US cargo carrier Kitty Hawk has shut down, citing weak demand in the domestic cargo market. The Dallas-based cargo carrier, which ceased operations at the end of October shortly after its second trip to bankruptcy court since 2000, operated an overnight domestic network with a fleet of about 15 Boeing 737 and 727 freighters. Kitty Hawk says demand for its services, which catered to domestic freight forwarders, had fallen by more than 25% over the last year.
AirTran Airways will also cease belly cargo operations from the beginning of December, saying cargo revenues were not sufficient to cover the investment required to keep the business going. Overall US domestic cargo traffic is at the same level as 2000. "Domestically, it's economy-related, and the housing and credit crunches have already led to slowing retail sales," says Bob Gallo, managing director of air cargo logistics firm MergeGlobal.
As consumer behaviour has begun to react to rising energy costs, the domestic outlook is troublesome for the next few months at least. For instance, at DHL Express, executives have given up on their plan to see it achieve profitability by 2009, blaming overall economic weakness.
FedEx and UPS have also seen slower domestic traffic growth. Gallo says the international picture is brighter but a few carriers are also having international problems. For example, Northwest Airlines reported a 7.3% drop in cargo yields for the third quarter and a 17% or $42 million drop in cargo revenues.
Northwest executive vice president for strategy and international Neal Cohen says: It's clearly a piece of our business that has underperformed and frankly a piece of the business that we need to focus the energy on delivering a better product."
Meanwhile, US cargo operator ABX Air has responded to the slow market conditions by buying another US operator, Cargo Holdings International (CHI), for $330 million. CHI, which operates 32 freighters, will become a wholly-owned subsidiaries of ABX Holdings.
Source: Airline Business
