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Day: August 13, 2019

Airline cargo revenue is cratering. Here’s why that’s actually good news

Airlines’ cargo revenue is slumping. That’s a sign of good news for travel recovery.
Delta, United and American this month each reported year-over-year declines of about 40% in their second-quarter cargo revenue.
For the first half of 2023, Delta’s cargo business generated $381 million, down from $561 million in the first half of 2022, while American’s cargo unit brought in $420 million compared with $692 million in the first six months of last year. United brought in $760 million from cargo so far this year, down from $1.2 billion a year earlier.

Meanwhile, airlines are reporting record revenue, if not earnings, thanks to the rebound in travel demand. That means the business impact of cargo, which once helped prop up airlines’ revenue during the Covid pandemic travel plunge, has faded.
Cargo revenue at United, which generates the most of that business of the three largest U.S. carriers, for the first half of 2023 represented a less than 3% slice of the carrier’s $25.6 billion year-to-date revenue.
That’s a significantly smaller portion than 2020, when cargo revenue made up more than 10% of United’s sales.

Through June, cargo revenue made up 1.3% and 1.6% of overall revenue at Delta and American, respectively, down from 3.5% and 12% in 2020.
But it’s not all bad news.
Flying goods around the world was a lifeline for passenger carriers during the pandemic when bookings dried up and travel restrictions forced airlines to slash service abroad.
Normally about half the world’s air cargo flies in the bellies of passenger planes. That reduced cargo capacity during the pandemic helped drive shipping rates up to records, along with strong e-commerce demand, supply chain problems and port congestion.
But travel demand has roared back, particularly for international trips, as customers rush to take vacations abroad that they put off in recent years.
The renewed demand has prompted airlines to add back service. U.S.-Europe flights alone are expected to be the highest in five years.
The added passenger capacity also boosts the world’s supply of space to fly cargo, at the same time that demand for air cargo is waning.
The Baltic Air Freight Index, which tracks worldwide air cargo rates, is down 47% from a year earlier. In May, the latest available data, the International Air Transport Association, said air cargo capacity was up nearly 15% from the same month of 2022 while demand dropped 5%.
Airlines are planning to expand flights this year, too, to capitalize on strong international travel demand, a trend that could further drive down cargo revenue.


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China’s steps to boost sales of cars, electronics disappoint market

BEIJING, July 21 (Reuters) – Chinese authorities announced measures on Friday intended to help boost sales of automobiles and electronics with the goal of shoring up a sluggish economy, but the steps failed to impress investors who have been clamouring for stronger stimulus.
Regions will be encouraged to increase annual car purchase quotas and efforts will be made to support sales of second-hand vehicles, said a statement on automobile consumption published by 13 government agencies including state planner National Development and Reform Commission.
As China’s post-pandemic economic recovery slows, policymakers have identified the country’s automobile sector as a key lever which they want to use to shore up growth. In June, they unexpectedly extended a purchase tax break on new energy vehicles (NEVs) until 2027.
But domestic consumer demand has remained weak and the world’s largest auto market has been grappling with a price war triggered by Tesla (TSLA.O) in January that has since spread to more than 40 brands offering discounts on their vehicles.
In March, a top industry association urged the auto industry and authorities to cool the ‘price-cut hype’ to ensure the healthy and stable development of the industry.
The Friday statement aimed at encouraging automobile consumption echoed this. “Localities must not roll out protectionist policies and avoid vicious competition,” it said.
A separate statement on supporting sales of electronics products said authorities would encourage scientific research institutes and market entities to actively apply domestic artificial intelligence (AI) technology to improve intelligence levels of electronic products.
The measures echoed similar ones announced by authorities in recent months and failed to boost the market, with shares in China’s automobiles index (.CSI931008) down 0.3% and the electronics index (.CSI930652) falling 0.6% against a 0.1% rise in the benchmark index (.CSI300).
“These supports will unlikely significantly boost consumption when people are still generally reluctant to spend as they lack confidence in the economic recovery,” UBS said in a note on Friday.
Investors have said they are disappointed by China’s weak second quarter growth and want to see stronger stimulus, with some pinning their hopes on the Politburo meeting later this month.
Reporting by Qiaoyi Li, Liz Lee and Brenda Goh; Additional reporting by Jason Xue; Editing by Tom Hogue and Muralikumar Anantharaman.


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