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Yahoo
18-07-2025
- Business
- Yahoo
FedEx and UPS cease parcel discounts, ‘weaponize' fuel surcharges: report
Legacy parcel carriers FedEx and UPS have begun to discontinue commercial discounts, previously offered in response to increased market competition, prioritizing instead high-yield shipments and profitability to better meet Wall Street expectations, according to the TD Cowen/AFS Freight Index published this week. Businesses are paying more per package shipped with FedEx (NYSE: FDX) and UPS (NYSE: UPS) as the couriers' ground networks lose volume at the bottom end and replace some of that with express volume as customers trade down in service levels. The shift of cost-conscious shippers to alternative providers with slower, cheaper services is reflected in the ground parcel cost per package reaching a record high of 32% above the index's 2018 baseline during the second quarter. The loss of lightweight volume resulted in a higher average billed weight per package that in turn drove up the cost per package, the report from AFS Logistics and financial services firm TD Cowen said. Parcel volumes for the two delivery powers soared during the pandemic, but began declining in 2023 as e-commerce sales normalized, Amazon expanded and new couriers entered the market. FedEx and UPS engaged in a pricing war with startup delivery companies and retailers like Walmart for about 18 months. Management at both companies has signaled to investors this year that the focus is now on profitable parcel freight. UPS's decision in January to give up half of its business with Amazon over the next two years underscores the interest in boosting profitability. Data analytics and consulting firm LJM Group echoed the index's findings in an investor briefing this week, saying that parcel pricing is more stable today than it was in 2023-24, but is not back to pre-pandemic predictability, according to a readout of the call from Susquehanna Investment Group. It said many clients are making the shift to use the U.S. Parcel Service because of Ground Advantage, a product introduced two years ago as a low-cost option for packages up to 70 pounds with transit times of two to five business days. 'The challenge for smaller and mid-sized shippers is that saving $3 to $5 per package by shifting some of their business to USPS or a regional carrier from FedEx or UPS must be weighed against the loss in savings from FedEx/UPS's volume-driven pricing structure when some of that volume is shifted away. This can effectively trap small and/mid-sized shippers with limited volume in a sole-sourcing parcel strategy with one of the legacy national providers,' Susquehanna equity analyst Bascome Majors wrote. The parcel giants have also been busy tacking on service fees to their base shipping rates, usually matching any surcharge imposed by their rival. Memphis, Tennessee-based FedEx earlier this month notified U.S. customers of peak season surcharges that are higher than those imposed last year. The extra fees begin phasing in on Sept. 29, based on the handling needs or service levels, and run through Jan. 18. FedEx also imposed similar handling, oversize and unauthorized package surcharges on July 14 for international packages. UPS has been the most aggressive of the two in overhauling its rating model and rolling out new surcharges, according to the TD Cowen/AFS Freight Index. The manipulation of surcharges by the integrated network carriers is most notable with fuel. Fuel surcharges, based on opaque formulas pegged to the price of fuel, have long been considered a way for carriers to pad profits beyond simply being a cost-recovery mechanism, but FedEx and UPS have 'weaponized fuel surcharge as a revenue tool,' the authors said. During the past year, domestic ground shippers have experienced a cumulative increase in fuel surcharges of 30% when compared to a constant diesel fuel price level, indicating that the fees are because of carrier actions rather than fuel price fluctuations, according to TD Cowen and AFS data. Express shippers saw a modest 0.6% increase due to carrier adjustments even though the U.S. Gulf Coast jet-fuel index fell 10.3% in the second quarter. 'Low demand and competition from other players have pushed both FedEx and UPS to focus on right-sizing networks to hold onto the volumes they can profitably serve,' said Mingshu Bates, AFS Logistics' chief analytics officer and president of parcel, in the report. FedEx has recently accelerated the consolidation of its separate Ground and Express networks. UPS is also closing terminals and moving activity into larger, automated sortation centers to reduce overhead and improve efficiency. The TD Cowen/AFS Ground Parcel Freight Index is expected to reach 29.2% in the third quarter, representing a 7% year-over-year increase and a 2.2% decrease from the second quarter. AFS Logistics provides managed transportation, freight audit and cost management services to freight buyers. It has visibility into more than $39 billion in annual freight spending. Click here for more FreightWaves/American Shipper stories by Eric Kulisch. Write to Eric Kulisch at ekulisch@ RELATED STORIES: LTL pricing index to hit record high in Q3 FedEx, UPS lose market share to big retailers, small couriers US parcel market to grow 36% by 2039, Pitney Bowes says The post FedEx and UPS cease parcel discounts, 'weaponize' fuel surcharges: report appeared first on FreightWaves.
