UPS's Revenue Slides 34% to $64.2B as FAA Grounds 9% of MD-11 Fleet
UPS's daily package volume fell from 25.25M in 2021 to 19.97M in 2025, cutting revenue from $97.3B to $64.2B and margins from 13.5% to 6.8%. FAA's grounding of 9% of UPS's MD-11 fleet will strain peak-season operations and compress margins ahead of the Jan. 27 Q4 earnings report.
1. Ongoing Revenue and Volume Declines
United Parcel Service reported a continuation of softening demand through the first nine months of 2025, with average daily package volume falling to 19.97 million from 22.42 million in full-year 2024 and 25.25 million in 2021. Total revenue for the nine-month period reached $64.18 billion, down from $91.07 billion in 2024 and $97.29 billion in 2021, reflecting a mix shift away from lower-margin orders. The company compensated partially by raising average revenue per piece to $14.46 from $13.60 a year earlier, but volume declines drove a 3 percent year-over-year revenue decrease in 2025 consensus forecasts.
2. Fleet Grounding and Operational Impact
In November 2025, the Federal Aviation Administration grounded all MD-11 freighters—approximately 9 percent of UPS’s air fleet—following a fatal crash in Louisville. The grounding occurred during peak holiday season and forced UPS to reroute shipments onto alternative aircraft types, trucks and partner carriers. Management estimates this network disruption will depress fourth-quarter operating margins by 50–70 basis points, with full impact to be quantified in the January 27, 2026 earnings report.
3. Cost-Cutting Initiatives and Margin Trends
To offset volume pressures, UPS implemented $3.5 billion in cost reductions in 2025, including workforce trims, automation investments and site consolidations. Despite these actions, adjusted operating margins contracted to 6.8 percent in the first nine months of 2025 from 9.8 percent in 2024 and 13.5 percent in 2021. Higher labor and pension obligations secured in the new Teamsters contract, alongside pension expense and impairment charges, accounted for nearly 120 basis points of margin erosion over the period.
4. Outlook for 2026 and Investor Considerations
Analysts project flat revenue in 2026, building on stabilization in volumes as U.S. package market overcapacity abates and the MD-11 fleet returns to service. Consensus expects a 7 percent rebound in adjusted earnings per share, driven by margin improvement initiatives and a growing mix of healthcare and small-and-medium-business deliveries. Investors will monitor the January earnings release for clarity on the timing of fleet reinstatement and the effectiveness of margin restoration strategies.