AF-KLM says third-quarter cargo gains are evidence of ‘cargo turnaround’

Air France-KLM’s self-described “cargo turnaround” seems to have finally pushed the carrier’s third-quarter results back into the black, with total cargo revenues up 1.2 percent to €493 million. Across a longer timeline however, year-to-date cargo statistics at the carrier still indicate an airline that has struggled to match the recovery rates of its regional counterparts, such as Lufthansa.

At AF-KLM, nine-month total revenues are still down 1.3 percent to €1.5 billion, and while most other carriers have managed to turn rising demand for airfreight into improving balance sheets, AF-KLM has cut capacity, pursued low-volume/high-value cargo and other combinations thereof.

For context, cargo revenues fell especially hard in 2016, down 14.7 percent to €2.06 billion, as the storied combined cargo carrier struggled to keep up in a competitive marketplace. AF-KLM blamed “weak global trade and structural industry overcapacity, and to maximize its contribution to the group.”

AF-KLM now says that the key to keeping momentum on the cargo side is offering customers a simplified product portfolio and multiple digitalization solutions, such as “Quote to Book” and its customer portal, “My Cargo.”

In line with what AF-KLM called “the strategic repositioning of the cargo business,” the group has implemented a new business model aimed at optimizing the belly and combination capacity of the passenger aircraft and reducing the full freighter fleet. That has meant shedding freighters, with third-quarter available tonne kilometers falling a further 0.3 percent as the carrier pushes even more volume below passengers.

By the end of 2017, AF-KLM expects bellies of passenger aircraft to carry more than 85 percent of total cargo capacity. The full freighter fleet, as of the third quarter consists of two B777 and four B747 freighters which AFKLM said meant a 24 percent reduction full freighters capacity in 2016, and a more than 50 percent reduction since 2013.

AFKLM does not provide detailed reporting on cargo finances. Following years of heavy airfreight losses, Air France-KLM’s cargo sector said in early 2017 that it would not be reporting within its overall financial reporting.

The accounting decision took the struggling cargo arm out of the public eye. “It has been decided to change the cargo reporting as per fiscal year 2017 based on contribution margin and to include it in the passenger network results. This change will be effective as from the Q1 2017 results presentation,” the group said.