UPS to add 50 planes to air fleet by 2022

Dive Brief:

UPS plans to add 50 new, converted and leased 747-8s and 767s to its fleet by 2022, the company announced citing growth in Next Day Air volume. The carrier said it is seeking to capitalize on growing e-commerce, healthcare and small business service demand and increase its market share through the investment.
To support its growing fleet, UPS also announced plans for a $750 million expansion and infrastructure upgrade to its Worldport campus in Louisville, Kentucky over the next 15 years, including a new $220 million hangar to house the largest planes in the fleet.
The carrier's fleet expansion increases competition for freight volumes with Amazon, which added 15 planes over the summer and plans to have 70 planes in its portfolio by 2021. FedEx plans to cut excess air cargo capacity, citing "soft demand" and plans to retire 30 planes over the next fiscal year.

Dive Insight:

Contrary to FedEx's strategy, UPS has invested in the growth of its freight network in the air and on the ground this year, with a particular eye toward leveraging next day and international delivery services. Despite a soft outlook for air cargo, and FedEx's demand woes, UPS is focused on market growth.

July was the ninth consecutive month in which growth in air freight demand declined, according to the latest numbers from International Air Transport Association. Trade tensions have been especially hard on air freight demand, experts say.

Last month, the carrier announced it is converting four U.S. airfreight hubs in Chicago, New York City, Dallas Fort Worth and Los Angeles into foreign trade zones (FTZs) to allow shippers to delay paying tariffs on imported cargo. This could result in significant savings opportunities for firms affected by the U.S.-China trade war and the impending EU tariffs. It is also a strategic business opportunity for UPS as trade has negatively affected air cargo volumes this year.

The decision came after UPS acquired Zone Solutions, an FTZ service provider, in 2017. At the time, President of UPS Global Brokerage and Customs, Jeff McCorstin, said the decisions would enable the carrier to better respond to the increasingly global needs of its customers.

The investments UPS plans to make in its Louisville Worldport campus will support this domestic and international service growth, UPS Airlines President Brendan Canavan said in the press release, and enable the carrier's ambition to expand into "strategic markets" by enhancing its ability to offer next day deliveries to more customers moving into peak season and beyond.