Delta Air Lines’ cargo revenue dropped by more than a third year over year (y/y) for the second consecutive quarter amid an ongoing freight recession that has sharply eroded demand and shipping rates. The cargo and maintenance businesses pressured total unit revenues by a point in an otherwise strong third quarter for the airline.
The Atlanta-based airline said third-quarter revenue for cargo fell 36% y/y to $154 million after a 37% decline in the second quarter. Cargo sales year to date through September were down 33% to $535 million. The decline in freight business began early last year. Revenue has tumbled from $272 million in the second quarter of 2022.
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. Cargo was the airline industry’s golden child for nearly two years after the pandemic wreaked havoc with ocean shipping reliability and caused carriers to halt passenger flights, resulting in a huge loss of belly capacity.
Delta Cargo even underperformed versus 2019, a relatively weak year for shipping demand. Cargo revenue was 18.5% lower in the third quarter and 6% for the January-to-September period than before the pandemic.
Delta (NYSE: DAL) is the first publicly traded carrier to report results and other airlines are expected to have similar results for cargo.
On Wednesday, Delta Cargo announced the addition of pharma stations at Philadelphia International Airport, Chicago O’Hare and the airport in Raleigh, North Carolina. All three pharma facilities have temperature-controlled storage and refrigerated container support. Delta now has 44 airport facilities that meet the highest industry standards for pharmaceutical transportation.
Delta reported record overall adjusted operating revenue for the third quarter of $14.6 billion, up 13% from a year ago, and came in ahead of Wall Street’s consensus performance estimate. Net income was $1.1 billion, up nearly 60% from last year, with a 13.5% operating margin.
The company said domestic and international travel demand remains robust. Unit revenue for international travel may dip in the fourth quarter as the carrier adds more capacity relative to last year. Delta also faces higher costs from higher jet fuel prices and labor associated with this year’s new contract with its pilots.
Delta also could see revenue deterioration because of the war in Israel, where it has suspended flying until the end of the month, and from a potential defect with Pratt & Whitney engines that will require about 100 aircraft to be removed from service so the engines can be dismounted and serviced.
Click here for more FreightWaves/American Shipper stories by Eric Kulisch.
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