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All-cargo vs combination carriers

Alex Lenanne by Alex Lenanne
July 15, 2015
in News Archives
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Unlike other Western European combination carriers, Lufthansa has maintained its commitment to freighter operation.
Unlike other Western European combination carriers, Lufthansa has maintained its commitment to freighter operation.

Europe’s combination carriers are having a miserable summer. While the difficulties at AF-KLM – which announced that it was to cut frequencies and routes and reconsider its aircraft orders while bringing forward cost-cutting plans – have been well-documented, airline sources say the market is hard for all the legacy carriers.

A spokesman for Lufthansa Cargo told Cargo Facts: “Of course it is tough, and we see overcapacities in the market that lead to a challenging situation.”

The difficulties at the major carriers don’t appear to be mirrored by the all-cargo airlines, however. As Denis Ilin, Executive President of AirBridgeCargo, said in May, the freighter operators are taking traffic left behind by the other carriers. “Unlike the overall perception of other carriers, I think we [ABC] really can keep growing. That’s not growth from the market, but from other players. We outperformed the industry last year. We picked up pieces of the market that were voluntarily given up by other carriers.”

There is also a sense that the benefits of lower fuel prices have been eaten up by passenger divisions, which often lease the belly capacity to the cargo division at a rate that doesn’t change according to fuel costs.

Oliver Evans, cargo chief at SwissWorldCargo, said: “We are in a very difficult phase. As a cargo division, we don’t get the direct benefit of lower fuel costs. But with freighters there is a direct translation to the bottom line, so some operators will have pretty healthy figures this year. However, the long-term trends show sluggish and uneven growth, while yields keep on going down. That’s not a healthy scenario for any industry and not too many people seem to be paying attention to that.”

AirBridgeCargo, however, appears to be betting on continued growth (it has averaged 11% per year over the last few years), although there have been conflicting reports on the realities of its now-famous Paris Air Show order for twenty 747-8Fs. The group told Cargo Facts that it expects deliveries of two 747-8Fs each year, for the next seven years – so only fourteen aircraft, some of which will replace older 747Fs. By 2025 it hopes to have an all-747-8F fleet, it added.

It said: “ABC’s long-term strategy comprises strengthening positions in global cargo markets and development of the niche ones.”

Meanwhile, Lufthansa Cargo has denied speculation that it may reduce its freighter numbers. With the fourteen MD-11Fs effectively paid for, it is able to use them as much or as little as it likes. And it is unlikely to reconsider its 777Fs.

A spokesman said: “We consider freighters as an integral part of our fleet. Our five 777Fs are performing extremely well, and also our MD-11s are reliable and efficient aircraft and still the backbone of our freighter fleet.”

For more on the recent performance of the European carriers, see our analysis of June 2015 results.

Tags: Air France KLM Martinair CargoAirBridgeCargo Airlinesall-cargocombination carriersEuropeLufthansaSWISS
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