2023 was undoubtedly a challenging year for the air cargo industry. The annual demand for the top 25 air cargo carriers, measured by Cargo Tonne Kilometers (CTKs), fell by 1.7% compared to 2022, as inflationary pressures suppressed consumer spending. On the other hand, as pandemic restrictions continued to ease and there was an unexpected surge in e-commerce-related demand toward the end of the year, passenger airlines benefited from the sustained recovery of bellyhold capacity.

1. FedEx Retains the Top Spot

According to the latest report from the International Air Transport Association (IATA) WATS, overall air cargo demand in North America declined by 5.7% due to spending slowdowns caused by inflation and related cost-cutting measures. Despite an 8.3% decline in its cargo volume, dropping to 17.9 billion CTK, FedEx remained the leading air cargo carrier among the top 25 in 2023.

Throughout the year, FedEx launched its DRIVE program, which included the grounding and retiring of aircraft, reducing trans-Pacific and trans-Atlantic flights, closing facilities, canceling network capacity projects, reducing Sunday operations, aligning employee numbers with the handled cargo volume, and completing its workforce reduction plan in Europe.

To respond to market conditions, FedEx implemented cost-cutting measures and focused on improving capacity to partially offset the impact of declining capacity. Besides retiring aircraft, investing in fleet modernization to improve cost efficiency remained a priority for FedEx.

In terms of fleet adjustments, FedEx's 2023 annual report indicated that as of May 31, the company had 407 mainline aircraft, down from 417 a year earlier, while the number of smaller feeder aircraft remained unchanged. FedEx had 128 Boeing 767-300F aircraft, an increase of 14 from May 31, 2022, and plans to receive 14 more in 2024 and another 10 in 2025. Additionally, the Boeing 777F fleet increased to 53 aircraft, up by 2 from 2022. FedEx plans to deploy 2 more 777Fs this year and add another 2 in 2025.

The MD-10-30 fleet has been fully retired, and FedEx has accelerated the retirement plan for its MD-11 fleet, moving the retirement date up to the end of 2028, with 11 aircraft retired between mid-2022 and mid-2023. Furthermore, 4 Boeing 757-200F aircraft were retired, leaving 115 in service. FedEx also retired two Airbus A300-600 aircraft, with 65 remaining in operation.

2. Qatar Airways Secures Second Place

Qatar Airways ranked second, with a slight increase in cargo volume by 1%, reaching 14.4 billion CTK, outperforming the market average.

This growth was attributed to the continued expansion of the airline's bellyhold capacity following the easing of pandemic-related restrictions, as well as its ability to capitalize on the year-end surge in e-commerce demand.

In its 2023/24 fiscal year report, the Middle Eastern airline noted that ongoing increases in bellyhold capacity, driven by pharmaceutical and charter demand as well as network expansion, brought additional benefits. The airline operated more than 1,400 charter flights and added new charter services to China to better serve e-commerce customers. New cargo routes were launched to Algiers, Bogotá, Dallas, Dammam, Miami, Sharjah, and Warsaw.

The report also confirmed Qatar Airways' fleet size, listing 28 777F aircraft, with 27 777Fs in its fleet as of December 31. It had also ordered 34 Boeing 777-8s, with an additional 16 as options. By the end of 2023, the airline still had two Boeing 747F aircraft, although these had been removed from service.

3. UPS Drops to Third Place

Like FedEx, UPS also faced challenges during the year, marked by economic difficulties and labor contract disputes. Its cargo volume fell by 10.4%, dropping to third place with 14.2 billion CTK.

UPS attributed its poor cargo volume performance to weak demand on Asian and European trade routes. In its 2023 annual report, UPS stated, "Throughout the year, macroeconomic headwinds, including inflationary pressures and shifts in consumer behavior, coupled with freight volume diversion due to labor negotiations with the International Brotherhood of Teamsters, led to a decline in our U.S. small package business. In international markets, challenging macroeconomic conditions, along with geopolitical tensions, resulted in decreased demand for our small package services in Europe and Asia. Our freight forwarding business, including truck brokerage, was negatively impacted by weak demand and market oversupply."

