Cargo Chat: IAG Cargo’s Shepherd on LHR investments, capacity slashes and changing demand patterns

This year has been another turbulent one for cargo stakeholders as they grapple with challenges caused by airspace sanctions, surging summer passenger travel and corresponding capacity caps at major European airports, as well as the need for infrastructure investments as airfreight demand continues its climb. U.K-based IAG Cargo is no stranger to cargo growth and development plans, with revenues at its airline subsidiaries increasing 9.6% year over year to 843 million euros (US $835 million) in Q2, according to its July earnings report. With the return of passenger travel, IAG Cargo has been looking to expand its network and recently increased connectivity between its Madrid (MAD) hub and the U.S ., with additional flights to Johannesburg (JNB) and Dubai (AUH) as well. The company also planned recruitment drives to shore up the workforce as the industry continues to face labor constraints. IAG Cargo has also eyed digital improvements — including the adoption of Dangerous Goods AutoCheck earlier this year — enabling airlines, ground handlers and forwarders to automatically validate the shipper’s declaration of dangerous goods against IATA regulations. [caption id="attachment_96225" align="alignright" width="196"] David Shepherd, Managing Director, IAG Cargo[/caption] Air Cargo World caught up with IAG Cargo Managing Director David Shepherd to discuss the company’s new infrastructure investments at London Heathrow International Airport (LHR), capacity cap consequences on cargo and changing market demand patterns. What follows is an edited version of the conversation. Air Cargo World : LHR recently implemented capacity caps that were extended through October due to elevated passenger travel. How is IAG Cargo working through capacity challenges? David Shepherd : British Airways [recently] announced the cancellation of 10,000 more flights over the winter schedule, and that’s expecting it to be a constraint through Heathrow [LHR] over the course of the winter. The good news for us in the cargo business is that [the cap] is almost exclusively focused on the narrow-bodied operations … but the wide-bodied long-haul service is remaining intact. So, we’re flying back to nearly every single, two-destination point that we would have pre-pandemic. Places we’re not flying to just yet are our Asian routes because of COVID-19 [and] because of the horrific tragedy and humanitarian problem in Ukraine, we’re having to fly around Ukraine and that makes it very, very challenging to get to some of these places because of the airspace constraints. ACW : What is IAG Cargo’s outlook for the rest of the year and into 2023, and what are you doing to prepare for further growth? DS : We’ve remained cautiously optimistic for the remainder of the year. Beyond that, I think there are plenty of indicators in the market that there’s a cautionary note to have. The inflationary pressures that pretty much the whole globe is under are problematic and inflation is going to continue, and I think that’s going to mean that the level of disposable income that consumers have is going to be under pressure next year. There are consequences, and it’s certainly a bit of a worry for world trade, but I think the long-term future is good. ACW : Looking forward, what else can we expect from IAG Cargo? DS : One of the very exciting things we've got coming up over the next year is that we've been investing in a very large premium facility at Heathrow Airport to grow the capacity that we have there and to enable us to completely harness the fluid capacity that we have coming from the Far East, and with pallets of express business coming in. It also gives us the capability to build … passive-temperature pharmaceuticals in our operation as well. So, in dollar terms, that's … about a $120 million investment that we've made, and it's really quite exciting for us, and we hope to open at some stage in the next nine to 12 months. The building is built, you’ll to be glad to hear, at this point in time. We're just in the process of finally finalizing the material handling system.

Cargo Chat: IAG Cargo’s Shepherd on LHR investments, capacity slashes and changing demand patterns

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