The air cargo business is booming, thanks to improved global trade, and the impending expansion of Amazon.com Inc.'s (AMZN) Prime Air cargo carrier seems likely to fuel further growth.
In the first half of 2017, global air freight volume grew 10.4%, the strongest first-half performance since the industry's 2010 rebound from the global financial crisis and nearly triple the growth rate over the past five years, according to the International Air Transport Association.
IATA said air freight demand grew 11% in June, while capacity grew 5.2%, leading to higher yields for freight carriers. It also forecast 8% current quarter growth.
In the second quarter, American Airlines Group Inc. (AAL) , Delta Air Lines Inc. (DAL) and United Continental Holdings Inc. (UAL) all reported double-digit cargo revenue growth, with United citing 22% growth to revenue of $254 million, compared with 13% at American and 11% at Delta.
United benefits from being the leading U.S.-Asia carrier, from increased widebody service at its domestic hubs, and from building partnerships with freight forwarders despite the slow growth in recent years, said spokesman Charles Hobart.
"Now that business has picked up, and we are gaining an impressive share of the market," Hobart said. "Decision-makers at these large forwarding companies know and trust {us}."
Meanwhile, shares in Atlas Air Worldwide Holdings (AAWW) are up 20% year to date, partially because subsidiary Atlas Air is scooping up Prime Air business. By the end of 2018, Atlas Air expects to have 20 Boeing 767-300Fs flying for Amazon, up from six today.
Prime Air has said it will operate a cargo hub at Cincinnati/Northern Kentucky Airport, where it is spending $1.5 billion on new facilities. But entry into the airline business, even through the use of contractors, means that largely non-union Amazon confronts a heavily unionized workforce.
Hello Teamsters Union.
Atlas and its Teamster-represented pilots are in talks over a contract that became amendable in September 2016. Robert Kirchner, an Atlas pilot and chairman of Teamster Local 1224, said the current contract is inadequate and leads to constant workforce churn, especially given a global pilot shortage. "Our pilots are leaving in droves," he said.
Kirchner said an Atlas Boeing 767 captain earns about $185,000 annually, about two-thirds of the FedEx rate and 60% of the Delta rate. Additionally, he said, the union would like to cut back on pilot trips that sometimes last as long as 20 days. The carrier has sought to push the pilot group into arbitration, bypassing first-step negotiations, Kirchner said.
In a statement posted on its website, Atlas said it employed more than 1,700 pilots at the end of 2016, up from about 1,100 at the end of 2014. "We offer competitive compensation," Atlas said.
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