Home»Concerning the Financial Markets»High aircraft utilization translates to robust on-line shipping

High aircraft utilization translates to robust on-line shipping

Many economists have expressed concern over the low peak season shipping levels, especially coming into the holiday season.  We commented on this observation last week and confirmed the downtrend in port activity with our Dry Cargo Index.  However many speculated this import slump might not reflect a poor holiday buying season – instead it might be due to retailers having higher inventory on hand than previous years.  

There is no doubt consumers are feeling the pressure as wages remain stagnant despite increasingly low unemployment.  This pressure however is being offset by record low gas prices and an increasingly strong US Dollar, so how are consumers going to spend their money this holiday season?  The Cass Freight Index for October shows a year-over-year change of -5.3% for shipments with the past several months remaining steadily below 2013 levels.  How these data translates to consumer spending this holiday season remains unclear.  However, shipping companies such as UPS are still predicting an increase in shipping this season.  Retailers seem to be equally uncertain as to how the holiday season will affect them.  Third quarter earnings were mixed for retailers, with good news from brands such as Home Depot and Amazon, while others like Target continue to struggle.  One distinguishing shift in spending is the increasing volume of on-line retailing.  Despite the pressure on retailers to deliver better deals this Black Friday, many consumers are spending their time shopping on-line instead of waiting in long queues this Friday.  comScore reported its official forecast for the November/December holiday season and predicts on-line spending will reach $70.1B, a 14% gain from last year.

FedEx Utillization
Average aircraft utilization for FedEx

This increase in on-line spending and mixed brick-and-mortar performance might be confirmed by the higher volumes expected by shipping companies such as UPS and FedEx. The FedEx Cargo Utilization Index trends the cargo aircraft utilization in real time and can give us some insight on the cargo levels for FedEx, which transports many on-line purchases. The data above shows overall aircraft utilization has been trending upwards since mid-summer, indicating an increase in overall air freight volume for FedEx.  Additionally, we can see aircraft utilization by type, which shows a similar trend (below).  Interestingly, much of the increase in utilization can be seen specifically in 777 and MD-11 utilization.  Typically these aircraft are used on longer international routes, meaning the increase in their utilization might mean retailers stocking up last minute before the holiday rush.  More information on the FedEx Cargo Utilization Index can be found under our Indexes menu.

FedEx Utilization by type
Aircraft utilization by aircraft type

Even though the data points to muted holiday spending, there are a number of indicators that are showing growth in on-line shopping.  This correlates with the data we see from FedEx and their increased aircraft utilization coming into this holiday season.

Written by

The author didnt add any Information to his profile yet

Leave a Comment