A major strategic change at IAG Cargo

Eighteen years ago, when British Airways needed main-deck freight capacity, it took the then-unusual step of leasing a freighter on an ACMI basis, rather than buying or dry-leasing its own freighter. The provider of the freighter was a relatively young US-based 747 freighter operator, Atlas Air.

There have been big changes at both companies since then. British Airways is now part of International Airlines Group, and its cargo activities have been merged with those of Iberia under the IAG Cargo brand. For its part, Atlas Air survived the death of its founder and a restructuring under Chapter 11 protection, and morphed into Atlas Air Worldwide Holdings, which now offers not just ACMI freighter leasing, but also scheduled and charter freight service, passenger charter service, and dry leasing of both freighter and passenger aircraft. It has a fleet of almost fifty aircraft of its own (ranging in size from 737 to 747-8, and including both passenger and freighter aircraft), and also operates fourteen freighter and passenger aircraft for customers on a CMI basis.

Through all those changes, the relationship between British Airways and Atlas survived, with BA World Cargo ACMI-leasing three 747-400Fs from Atlas’ UK subsidiary Global Supply Systems (GSS), and then switching to 747-8Fs – the first Atlas customer to do so. But as of 1 May 2014, that relationship will come to an end, as IAG cargo transitions away from main-deck freight operations and focuses primarily on using the belly space in the British Airways and Iberia passenger fleets.

Commenting on the decision, IAG Cargo CEO Steve Gunning said: “We have reviewed our long haul freighter program following the merger of British Airways and Iberia freight businesses to create IAG Cargo. The review took account of the growing cargo capacity available to us from our passenger fleet as well as the outlook for the air freight industry overall and we have made the strategic decision to significantly revise our longhaul freighter program.”

Freighters will not disappear entirely from IAG Cargo’s operations however, as IAG has signed an agreement with Qatar Airways under which Qatar will operate five weekly 777F frequencies between Hong Kong and London on IAG’s behalf. Regarding the rest of its network, IAG Cargo said: “Other destinations previously served by our longhaul freighters will now be operated exclusively by our passenger aircraft. We will remove services from a small number of longhaul freighter-only destinations that are not currently served by our passenger network.”

Atlas Air Worldwide holdings said that effective with the termination of the agreement, “the three 747-8Fs will be redelivered to the company by GSS. Through GSS, the company also will receive contractual early termination fees from British Airways.” Looking ahead, Atlas said it would pursue new ACMI placement opportunities for the three 747-8Fs.