilaration when FedEx and UPS made their first vaccine deliveries in December 2020, while a Qatar Airways cargo executive recalled how exhausted employees worked long shifts to make sure that medical supplies were delivered around the world.
At US passenger airlines, the cargo divisions, which have periodically been overlooked, gained new prominence that isn’t likely to dissipate. Jessica Tyler, American Airlines president of cargo, said cargo “has always been a really important strategic level for our organization, (but) we haven’t in the past always been that early-on involved in the network decisions.”
When the pandemic began, Tyler said, “The dramatic drop in passenger demand had everyone scurrying around making decisions (such as) to stop flying and park airplanes. Cargo wasn’t a driver.” However, executives came to realize that cargo operations became far more important in the absence of passenger flights, particularly international flights. Normally, passenger aircraft deliver about half of the world’s air cargo.
In March 2020, American operated its first all-cargo flight since 1984, flying a Boeing 777 from Dallas-Fort Worth to Frankfurt. American had retired the last of its Boeing 747 freighters in 1984. In the second quarter of 2021, American cargo revenue was $326 million, about 5% of total revenue – up from the second quarter of 2019, when cargo revenue was $221 million, about $1.8% of total revenue. For Tyler, the decision to boost cargo service was affirming. “When you can put your strength to work in a crisis, it feels really good,” she said. “We had headcount reductions, which made it even harder, but the passion in the mission was there.”
Now, cargo and Tyler have gained a stronger voice at the airline. “The relationship forged has changed (things) in the last year and a half,” she said. “Conversations around a market (involve) freight and mail as well as passenger service.” She added, “There’s every indication we’ll be able to stay involved in these conversations.”
United’s cargo business has also made permanent gains, said CEO Scott Kirby, who declared that United offers better customer service than cargo carriers.
“Our cargo business will be much better,” Kirby told reporters at the IATA meeting. “Our level of service is so high. Historically, cargo is commoditized.” Now, he said, cargo customers “realize that quality matters.” He said some pharmaceutical firms have sought out United to transport vaccines.
United cargo revenue in the second quarter of 2021 totaled $606 million or 11% of revenue. In the second quarter of 2019, United cargo revenue was $295 million or 2.6% of revenue.
Meanwhile, Delta cargo revenue in the second quarter of 2021 was $251 million or 3.5% of revenue. In the second quarter of 2019, Delta cargo revenue was $186 million or 3.5% of revenue.
Delta said recently that it shipped its 4 millionth Covid-19 vaccine dose from the U.S. to Colombia. “As a part of the critical supply chain, Delta is supporting global efforts to end the pandemic and reconnect the world,” the carrier said in a press release, reflecting the pride and involvement many airlines have had in providing cargo services intended to battle the pandemic.
During the panel, FedEx Express CEO Don Colleran recalled the first day of vaccine delivery. “When the first flight left Grand Rapids, Michigan, it was personal,” he said. The captain had recovered from Covid. The first delivery was made to Boston Medical Group at 5:53 a.m. on Dec. 14. “It was an industry win,” he said. “We were delivering hope.”
This article was originally found in Forbes.