E-Commerce traffic boosts US domestic air express outlook through 2026

As we head into the last quarter of 2021, we are in the process of updating our annual air express market outlook , which provides an in-depth look into the historical performance and outlook for the world's major express companies — including DHL, FedEx, SF Express and UPS — as well as regionally operating companies such as Aramex, Blue Dart, Toll and Estafeta, among others. The report is set for release in late October or early November and will include a forecast of Domestic U.S., international and intra-European express volumes. The U.S. represents the world's largest domestic air express market and is expected to hit two billion shipments this year. We define air express as the market for overnight and deferred shipments, excluding ground operations. The combined ground operations for FedEx and UPS move more than four times the amount of shipments moved by air. We also include UPS express mail operations, but since the departure of DHL from the U.S. market in 2008, the market is essentially a duopoly between FedEx and UPS. We do not include Amazon's in-house operations as it is essentially an intra-company fulfilment network. Measured in flights, Amazon’s air network is one-third the size of UPS and one-fifth the size of FedEx. FedEx and UPS together account for 50% to 55% of domestic revenue freight ton miles, although this share has decreased primarily as a result of Amazon's dedicated network, which will have around 90 aircraft operating in North America by the end of the year. The figure below provides an overview of our most recent air express shipment traffic history as well as a forecast through 2026. The U.S. air express market has gone through a number of phases. The U.S. domestic air express market hardly showed any growth until 2013. Much of the volume that DHL left over after its departure literally disappeared or began moving in-ground networks. Growth peaked between 2013 and 2018 to an average of 3.4% per year, as the economy was doing well. The air express market went into overdrive after 2018 thanks to rapid growth in e-commerce shipments requiring two-day and overnight delivery. US Domestic Air Express Shipment History and Forecast 2003 - 2026

While e-commerce traffic had increased as a share of total shipment volumes for years, 2020 provided an additional boost — business-to-business traffic dropped and business-to-consumer traffic surged as large parts of the fixed retail business was closed. Traffic this year has remained strong but business-to-business traffic has grown to pre-crisis levels.

In our forecast, prepared in late September, we expect the market to grow by just under 10% this year and then moderate somewhat to an average of 5.1% per year for the next five years. Excluding the effect of online shopping moving through express networks, growth would be closer to 3% per year. Readers will note FedEx recently expressed its expectation that the U.S. domestic package market would grow by 10% per year through 2026. Our own analysis points to lower growth rates, at least for the air express market. Most of the growth in the package market has been and is likely to continue to be seen in ground, not air, networks. Witness China, where a few years ago SF Express was moving 18% of its traffic through its air network. Today that figure is closer to 10%. Air Express networks are too yield hungry for business-to-consumer e-commerce and densification of distribution center networks will see volumes increase more in last mile than longer haul networks.

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Express growth remains strong in 2021

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