Yahoo
07-04-2025
- Business
- Yahoo
LTL stocks bloodied post-Liberation Day, estimates cut ahead of Q1 reports
Transportation stocks took it on the chin following the Trump administration's announcement of widespread tariffs after the market closed on Wednesday. Less-than-truckload stocks fared the worst in the two trading sessions following Liberation Day as investors who entered the year hopeful for a positive inflection in the industrial complex appear to have called it quits for the time being. Less-than-truckload stocks fell 18% over the two-day period and are off 33% year-to-date (both on an unweighted basis). (Old Dominion Freight Line's (NASDAQ: ODFL) outperformance compared to the rest of the group has minimized the impact to the weighted average as it represents 60% of the group's market cap.) The LTLs are among the worst performing industrials this year as earnings expectations and valuation multiples are being reset sector was a pandemic and post-pandemic darling, garnering record valuations at times, given its manufacturing-heavy exposure and role in a mass inventory restocking. However, an extended industrial downturn along with several carriers acquiring terminals from defunct Yellow Corp. (OTC: YELLQ) in addition to other organic additions, has left many LTL networks at or near record latent capacity. That has LTL bears calling for an unraveling of the industry's favorable pricing dynamics. Further, a March report saying Amazon (NASDAQ: AMZN) could become a more meaningful LTL player has weighed on shares. The first-quarter LTL earnings season, which starts Apr. 23 when Old Dominion reports, may leave onlookers with more questions than answers as an all-out trade war now overhangs an already demand-depressed LTL industry. Intraquarter updates in early March provided no reprieve from the dour volume trends other than to show that a weather-marred January likely marked the worst of the tonnage declines (on a two-year-stacked comparison). Channel checks signaling continued uncertainty around trade policy, which is weighing on capital investment and domestic manufacturing, has prompted analysts to further lower Financial Group's Bascome Majors told clients last week that 'the chaotic policy and macro backdrop of the last six weeks has only amplified our fears into this important spring and early-summer period for the industry.' He lowered first-quarter earnings-per-share estimates for core LTL carriers by 2% to 7%. Full-year 2025 numbers were lowered by high-single-digit to midteen percentages with the changes resulting in flow-through impacts of mid- to highteen percentages to 2026 EPS estimates. His estimates are approximately 10% to 20% below consensus for 2025, and 5% to 20% below 2026 consensus. FedEx's (NYSE: FDX) LTL unit, FedEx Freight, also provided lackluster results for its fiscal quarter ended Feb. 28. Revenue was off 5.3% year over year as tonnage fell 7.6% and revenue per hundredweight, or yield, increased just 2.2%. The segment recorded an 87.5% operating ratio (inverse of operating margin), 300 basis points worse y/y. Roughly 90% of its top line is tied to business-to-business commerce and more tethered to the impact of tariffs. The bright spot, however, was that volume erosion at the nation's largest LTL carrier appears to have bottomed during its fiscal second quarter ended Nov. 30. when tonnage was down 11.3% y/y (the two-year-stacked comp bottomed in the quarter ended May 31, 2024). FedEx said the y/y decline in revenue for its current fiscal quarter (ended May 31) is expected to be less severe. The Manufacturing Purchasing Managers' Index signaled slight growth (a reading above 50) for the first two months of the year after a 26-month downturn. However, trends slowed in February as the trade landscape began to shift and March's 49 reading has the dataset back into contraction territory. Importantly, the new orders subindex came in at 45.2 (after readings of 55.1 and 48.6 in January and February, respectively), a less-than-encouraging signal for near-term demand. The Tuesday report called out new tariffs and uncertainty around future tariffs as the primary detractors. The prices subindex jumped again, up 7 percentage points from February to 69.4, as many industries are already seeing the inflationary impact from the new levies. (Changes in PMI data usually precede LTL volume inflections by three to four months. Industrial-related shipments account for roughly two-thirds of freight mix for some carriers.)Other analyst reports said recent conversations