Amerijet lays off workers as freight recession drags on

July 1, 2023

Business

Amerijet lays off workers as freight recession drags on

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Amerijet International on Wednesday terminated more than a dozen employees because of sharply lower revenues associated with a prolonged slump in global air cargo demand that is beginning to materially hurt more freighter operators.

The move comes on the heels of the company’s pilots on Friday ratifying a new three-year contract that raises their pay up to 45%, increasing expenses for the Miami-based all-cargo carrier at a time of shrinking sales.

“Over the past several months, our company, like many others in the air cargo business, has faced several challenges and market shifts that have impacted our financial stability. Despite our best efforts to mitigate these challenges with cost reductions and avoidances across the board, it has become necessary for us to take action to ensure the long-term sustainability of our organization,” said CEO Tim Strauss in a memo to staff announcing the reduction in force that was shared with FreightWaves.

“We have had to make some tough choices to align our resources with our strategic goals and create a leaner, more agile organization for the future. … We all recognize that our economy is severely impaired currently, but when the news hits close to home, it always comes as a shock,” said Strauss, who expressed gratitude for the contributions of those let go.

Amerijet terminated 15 workers at its headquarters, spokeswoman Christine Richard said in an email response. An industry source familiar with the company said the layoffs were in several departments where compensation is significantly less than that for pilots. Workers will receive several weeks’ severance pay, according to the person.

The job eliminations are the latest cost measure at Amerijet. Earlier this year, the airline shut down its small freight forwarding division that employed 27 people, and it outsourced accounting functions to Trinidad and Tobago.

Richard said Amerijet has reduced its flight schedule to Aruba and Brussels because of the downturn in business.

Amerijet has 24 cargo jets, including planes operated for DHL and Maersk Air Cargo, under its operating certificate. One of DHL’s 767-200s has not flown since April 5, according to flight-data provider Flightradar24.

Tim Millar, the chairman of the Amerijet local division of the Air Line Pilots Association, said the new labor contract was crucial to slow attrition because the pilots “were at the bottom of the scale” compared to competitors.

The company is still actively hiring pilots, with a class of 24 undergoing training now and another class of at least a dozen pilots starting in a couple of weeks, he said.

Amerijet has more than 270 pilots, according to the union.

Airfreight sector feels pressure

The rate of decline in air cargo volumes has slowed since the start of the year, but airlines are coping with 16-consecutive months of negative growth. Volumes are down 1% to 4% year over year, according to various market watchers. Last year cargo traffic shrank 8% from the extraordinary high in 2021, when shippers sought out airlift to get around pandemic-related supply chain disruptions. The downturn in volumes reached about 10% in the December-January period.

Cargo jet utilization fell 5.3% year over year in April and May, according to research from BMO Capital Markets.

The International Air Transport Association (IATA) recently projected air cargo demand will shrink 3.8% for the full year and airline cargo revenues will contract by a third to $142.3 billion year over year as a surge in passenger flights ushers in more belly space and global trade slows. Market dynamics mean yields will come in nearly 30% below last year’s average, the trade association said.

Cargo volumes are 5.3% below 2019 levels.

The freight recession is forcing cargo airlines of all sizes to downsize their operations.

FedEx Express last week said it plans to park 29 more aircraft during the fiscal year that runs through May 31, 2024, in response to falling demand and a corporate campaign to take out billions of dollars in structural costs. It is also consolidating maintenance facilities, routes and crew bases. The delivery company’s flight activity fell 12% in the previous quarter.

Western Global Airlines, also based in Florida, is also being pinched by poor sales, high maintenance costs for its aging fleet, pilot attrition and a heavy debt load. The company appears to be winding down flight activity ahead of a possible bankruptcy filing.

Cargojet, a Canadian carrier, recently postponed plans to convert large Boeing 777 passenger jets into freighters and is selling them off instead to focus on debt reduction and improving returns.

Click here for more FreightWaves stories by Eric Kulisch.