UPS cut its air capacity out of Asia 10 percent during the recent third quarter amid a deep slowdown in demand, and carrier officials said Tuesday they are poised to adjust space again based on market demand.
“We have the capability of adding capacity back if there is a sudden surge closer to the holidays such as we saw in 2009,” said UPS Chief Financial Officer Kurt Kuehn. “We are keeping enough infrastructure in place to take advantage of the upside.”
Kuehn said the parcel carrier's international operation saw “single-digit declines out of Asia” during the quarter ending Sept. 30, while business in other regions remains relatively solid.
“We are seeing some firming in Asia” in October, he said. “Europe remains fairly stable and the U.S. is perhaps a little bit softer.”
Like other air cargo operators, UPS believes retailers may seek to scale shipping up rapidly closer to the holidays after holding inventories tight early in the fall. In the meantime, the company believes more capacity is likely to come out of the air freight market as other carriers respond to weaker demand.
“We’re cutting our capacity and our margins are double theirs, so there has got to be a lot of pressure on the part of our competitors to reduce capacity,” said Kuehn.