with industry participants combined with other data points indicate demand headwinds didn't abate in March – the seasonally strongest month of the first quarter. The LTL industry has lost some heavier-weighted shipments to the truckload market as rates in that market largely remain depressed. The LTL space won't likely recover that freight until there is a material inflection in the TL spot market. Also, lower fuel surcharge revenue (diesel prices were down 9% y/y in the quarter) is weighing on yields, which remain positive excluding fuel. Fuel recovery mechanisms for LTL carriers are significantly accretive to margins when prices at the pump rise. Carriers have been successful capturing annual contractual rate increases in the mid-single-digit range, but after multiple quarters of gains, the redeployment of numerous terminals that need to generate returns sooner than later, and a still-soft demand backdrop, it will be interesting to see how the industry's 'price discipline' mantra holds throughout the year. 'We remain firm in our belief that LTL earnings risk is far more about volume than pricing risk (more analogous to rail than truckload) as we continue to believe pricing discipline will still hold through a further extended period of demand weakness and excess capacity,' Majors said. TD Cowen cut estimates on Montreal-based TL, LTL and logistics conglomerate TFI International (NYSE: TFII), citing margin risk at LTL subsidiary TForce Freight, among other concerns. On a consolidated basis, TFI's businesses are roughly 80% exposed to the industrial complex and feeling the pressure from tariffs, analyst Jason Seidel said in a March 28 note. That exposure extends to its specialized TL segment, which includes the acquisition of flatbed carrier Daseke. Seidel cut his first-quarter estimate by 9% and the 2025 full-year number by 3% (both of which were below consensus at the time). The 2026 estimate was trimmed 5% and remains above consensus. He also cautioned that the company's full-year LTL OR target of 93% to 95% could be in jeopardy. He is forecasting a 99% OR in the unit during the first quarter. TFI chief Alain Bédard candidly told investors on a February fourth-quarter call that its U.S. LTL platform lacked volume density and was effectively broken. He pointed to a negative flywheel of poor service leading to soft volumes (poor density) leading to poor pricing, and outlined several cost and service-enhancement initiatives around maintenance, linehaul, routing and billing. Bédard also said TFI was unlikely to engage in any 'large M&A' during the year, implying that its timeline to acquire a large U.S. LTL carrier as early as late-2025 has been extended. Majors cut his TFI estimates by 12%, 19% and 13% for the first quarter, full-year 2025 and full-year 2026, respectively. TFI is the second-worst performing stock in trucking this year (down 41%) given its LTL woes. Forward Air (NASDAQ: FWRD) is the worst performing stock (down 59%) as investors await the results of a strategic review following a controversial merger with Omni Logistics. Shares of the also industrial-dependent U.S. Class I railroads were off 10% on average in the two sessions following Liberation Day. The severity of the pullback in transports may have investors returning sooner than later, especially given the administration's on-again, off-again approach with prior tariffs. More FreightWaves articles by Todd Maiden: Turvo, SMC3 team up to improve LTL shipping process March supply chain data craters following inventory pull-forward Yellow's new bankruptcy plan revealed, next steps still uncertain The post LTL stocks bloodied post-Liberation Day, estimates cut ahead of Q1 reports appeared first on FreightWaves. Sign in to access your portfolio
Yahoo
28-03-2025
- Business
- Yahoo
Truckload earnings estimates cut as Q1 draws to a close
Susquehanna Financial Group cut estimates for trucking and logistics companies heading into the first-quarter earnings season. Uncertainty around tariffs and retailers building inventories in response has turned 'macroenthusiasm into pessimism,' analyst Bascome Majors told clients in a Wednesday report. 