Shipping impact from plane grounding after UPS crash seen as ‘minimal’
Grounding of MD-11 aircraft following fatal crash POWER SUPPLY A move earlier this month could boost air cargo rates during the peak holiday shipping season as some capacity leaves the market, but analysts don’t expect a major impact.
The Federal Aviation Administration banned flights of MD-11 planes on Nov. 8, less than a week after a Honolulu-bound UPS plane crashed just after takeoff from Louisville Muhammad Ali International Airport in Kentucky, killing three crew members and 11 others on the ground.
TAC Index, which tracks air freight rates around the world, said earlier this week that the Baltic Air Freight Index was up more than 4% in the week ending Nov. 17, compared with a 2.4% increase last week compared to the same period last year.
“While it is normal for rates to increase ahead of the Thanksgiving holiday in the U.S. and Christmas in Europe, sources have suggested that an additional increase was given following the fatal crash in Louisville earlier this month, when all MD-11 freighters grounded,” a note said. The statement was included.
UPS and Fedex Each said they were grounding planes that make up 9% and 5% of their fleets, respectively, according to a Bank of America note.
FedEx said it is working with the FAA to ensure the company’s 28 MD-11 jets comply with standards.
“We are flexing our integrated air-ground network in the most efficient way possible to deliver exceptional service, which includes the use of contingency options such as utilizing service rescue backup aircraft on the network, utilizing ground service where possible, and strategically leveraging limited commercial line transportation and charter opportunities,” the company said in a statement to CNBC. he said.
POWER SUPPLY He said there were contingency plans in place to continue providing service after the accident.
“We made this decision proactively upon the recommendation of the aircraft manufacturer,” UPS said on Nov. 7. “Nothing is more important to us than the safety of our employees and the communities we serve.”
UPS told CNBC on Friday that the company did not impose any additional peak season surcharges as a result of the grounding of 26 MD-11s. Instead, the company said it is procuring additional aircraft for its fleet, similar to the leased aircraft it purchases during peak season, and combining flight routes to maximize air capacity.
“We have reconfigured our ground network by adding additional capacity to move more packages,” a UPS spokesperson told CNBC. “Our contingency plans give us the assurance that we will continue to effectively increase volumes and deliver to our customers now and throughout the peak season.”
In the company’s last earnings call before the fatal crash, CEO Carol Tomé said initial forecasts from its top 100 customers signaled a “significant increase in volume” during the peak season.
Still, as UPS begins to phase out its operations AmazonPreviously its largest customer, Tomé added that the decrease in Amazon volumes means that overall peak season average daily volume in the US will decrease from the previous year.
Stifel predicted in a note Wednesday that the operational and financial impact of the grounding would be “minimal.”
“More importantly, instead of the entire MD-11 fleet waiting for a single decision, the planes will fly back once they are approved individually, and the FAA can effectively assign outside parties to perform inspections that, according to management, have already begun,” Stifel analysts wrote. he wrote.
Bank of America said in a note Monday that air cargo volumes in October increased 4% year-over-year, and cargo supply increased an average of 3% year-over-year in the past four weeks. Analysts said any potential disruption due to the disembarkation was not immediately apparent, but overall a quieter holiday shipping season was expected compared to the past two years.
The National Transportation Safety Board, which is leading the investigation into the UPS crash, said the jet’s left engine separated from the wing during takeoff before the plane crashed into a row of businesses just outside the airport.
In its preliminary report this launched On Thursday, the NTSB said it found evidence of fatigue cracks in the jet as well as areas of surge failure.
Although UPS is headquartered in Atlanta, the Louisville airport is home to the largest global package handling facility.
The crash occurred during the country’s longest-running government shutdown, which led to disruptions in air travel due to a shortage of air traffic controllers. It also limited some cargo flights. Both commercial and private shipping companies transport packages and other goods.
During the shutdown, Treasury Secretary Scott Bessent told ABC News that the shipping slowdown could lead to shortages during the holiday season. The shutdown officially ended last week and disruptions to air travel have largely disappeared.
Correction: Highlights of this story have been updated to reflect the number of people killed in the UPS freighter crash.
