A tale of two cargo carriers

Air France-KLM and International Airlines Group (parent of British Airways and Iberia) operate their cargo businesses in the same market. But in 2012, they achieved dramatically different results.

As Air France-KLM’s cargo traffic declined over the last two years, the carrier said its focus was on profitability, not market share. However, its 2012 financial and operating data show that far from achieving profitability, AF-KLM’s cargo division reported a 2012 operating loss of €220 million – substantially worse than the €60 million loss in 2011. Cargo revenue was down 2.7% to €3.06 billion, traffic declined 6.3% to 10.6 billion RTKs, and while cargo yield was up 3.0% on a reported basis, it was down 0.9% with favorable exchange rate effects excluded. Air France-KLM says it has undertaken several initiatives that it hopes will cut its cargo operating loss by about half. We analyzed these in an earlier post, but the takeaway from the company’s comments on the subject is that the problem lies not with Air France-KLM, but with the air freight business – that the worldwide economic circumstances are such that it is not really possible for any carrier, particularly no European carrier, to operate profitably.

But is that really the case? Not according to IAG Cargo, the cargo arm of International Airlines Group. In 2012 IAG cargo faced the same cargo market circumstances as Air France-KLM, and in fact did see its traffic fall by 1.2%. But despite the tough market, and despite the well-publicized problems at Iberia, it nonetheless reported cargo revenue up 2.3%, and cargo yield up 3.6%. Following publication of IAG’s 2012 results, our European editor Alex Lennane spoke with IAG Cargo boss Steve Gunning, who said “We had a solid set of results in a difficult market.” He placed much credit for those results on his company’s approach to the business. ““Being a separate division has made a lot of difference, increasingly so. There is a different feel to the business. We have a better share of the voice and more autonomy than we did in the past. We are a young, new company.” You can read the full discussion at Alex’s Loadstar site here but the IAG Cargo story is one of optimism, of the belief that even in tough times it is possible to prosper.

Air France-KLM, on the other hand, almost sounds like it has given up.