LONDON – After two years of a fast expanding air freight market during the COVID-19 global pandemic brought commercial travel to a close, the market has taken a slight dive in price, causing FedEx to close bases and ground planes.
Why has Demand Slowed
Demand has slowed due to the economic struggles that many globally are now facing. Customers are saving more money to purchase essential items such as fuel and food amongst widespread inflation.
The market results were influenced by the macroeconomic weakness in Asia, and the service issues in Europe which are suffering an energy and staff shortage crisis. These issues mixed have meant that the market has suffered a shortfall of 500 Million Dollars of initial forecasts.
Under these conditions was the major deciding factor for FedEx to close more than ninety offices, ground aircraft and cut the working hours of part of its workforce.
In stark contrast to their competitor FedEx, UPS’ management reaffirmed their full-year financial targets earlier this month, even though they continue to face additional struggles from COVID_19 outbreaks in China and the energy crisis striking Europe.
All combined this has meant that FedEx saw its market value drop by 11 billion dollars in value, which brought a sharp and very abrupt end to the two years of stock market gains it had been experiencing. This means that the shared plunged around 21.4 per cent in a single day it will become one of the word single-day drops in history for the carrier.
it is understood that despite the drops the carrier is still expecting to push forward with its share buyback plan and is expecting to bill between 23.5 and 23 billion dollars in the second fiscal quarter of the year.
FedEx Struggles Worry Industry
With this announcement from FedEx, it could mean we continue to see large market sways in the air cargo market, as many investors may take this as a sign to sell off their assets and pull funds, worrying that this could be an early indication of a collapse of the share prices.
It is worth noting, however, that despite these issues the reintroduction of the commercial travel market sector has meant that demand for freight no longer now needs to be filled by cargo-only operators, while it is not a major factor, will be another struggle that these companies must face.
Historically the Air Cargo market for freighter airlines always sees demand climb sharply and then begin to slow so this should not be at this moment in time a worry for anyone, however, the global economy is beginning to look more and more fragile which is being shown through the widespread inflation rises.
Should the inflation costs continue to rise it could mean that many people cut back further again and stop travelling to save costs, this could mean that commercial airlines move swiftly to increase services and flights we could see a large drop in travel and freight demand during the winter period, but this remains to be seen and right now it is a major unknown factor.
The question now is should we see the inflation costs continue to go how they are, will we then see a global recession bringing more struggles to airlines and operators around the globe after two years of COVID-19 restrictions battered their growth and fleets?