Due to economic conditions, the company also introduced a voluntary departure program while reducing flight operations. CEO Carol Tomé remarked during UPS's fourth-quarter earnings call for the year ended December 31, "Frankly, 2023 was a unique, difficult, and disappointing year. We saw declines in volume, revenue, and operating profit across our three business segments. Part of this performance was due to the impact of the macroeconomic environment, and another part was due to disruptions related to labor contract negotiations, as well as cost increases associated with the new contract."

Like other companies, UPS took steps to improve efficiency by restructuring its fleet. As of the end of 2023, UPS had 563 aircraft, down from 586 a year earlier. Of these, 269 were operated by other airlines as charters or leased aircraft, down from 295 in 2022.

Among the aircraft owned or operated by UPS, there were 75 Boeing 757-200F aircraft, unchanged from the previous year. Additionally, there were 88 Boeing 767-300F aircraft, an increase of seven from the end of 2022, with 21 more on order. The company also had 41 Boeing 747F aircraft, unchanged from 2022. Two 747-8Fs ordered last year are still awaiting delivery. Lastly, UPS had 36 MD-11s, six of which have been retired, and UPS plans to retire nine more MD-11s this year.

4. China Cargo Airlines Breaks into the Top 20

The end of pandemic lockdowns and crew quarantine restrictions allowed Cathay Pacific, based in Hong Kong, to increase its capacity, adding both passenger and cargo flights. Cathay Pacific rose five places in the rankings, making it into the top airlines.

Driven by e-commerce and perishable goods demand, cargo volume increased. Meanwhile, Lufthansa noted in its 2023 annual report that passenger volume "trended upward" in the second half of the year, driven by the development of its A321F e-commerce-driven intra-European network and the ongoing introduction of passenger services, resulting in a three-place rise in its ranking.

In contrast, China Airlines acknowledged in its 2023 annual report that inflationary pressures eased, and demand recovered in the second half of the year, but it still fell four places in the rankings. All Nippon Airways, which is acquiring Japan Cargo Airlines, also reported a continued decline in demand from key industries such as semiconductors, electronics, and automotive-related sectors, resulting in a four-place drop in its ranking.

Additionally, Avianca entered the top 15, ranking 15th, while China Cargo Airlines newly entered the rankings at 19th. French airline Air France, which entered the rankings in 2022, along with Japan Airlines, both exited the list.

Conclusion

It was no surprise that airlines faced challenges in 2023, as air cargo demand only began to recover in the second half of the year. The June cargo volume decline was the smallest of the year, and August saw year-on-year cargo volume start to recover, marking the first increase in 19 months. Cargo rates also began to recover in August. However, capacity growth still outpaced demand, and November was the first month where demand exceeded supply. Despite a 10.8% year-on-year increase in CTKs in December, this rebound was not sufficient to turn the full-year data into positive growth.

Beyond the top 25 airlines, the global demand for air cargo as a whole also fell by 1.7% year-on-year. Demand was also down 3.6% compared to 2019. Meanwhile, cargo demand fell by 5% for the year, while bellyhold capacity increased by 3.9%.

In a January press release, IATA Director General Willie Walsh commented, "Despite political and economic challenges, the air cargo market in 2023 recovered the losses of 2022 after the pandemic peak in 2021."

In IATA's 2024 annual review, Walsh further commented on the financial performance of air cargo, noting that cargo revenue was expected to decline by one-third, mainly due to declining demand and lower freight rates. As more passenger aircraft returned to service, increasing capacity, and competition from declining ocean freight rates, yields faced downward pressure.

In terms of regional performance, Latin American airlines performed best, with a growth of 2%. The Middle East saw growth of 1.6%, while the Asia-Pacific region, despite an increase in e-commerce shipments, saw only a modest growth of 0.9%. Meanwhile, Africa declined by 1.8%, and Europe by 3.9%. However, North America experienced the largest decline, with the region down 5.7%, with domestic demand being a particular weak point.

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