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Performance reflects weaker shipping conditions, economic uncertainty

The higher they climb, the harder they fall. United Airlines is the king of cargo among the U.S. international passenger airlines and took its cargo business to unparalleled heights during the COVID crisis when supply chains were shattered and companies needed alternative transport.

The Chicago-based carrier on Tuesday reported cargo revenue dropped 36.5% in the first quarter to $398 million, surpassing the 28% fall in cargo business at Delta Air Lines. But the earnings report was mostly positive overall, showing a company that continues a strong recovery from the pandemic. United Airlines (NASDAQ: UAL) posted a smaller-than-expected adjusted net loss of $207 million (or 63 cents per share), on revenue of $11.4 billion.

The fact that United’s cargo revenue shrank was no surprise considering the first quarter of 2022 set a record and the airfreight market has been in a slump ever since, weighed down by high inflation, overstocked retail shelves and economic disruption from the Ukraine war. During the first quarter, global cargo volumes were down about 5% year over year, and the price of shipping goods by air is 40% lower than a year ago. The only question was how much of a sales hit United would experience.

United’s cargo revenue was 39% above the same period in 2019, before the COVID crisis.

In 2022, the airline posted cargo revenue of $2.17 billion, down 7.6% from the record $2.4 billion the prior year.

CEO Scott Kirby said low yields across the industry impacted United’s cargo sales.

“We are holding our own. We do expect to see more and more pressure on cargo yields going forward. But the United team is executing in an amazing way. Our relative size to our primary competitors, you can see it in the numbers,” Kirby said on an earnings call with analysts the next day. “And so I am still actually bullish about the business relative to 2019. [Last year], we reached an unbelievable high based on where we were with the pandemic and COVID. We didn’t expect we would be able to re-achieve that number.”

United said revenue-ton miles declined 7.6% from the first quarter of 2022, reflecting a mix of less weight and distance carried.

Global airfreight traffic has tumbled several points in April compared to previous weeks, when demand and rates regained some footing, according to price reporting agencies.

“We are watching the macroeconomic risks carefully, but demand remains strong, especially internationally, where we are growing at twice the domestic rate. We expect all of these factors will keep us on track to achieve our full-year adjusted diluted EPS target” of $3.50 to $4, said Kirby in a news release.

U.S. carriers have said that January and February traffic was a bit soft, but that they see strong booking activity in the spring and summer.

Earlier on Tuesday, United announced its largest South Pacific network expansion ever, with 66 weekly flights to Australia and New Zealand for the upcoming season. During the quarter it also added four new international routes between Dubai and Tokyo and three of its main U.S. hubs. It also resumed four routes it hadn’t flown since the pandemic and resumed nonstop service between Shanghai and San Francisco, becoming the first U.S. airline to not require a refuelling stop between the U.S. and Shanghai since November 2020.

More widebody flights offer opportunities for freight forwarders to book cargo shipments to those cities.