'We're cautious into spring as the truckload cycle likely gets worse before it gets better,' Majors said, noting that 'pending tariffs have caused a broad 'wait & see' approach for retail and industrial shippers alike.' He said key industry data points are closing the quarter 'with a whimper into the critical spring bid season.' Majors noted shippers have their own margin concerns as they navigate a changing trade landscape, which he believes will 'weigh on carriers' rate/margin gains in bid season.' Retailers are still working their pricing models to determine the right balance between shielding consumers from price hikes and protecting their own gross margins. Majors selectively lowered first-quarter earnings numbers, primarily targeting TL carriers, as the seasonally strongest month of the period – March – will likely disappoint. Broader changes were made to the full year, which produced knock-on effects to 2026 estimates.'1Q is seasonally weaker, but we fear the exit rate of spot rates into the most critical months of the annual contract bid season poses some risk to annual pricing that will drive margins in 2H25 and into 1H26,' Majors said. Majors cut his Knight-Swift Transportation (NYSE: KNX) earnings-per-share estimate by 16% for the first quarter, with Schneider National (NYSE: SNDR) taking a 9% haircut. Truckload carriers, including Werner Enterprises (NASDAQ: WERN), saw low-double-digit to midteen estimate cuts for full-year 2025 given the slow start to the year, with flow-through effects impacting the 2026 numbers by a similar amount. 'Reflecting a shakier cyclical backdrop for TL/intermodal/trade and contractual bid season, we're exercising more caution in 2Q toward both demand and pricing, which flows through to 2H and 2026 estimate reductions.'Across his trucking, intermodal and logistics coverage, which includes brokers, numbers sit 5% to 15% below consensus for 2025 and 5% to 25% below for 2026. (Majors has not issued quarterly previews for the less-than-truckload carriers and railroads that he follows.) Truck broker Landstar System (NASDAQ: LSTR) is the only company for which Majors' first-quarter number sits above other Wall Street estimates. He raised the estimate by 4% given recent outperformance in the flatbed market, which accounts for 30% of Landstar's revenue. However, he quantified the near-term strength in that market as 'transitory.' He pointed to the potential for a supply shock next year as changes in trade policy will push new Class 8 tractor prices higher and as equipment prebuying is curbed as the new administration works to nix planned changes to nitrogen oxide emissions standards. 'In 2026, we could see truckload/intermodal demand grow while the class 8 fleet shrinks, fueling a stair-step lift in TL/IM price and margins after 2025's emerging disappointment.' His call for the 2025 bid season, which is based on channel checks and recent public carrier commentary signaling low-single-digit rate increases, is for contractual rate renewals to be positive. Majors downgraded multimodal provider J.B. Hunt Transport Services (NASDAQ: JBHT) to 'neutral' on Wednesday, cutting full-year 2025 and 2026 estimates by 5% and 7%, respectively. He said recent tariff-driven import activity has been behind the 7% y/y increase in North American intermodal container volumes so far this year. He expects contractual bid season to be fruitful on major headhaul lanes off the West Coast, which could be mostly offset by softness on backhaul lanes. The call is for intermodal rates to 'exit 2025 on a slight winning streak, with more meaningful opportunity for recovery in 2026.' 'We see a challenged 2025, with the largest earnings growth % at TL carriers vs. depressed 2024 troughs, but see strong growth for 2026 coming off the 2025 bridge year as our estimates reflect a more measured improvement to demand, pricing and margins across the industry.'More FreightWaves articles by Todd Maiden: FedEx prepping LTL unit ahead of spinoff Yellow's 325-door California terminal fetches $55M Roadrunner adds new lanes to long-haul network The post Truckload earnings estimates cut as Q1 draws to a close appeared first on FreightWaves. Sign in to access your portfolio
Yahoo
13-02-2025
- Business
- Yahoo
Local service still a sticking point for Class I railroads
