Air cargo
Jindel , president of SJ Consulting Group and package consultant ShipMatrix . “ USPS is doing more on the ground , and they ’ re switching to a carrier that has an integrated ground-air network .”
UPS and the postal service already partner through the UPS SurePost service , in which UPS hands off packages to the USPS for final-mile home deliveries .
The seeds of the switch go back to the demise of a similar service FedEx offered in partnership with the USPS — FedEx SmartPost — which ended in 2021 . FedEx pulled the home-delivery business formerly handled by the postal service in-house and renamed the service FedEx Ground Economy .
Cracks in the ‘ duopoly ’
The postal service has also made changes , reducing its air freight volume . In 2023 , the USPS introduced USPS Ground Advantage , a road-based service delivering packages within two to five business days .
That prepared the USPS to compete for a growing share of a package market that now includes Amazon as well as UPS , FedEx , DHL and regional companies .
FedEx and UPS have long been considered a “ duopoly ” in the US parcel market , but shippers are finding they have more options when it comes to package delivery , including Amazon and the delivery services launched by retailers such as Walmart and Target .
“ The parcel market has never been more competitive and more uncertain in the 40 years I ’ ve been involved with it ,” Jindel said . Supply still outstrips demand in the
package and parcel market , he said .
During its Investor Day March 26 , UPS claimed average daily package volume ( ADV ) for the entire market reached only 84 million in 2023 , compared with a 2021 forecast of 108 million .
“ They are all competing for those 84 million packages , but they have the combined capacity to handle 120 million packages a day ,” Jindel said . “ And 39 million of those packages are handled by the USPS .”
That 39 million includes about 20 million packages funneled into the USPS network by UPS , FedEx , Amazon and others , he said .
“ UPS and FedEx are both operating at about 90 % of their capacity ,” said Jindel . “ Most of the excess capacity is at the postal service . The USPS will continue to look to expand their share of the market , and that will be a headwind for everyone else .”
At its Investor Day , UPS executives estimated there is a surplus of almost 12 million in ADV capacity , with about 6 million excess ADV capacity at the USPS .
“ The industry is expected to revert to equilibrium as the market grows and we optimize capacity ,” Matthew Guffey , chief commercial and strategy officer , said at the event .
“ Optimizing ” in this case means consolidation . In 2023 , UPS closed 30 sortation centers , Guffey said , and the company expects to close 40 more this year .
Journal of Commerce Analyst Cathy Morrow Roberson contributed to this report .
email : bill . cassidy @ spglobal . com end of March were up more than 22 % compared with the start of the month , while Shanghai – North Europe rates of $ 4.09 rose 3 %, according to the Baltic Air Index .
Rising sea-air demand
On top of the boom in e-commerce is a move from sea to air by cargo owners with urgent shipments , which is boosting rates and driving up demand for space out of Vietnam , Thailand , Sri Lanka and Dubai .
According to air cargo analyst WorldACD , Asia – Europe sea-air hubs such as Dubai , Colombo and Bangkok have experienced exceptionally high air cargo demand to Europe since the start of this year .
Dubai – Europe tonnage was up 162 % in the last half of March compared with the level reached this time last year , while Bangkok – Europe volume was up 46 %. Colombo – Europe tonnages rose 22 % compared with the same two weeks last year . Air freight is often measured in one- or two-week blocks because of fast transit times .
Dimerco noted that in South China , e-commerce customers were even resorting to charter flights amid a surge in volume of electronic products , while in North China , Temu , Shien and TikTok were buying up much of the available space . South Korean carrier Asiana Airlines has responded to the demand surge by reinstating four freighter flights per week after canceling two in February .
Backlogs of cargo were developing in Vietnam ’ s export hubs of Hanoi and Ho Chi Minh City , with Dimerco noting that most flights from the country relied on intra-Asian hubs for transit as there were limited direct connections to North America and Europe . Space out of Thailand is also in short supply as the fruit season begins .
email : greg . knowler @ spglobal . com
Air freight volumes rose 11 % for the third straight month in March amid strong e-commerce demand . Jaromir Chalabala / Shutterstock . com www . joc . com April 22 , 2024 | Journal of Commerce 29