Lightweight Economy Squeezes Cargo Airlines

FedEx and UPS post drops in revenue per package as products grow lighter.

FedEx Corp. and competing cargo airlines are finding their yields squeezed in an economy that Alan Greenspan once observed is putting good things in ever-smaller packages.

Both FedEx and United Parcel Service Inc. have posted drops in revenue per package this year. With clients used to paying by weight, softer demand from a weakening global economy has hampered the carriers’ ability to change the way they set rates.

‘Big Winners’

Shippers and consumers are the “big winners” of the trend, said Aaron Gellman, a professor of management and strategy at Northwestern University’s Kellogg School of Management. Though cargo companies are likely to respond with changes to the way they calculate rates, those may be years away, he said.

Fundamental Change

Shipping has faced a fundamental change in the past few months, with exports and trade declining faster than global gross domestic product, FedEx Chief Executive Officer Fred Smith said on an earnings call at the time. The reverse was true for the past 25 years, excepting meltdowns in 2000-2001 and 2008-2009, he said.

‘How Small?’

The demand for the latest high-tech products like Apple’s iPhone 5 illustrates that, said Donald Broughton, an Avondale Partners LLC analyst based in St. Louis.

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