In the first quarter of 2025, Class I railroads in North America are so far demonstrating varied levels of service performance, according to new metrics mandated by the Surface Transportation Board. The STB now requires major freight railroads to report additional data on on-time percentages, train speeds and terminal dwell times in an effort to increase transparency and accountability. The new STB metrics, which began being collected in September 2024, establish baseline standards for on-time arrival percentage and successful local service percentage. If targets remain unmet, railroads could potentially lose business to competitors, pending shipper petitions to the STB. On-time arrival percentage is calculated as the number of manifest carloads that arrive at their final destination within 24 hours of the original estimated time of arrival, divided by the total number of manifest carloads. Successful local service percentage measures the number of cars placed at their final destination within 24 hours of the commitment, divided by the total number of cars with local service commitments. (Chart: Susquehanna) 'Entering 2025, rail service has been far more consistent than the 2021-22 experience aside from some disruption out West as a result from elevated imports (hurting BNSF specifically) and unusual weather in the East (hurricanes & irregular Winter storms having outsized affect on CSX), wrote Susquehanna equity analyst Bascome Majors in a February 5 client note. 'All the data supports the story of general service improvement with velocity up across the board from early 4Q levels. In dwell, CSX on a Y/Y basis has significantly lagged peers, but is showing some sequential recoverymore recently. Rails have performed fairly consistently for On-Time Arrival % except CSX who has had notable weakness vs. peers. BNSF since late November has drastically underperformed peers on local service % though is showing some recovery lapping holiday and winter seasonality. In short, this data supports the sound and consistent service at Union Pacific under Vena and the newfound steadiness for NSC under John Orr which should support respective FY25 margin expansion, but we're watching closely to see how the STB will collect and implement this data practically going forward.' Western railroads: Union Pacific vs. BNSF Union Pacific (NYSE: UP) has demonstrated strong service metrics to begin 2025, outperforming rival BNSF Railway in several key areas. UP's manifest on-time arrival percentage averaged 89% in January, compared to 84% for BNSF. UP also maintained higher average train speeds of 24.7 mph versus BNSF's 23.1 mph. 'We're showing our customers what's possible while at the same time driving productivity,' said Jim Vena, CEO of Union Pacific, on the company's Q4 2024 earnings call. 'What's exciting for me is that I know we're not done. There are more opportunities ahead and we have clear line of sight of how we drive further improvements in 2025.' UP did see slightly higher average terminal dwell times of 25.2 hours compared to BNSF's 24.7 hours in January. However, UP has made significant strides in this area over the past year. 'Notably, 2024 marked an all-time record for terminal dwell, a meaningful improvement in our service, which reduces customers' fleet costs through improved cycle times,' Vena noted. Canadian railroads: CN vs. CPKC North of the border, Canadian National (NYSE: CNI) has maintained an edge over rival Canadian Pacific Kansas City (NYSE: CP) in the early weeks of 2025. CN posted an average manifest on-time percentage of 91% in January, while CPKC trailed at 87%. CN also led in average train speeds at 25.9 mph compared to CPKC's 23.8 mph. However, CPKC demonstrated lower average terminal dwell times of 21.3 hours versus CN's 23.1 hours. RTOTC measures the total carloads moved by Class I railroads in the U.S. in a given week. (Chart: SONAR. To learn more about SONAR, click here) Eastern US railroads: Norfolk Southern vs. CSX In the eastern United States, Norfolk Southern (NYSE: NSC) and CSX (NASDAQ: CSX) have shown relatively similar performance levels to start the year, with some variations across metrics. NS reported a slightly higher manifest on-time percentage at 88% compared to CSX's 86% in January. CSX maintained a small advantage in average train speeds at 22.8 mph versus NS at 22.1 mph. Terminal dwell times were nearly identical, with CSX averaging 24.9 hours and NS at 25.1 hours. Importance of new metrics The implementation of these new service metrics by the STB marks a significant shift in how railroad performance is measured and reported. By focusing on on-time percentages and local service success, the STB aims to create a more comprehensive picture of how well railroads are meeting customer needs. 'These metrics are critical for shippers and regulators to assess railroad performance,' said rail industry analyst Jason Seidl of Cowen. 