The industry is suffering through shrinking cargo volumes caused by the worst global recession seen since the Great Depression. Retiring the freighters may prove crucial in the new beginning for Delta but the event signals the end of an era for the U.S. air cargo industry.

Neel Shah, vice-president for Delta Cargo, explained that from an operational perspective, the 747-200 fleet was reaching an end to its viable, economic life. The reduction of freighter service will commence in June with the termination of overnight service to Tokyo and Shanghai. Service from Tokyo, Osaka and Shanghai to Anchorage continuing to Los Angeles, Chicago and Atlanta will continue until the end of the year.

The Delta announcement came amid a first quarter $794 million net loss with its cargo revenue dropping 44 percent in the period to $185 million. There was no escaping the bloodbath as the U.S. Air Transport Association reported a 21.2 percent drop in overall cargo traffic for February 2009 compared to the same month last year. Traffic on Asia routes declined 25.7 percent and overall international traffic for U.S. reporting carriers dropped 23.6 percent for the month.

Since the Northwest freighters focused on the trans-Pacific market, the carrier suffered from decreased demand out of Asia. Japanese exports, once attributable to a significant portion of freighter volume now have softened to a 30 percent year over year reduction. The carrier lost a significant customer when DHL opted for another way to move its transpacific shipments. Forwarders, once clamoring for lift and guaranteeing block space allocations, are no longer doing so as their shippers have decreased volumes to and from the U.S.

Many had questioned the viability of the Northwest freighter operation even during more prosperous times. The 747-200 aircraft operational cost is 25 percent higher than newer versions and the fleet’s age demanded more expensive and rigorous maintenance. Airports served by the jets are also beginning to discourage the use of older planes in favor of quieter, more efficient aircraft.

Perhaps the decision to ground the fleet was actually made a few years ago without notice and we simply ignored the obvious signs. In a business requiring constant investment, Northwest chose not to purchase newer technology planes as competing carriers including Korean, Air France and Cathay Pacific readied for an uncertain future.
After all, freighter operations provided by passenger carriers have seen little success in America since American, United and TWA ceased domestic all cargo operations over twenty five years ago.

The past few years have seen the death of several freighter carriers operating in the U.S. including Emery, Kitty Hawk and most recently DHL. United, in a brief resurgence, tried again a few years ago only to quickly discontinue operations when expenses ruled out any profitability. As the economy softened, their collective absence has barely been noticed as others such as BAX Global moved in to fill the void.

The loss of the Northwest-Delta freighters, while seemingly insignificant today may prove crucial tomorrow as shipper demand will inevitably return amid a global economy recovery and regulatory uncertainty.

In addition to the expected economic upswing, the freighters may be missed for their front-loading capacity enabling odd size shipment accommodation not available with all freighter aircraft types.

Finally, as U.S. screening requirements approach 100 percent, access to passenger bellies may become more difficult for shippers requiring the use of freighter only aircraft to fly cargo. Time will tell if this cost-saving move will achieve the financial goals, without jeopardizing the ability to meet future demand.

- Brandon Fried, Executive Director, AFA