Flight cuts add strain to supply chain as US shutdown lingers

Several airports with major package distribution centres are on the list of airports that will reduce capacity in the wake of the US Federal Aviation Administration’s announcement of a 10 per cent reduction in flight capacity across 40 major US airports.

FedEx has hubs at the airports in Indianapolis and Memphis, Tennessee. UPS’ biggest hub, Worldport, is in Louisville, Kentucky, the site of last week’s deadly cargo plane crash.

Meanwhile, UPS and FedEx said late Friday they are grounding their fleets of McDonnell Douglas MD-11 planes “out of an abundance of caution” following the Tuesday crash, which killed 14 people, including the three pilots on the MD-11 headed for Honolulu.

MD-11 aircrafts make up about nine percent of the UPS fleet and four per cent 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 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 per cent 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 per cent of global trade by value but only about one per cent 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 by 10 per cent between 6 a.m. and 10 p.m. local time at each airport. 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.

Meanwhile, Mike Short, president of Global Forwarding at global freight forwarder C.H. Robinson, said his company is working with customers on contingency plans for the flight reductions if needed.

“While the FAA’s 10 per cent reduction in intra-US flights will create some ripple effects in transportation, the impact on air freight overall is expected to be limited,” he said. “Because most US 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.

Eytan Buchman, chief marketing officer for cargo booking platform Freightos, said fewer flights will put a strain on the domestic cargo-moving ecosystem, but added that the supply chain has become more nimble in recent years.

“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,” said Buchman. “I’d expect carriers to prioritise 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.”

AP