'They provide a more granular view of service quality beyond just the traditional measures of train speed and dwell time.' The STB's move comes after periods of service disruptions in recent years, particularly during the post-pandemic recovery. By establishing these new reporting requirements, the board hopes to incentivize railroads to maintain high service levels and provide more transparency to customers. Union Pacific's momentum Among the Class I railroads, Union Pacific appears to have built significant momentum in service improvements heading into 2025. The company's strong performance in on-time percentages and train speeds reflects its strategic focus on operational excellence. 'We operate the largest, most complex rail network in North America and with it comes challenges and opportunities,' Vena said. 'The team understands our goal is to deliver what's possible from this franchise. We intend to do that as an industry leader that keeps raising the bar as we drive value for our shareholders.' UP's management team has emphasized that improved service is key to winning new business and driving growth. The company's ability to handle increased volumes while maintaining strong service metrics will be closely watched throughout 2025. 'Our 2024 performance demonstrates that our strategy to operate with a buffer and connect more closely to our customers is paying dividends, both in terms of meeting our customer commitments and as a direct result winning new business,' Vena noted. As we move deeper into 2025, industry observers will monitor how well the rails maintain and improve their service levels in the face of potential economic headwinds and regulatory changes. The new STB metrics provide an additional tool for tracking these efforts and holding railroads accountable for their service commitments. The post Local service still a sticking point for Class I railroads appeared first on FreightWaves.
Yahoo
27-01-2025
- Business
- Yahoo
Airfreight outlook remains bright to start new year
Air cargo demand growth has maintained momentum on the heels of a robust 2024, but could be cut by up to two-thirds as the market normalizes and trade conditions turn less favorable, analysts say. But even 4% growth, on the low-end of projections, would be considered a solid year by most industry stakeholders. Global volume and rates have eased in the first two weeks of January, reflecting the post-holiday seasonal decline since the end of peak shipping activity in early December. But industry professionals say the year has started strong compared to historical trends. Demand is down about 3% halfway through the month versus a year ago, when air cargo networks were still in the early stages of recovering from a prolonged downturn, according to freight analytics firm Xeneta. Rates softened 3.7% on a sequential basis in the first week of January, according to the Baltic Air Freight Index, but were still up 26% year over year. As of early January, airfreight rates on the all-important China-North America trade corridor have fallen slightly less than typical from their traditional December peak. Prices out of Shanghai and Hong Kong are down about 20.5% compared to an average historical decline of 26%, a report by Bascome Majors of Susquehanna Financial Group showed. Logistics companies say volumes are rebuilding after a short slump at the tail end of December. Analysts attributed the improved seasonal economics to businesses stockpiling inventory to protect against China tariffs threatened by President Donald Trump and an earlier Lunar New Year, which starts Jan. 29. Businesses often move shipments forward to avoid delays in anticipation of factories and warehouses in China gradually reducing production and then closing for the holiday, which can result in operations being halted for up to a month. 'The end of 2024 was exceptionally strong. While we traditionally see a dip in the second half of December, this year was different. Week 51 experienced only a minimal decline, and Week 52 outperformed expectations, delivering the strongest load factors we've seen for this period in years,' Leonard Rodrigues, director of revenue management and network planning at Etihad Cargo, the cargo subsidiary of Etihad Airways, said by email. 'The consensus suggests this strength will carry into January, leading up to Chinese New Year. While some geographies are performing below historical levels, others are outperforming, which has balanced the overall market performance.' Taiwan-based freight forwarder Dimerco Express Group sees the market in similar terms. 'Starting mid-December, we've seen a significant uptick in cargo volumes, particularly for consumer electronics. This is unusual, as the market typically slows down after Dec. 5,' said Kathy Liu, vice president global sales in marketing, in the company's monthly market update. 