From the Cockpit with Baldvin Hermannsson

As a carrier with exposure to both cargo and passenger markets prior to the COVID-19 pandemic, Air Atlanta Icelandic has seen its business model undergo rapid transformation in the nearly one year since COVID hit. The carrier, which previously derived upward of 70% of its revenue from 747-400 passenger operations and was weeks away from adding the A330-300 and 777-300ER platforms, has responded to current market realities with a pivot to an all-cargo operation based around a fleet of 747 freighters. Cargo Facts recently caught up with Baldvin Hermannsson, CEO of the Iceland-based carrier, to look at what’s ahead for the company, including growth opportunities for the 747-freighter platform. [caption id="attachment_415512" align="alignright" width="560"] Air Atlanta Icelandic flies two 747-400Fs for Astral Aviation and Network Aviation Group. (Photo/Network Aviation Group)[/caption] Cargo Facts: How has the Air Atlanta Icelandic fleet evolved to reflect the new market realities? Baldvin Hermannsson: We added two 747-400 freighters to the fleet in 2019, and last year we successfully managed to add two more freighters into the mix, so the timing was good. Not only did we manage to add these airplanes, but we achieved absolute rapid utilization of all the freighters on top. So from a very gloomy outlook last March, we can say that we were very pleased with the way we managed to turn things around and how we closed the year. CF: How has your customer mix changed as these additional freighters have been brought into the fleet? BH: We have three main customers that we’re flying freight for: Network Aviation Group, Chapman Freeborn/Magma and Saudia Cargo. That is what comprises our cargo operations. If you look at 2020 compared to 2019, we have managed to increase the number of cargo block hours that we flew by about 95%, which is a considerable change from having always relied on having 65% to 70% of our revenue coming from passenger operations. CF: As passenger aviation begins to recover, how does this affect your long-term thinking about the fleet and your operation? The biggest hindrance to further growth in the cargo segment is simply the availability of suitable aircraft. It’s slim pickings at the moment. If you're keen on adding 747 freighter capacities, there’s nothing available. We are going to be heavily focused on cargo in 2021 and into 2022. But once markets start to reemerge, the passenger operation is something that we intend to relaunch, even if not much is going to happen this year. CF: Do you expect to add some of these newer types on a CMI basis, or will it be necessary to go out and acquire your own A330s and 777-300ERs to enter the platform? BH: We predominately own the fleet that we operate, apart from one aircraft which we’re operating on a CMI basis. Looking into new types, whether we go into outright purchasing or simply dry leasing or operating CMI for others, time will tell. Even today, we have two airplanes that we operate on CMI or an ACMI basis — CMI and hybrids of ACMI is something that we know intimately well, and we’ve been doing for a number of years. So both opportunities are going to be around different models. Different airlines have different requirements. So yes, there are opportunities for both types, be it controlling the aircraft or selling out the service. CF: For how much longer will the 747 remain the dominant freighter in the Air Atlanta Icelandic fleet? BH: I’ve been a firm believer in the 747 freighter, both the production freighter and the converted 747. People have always been quick to predict its doom, but I've always been a firm believer they have a certain segment, and they have certain capabilities that no other freighter has. If you look at our passenger planes, I wouldn’t rule anything out. We’re in the unlikely scenario where we could even evaluate sending some of our 747-400s in for conversion. Our 747-400s are 2003, 2004, 2005 vintage. These are not that old and are younger than some of the 777s that are out there today. CF: What would be required to convince your team to move forward and convert some of those 747-400ERs? BH: I would say our first preference is obviously to see some of the 747 passenger planes in the segment that they used to operate in, back in the air. That is priority number one. That obviously isn’t going to happen anytime soon, but I do believe that there is a certain segment and a need for these airplanes, which we’ve served well over the years, and we intend to continue doing so for a while more. Then secondly, whether conversion makes sense for a fifteen-to-seventeen-year-old 747-400; it will come down to the economics and what your anticipation of the cargo market is going to be for the next ten years at least. Is that a leap of faith that I’m willing to take right now? I would say no, but it’s something that we are keeping an eye on and we are evaluating. CF: Are you starting to evaluate other freighter types at this point? BH: Absolutely. We’ve looked carefully at the 777-300ER conversion program, which is going to be coming out in 2023. We’ve studied that intimately. We keep an open eye on A330 opportunities, be it converted freighters or otherwise. Predominantly, we always have been a widebody operator and I don’t really foresee that changing anytime soon, so we’re not looking at A320s or 737s. That’s simply not the segment that we have been in. But other widebody variants, we keep a close eye on. This Q&A first appeared in the March issue of Cargo Facts, as part of our new From the Cockpit series. Each month, this section will feature news and insights from a key executive at a cargo airline. Cargo Facts Asia, taking place April 20-21 as a virtual experience, is the event for exploring opportunity in the Asia-Pacific region. The event continues to bring together the best, brightest, and most innovative executives in the global air cargo industry. Learn more and register at www.cargofactsasia.com .

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