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Flight cuts from US government shutdown strain a supply chain that's already stretched thin
As the FAA implements a 10% cut in flight capacity, air cargo is feeling the squeeze, particularly affecting key hubs for FedEx and UPS. The recent grounding of MD-11 aircraft intensifies these challenges. With the holiday rush right around the corner, experts predict possible shipping delays for online orders. In response, companies are revamping their operational plans to adapt.
The Federal Aviation Administration's announcement of a 10% reduction in flight capacity across 40 major U.S. airports could put a strain on the air cargo as the peak holiday season approaches.
Several airports with major package distribution centers are on the list of airports that will reduce capacity - FedEx has hubs at the airports in Indianapolis and Memphis, Tennessee. UPS' biggest hub, Worldport, is in Louisville, Kentucky, the site of this week's deadly cargo plane crash.
Meanwhile, UPS and FedEx said late Friday they're grounding their fleets of McDonnell Douglas MD-11 planes "out of an abundance of caution" following a deadly crash at the UPS global aviation hub in Kentucky.
The crash Tuesday at UPS Worldport in Louisville killed 14 people, including the three pilots on the MD-11 that was headed for Honolulu.
MD-11 aircrafts make up about 9% of of the UPS fleet and 4% of the FedEx fleet, the companies said.
Logistics companies say consumers shouldn't expect delays on their packages due to the reduction in flights - for now. But they put a strain on the supply chain ahead of the all-important holiday shopping season.
Patrick Penfield, a supply-chain management professor at Syracuse University, called the 10% reduction in flight capacity and the grounding of the MD-11 planes a "one-two punch" for cargo carriers and shoppers.
"This is such a stressful time for both companies, and you've got this surge in demand and then you just lost some of your capacity," Penfield said. "So they're already scrambling as it is during the holiday season, and they're going to scramble even more."
Penfield thinks that it could take weeks for UPS and FedEx to get their MD-11 fleets back in service after a thorough review. He estimated that during the mid-December time frame, when shipping is at its peak, shoppers could see delays in deliveries by a day or two. He recommends ordering holiday gifts early.
As for the 10% reduction in flight capacity, most air freight is international. The reduction in flights so far is only on domestic air travel, not global flights. Airlines transport about 35% of global trade by value but only about 1% of world trade by volume, according to the trade group International Air Transport Association.
The FAA order did not address cargo flights specifically, but directed air carriers at 40 airports to reduce their total daily scheduled domestic operations between 6 a.m. and 10 p.m. local time at each airport by 10%. Air freight is carried not only on cargo planes, but also in the bellies of passenger aircraft.
Shipping companies said they're adjusting plans due to the cutbacks.
Both FedEx and UPS said many of their flights take place at night, outside the restricted window. Both also said they had contingency plans to protect shipments of critical items like pharmaceuticals, medical devices and essential manufacturing goods.
FedEx says that it "made the necessary operational modifications to meet the requirements so that shipments continue to move safely and swiftly through our network," following the FAA order.
UPS said it has built a network "to be safe and resilient and we're confident we can keep delivering the reliable service our customers count on."
Separately, UPS noted that contingency plans are in place to ensure reliable service after the grounding of the MD-11s.
Western Global Airlines is the only other U.S. cargo airline that flies MD-11s, according to aviation analytics firm Cirium. The airline has 16 MD-11s in its fleet but 12 of them have already been put in storage. The company did not immediately respond to an email seeking comment outside of business hours on Saturday.
Meanwhile, Mike Short, president of Global Forwarding at global freight forwarder C.H. Robinson, said it was working with customers on contingency plans for the flight reductions if needed.
"While the FAA's 10% reduction in intra-U.S. flights will create some ripple effects in transportation, the impact on air freight overall is expected to be limited," he said. "Because most U.S. domestic air freight moves in the bellies of passenger aircraft versus cargo planes, reductions in commercial routes will tighten air capacity in those markets. So the domestic air market could see temporary constraints and longer transit times."
He said trucks and expedited ground networks can absorb some displaced volume, but "not without challenges given that short-term surges drive spot rate volatility and equipment repositioning."
Smaller, high-value goods like smartphones, chips, videogame consoles and electronic toys are more likely to be transported by air using both cargo and passenger planes.
Domestic overnight parcels and letters are also carried by air cargo, but trucks can pick of some of the slack if needed so delays on those are less likely, said Ed Anderson, a professor of supply chain and operations management for the McCombs School of Business at the University of Texas.
Brandon Fried, executive director of the Airforwarders Association, which represents hundreds of air cargo companies, said flight reductions will worsen the disruption already being felt across the aviation sector as the federal government shutdown stretches on.
"Air cargo depends on every part of the aviation ecosystem working in sync," he said. "When capacity is cut and federal employees are stretched thin, the supply chain slows, and the longer this shutdown continues, the worse it will get."
Eytan Buchman, chief marketing officer for cargo booking platform Freightos, said fewer flights will put a strain on the domestic cargo-moving ecosystem.
"Typical safety valves will tighten and that may lengthen lead times and lift spot prices," he said. But the supply chain has grown more nimble in recent years so that might help, he added.
"The silver lining is that airlines have become very good at consolidating loads and adjusting fleets after five years of dramatic supply chain swings, so this won't translate to a simple one-to-one loss of capacity everywhere," he said. "I'd expect carriers to prioritize high-yield lanes, route via secondary hubs, and shift some domestic legs to other modes when it makes sense. Near term, space may feel a bit tighter and schedules less predictable on some connections."
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Source: EconomicTimes
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