'However, this year, the peak is expected to extend all the way to late January, just ahead of Chinese New Year. What's interesting is how general cargo has avoided the usual October-November e-commerce rush to better optimize capacity and costs. This could indicate a new trend going into 2025.' Demand for the entire month of December increased 11% year over year against a 2% bump in capacity (consulting firm Rotate showed capacity at plus 8% versus 2023), helping global spot rates increase 15% to nearly $3/kg, Xeneta said in a monthly report. It marked the fourteenth consecutive month of double-digit growth and meant 2024 volumes increased 12%. Demand growth slowed to 10.5% between September and December from about 13% earlier in the year, largely because of more difficult year-over-year comparisons as the market's recovery took off in 2023. With less volatility, spot rate growth for the final four months decelerated to 11% from 21%. Rates for immediate transport increased the most last month on the Europe-to-North America corridor, rising 21% to $3.27/kg, its highest level in more than two years. The spike is likely due to reduced cargo capacity as passenger airlines reduce winter flying schedules and all-cargo operators relocate freighters to Asia, Xeneta said. Meanwhile, air cargo yield increased 7.8% in November – 52% higher than in 2019, according to the latest statistics from the International Air Transport Association. The ingredients for last year's stout market included the effective cutoff of the Red Sea by Houthi rebel attacks on merchant shipping that led companies to divert some time-sensitive shipments to air, air space restrictions around Russia that forced Western airlines into longer routes and effectively reduced capacity, and the surge in e-commerce exports from China. It was a banner fourth quarter for airlines. United Airlines on Tuesday reported cargo revenue jumped 30% to $521 million, while full-year revenue was up 16.6% to $1.7 billion. Delta Airlines said cargo revenue increased 32% to $249 million. Revenue grew 14% to $822 million in 2024. American Airlines' cargo division didn't perform as well, with revenue growth of 10% to $220 million. Cargo revenue actually declined 1% for the entire year to $804 million – a surprising outcome considering the strong market conditions. E-commerce is expected to continue being the primary catalyst for air cargo volume growth this year. Experts attribute more than 50% of air cargo volumes out of Asia last year to e-commerce. The influx of large online marketplaces reserving huge allotments of container space has limited capacity for traditional freight like apparel, electronics and automotive parts, and influenced the upward move in yields. More cargo owners last year shifted to longer-term airfreight contracts with durations of one year or more to lock in better rates. Those contracts accounted for 63% of all transactions executed in the fourth quarter, a 16 point increase compared to the same period in 2023, according to Xeneta. At the same time, freight forwarders negotiated nearly half of their volumes in the more volatile spot market, which undercut margins as airlines raised selling rates. For 2025, airlines have announced a 10% increase in contract rates, Taiwan-based logistics provider Dimerco Express said in a recent market update. Economic recoveries don't last forever, though. Multiple analysts, including Cargo Facts Consulting, project volume growth will cool down to 4% to 6% this year. Downside risks include the resumption of shipping through the Suez Canal if the Israel-Hamas cease-fire holds, a soft manufacturing outlook, rising protectionism, continued geopolitical tensions and U.S. plans to restrict Chinese e-commerce sellers from leveraging a duty-free, expedited clearance program that enables their direct-to-consumer logistics business. Those e-commerce shipments almost entirely rely on air transport. Also, a potential strike at many U.S. ports was averted this month when dockworkers and marine terminal operators agreed on a six-year contract, eliminating the need for shippers to rebook urgent cargo with air carriers. Click here for more FreightWaves/American Shipper stories by Eric Kulisch. White House moves to exclude Chinese e-commerce from duty-free import Analysts predict air cargo bull market will cool 50% in 2025 The post Airfreight outlook remains bright to start new year appeared first on FreightWaves.
