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IAG Cargo details expansion plans

By control on March 1, 2012

After a successful 2011 — highlighted by an 8.6 percent, year-over-year, revenue surge — IAG Cargo is in expansion mode, the group’s managing director Steve Gunning told Air Cargo World. The carrier’s growth strategy isn’t confined to mergers and acquisitions, however; it also involves product development, Gunning revealed.

IAG Cargo’s express product, Prioritise, for instance, saw 20 percent, year-over-year, revenue growth in 2011, Gunning said. The introduction of more premium products will enable IAG to combat yield decline amid 2012’s economic challenges, he explained.

“The demand characteristics of premium products are much more resilient than those for general freight,” Gunning explained to Air Cargo World. “And so we see them as a real way [to move] forward — not just with our express product, but also with temperature-sensitive products and things like high-valuable goods as well.”

IAG also expects to move forward with its acquisition of low-cost carrier bmi from Lufthansa, which will supplement British Airways’ regional network. Although Gunning revealed that IAG won’t receive approval for this transaction until at least March 16, he expects bmi to integrate well into the IAG brand. “In terms of IAG Cargo, bmi is predominantly moving freight on short- or narrow-bodied aircraft,” he said, “which will be a welcome expansion for our business.”

Something he’s less loquacious about, however, is IAG’s reported interest in India’s Kingfisher Airlines. Despite rumors that IAG is currently in talks to take a minority stake in the floundering carrier, Gunning squashed them.

“Although they’re part of oneworld alliance, we don’t do a great deal with Kingfisher,” he told Air Cargo World. “They have mounting funding issues, but I believe they’re working through those with the Indian government and potentially outside investors.” Reiterating IAG CEO Willie Walsh’s stance, Gunning said IAG wishes Kingfisher well, but doesn’t view it as integral to its growth strategy. “I don’t think there’s any appetite or interest expressed in IAG Cargo taking a stake in them,” Gunning said.

He holds a vastly different view regarding IAG’s possible partnership with Japan Airlines. JAL, which recently applied for anti-trust immunity to ally with IAG on British Airways flights between Europe and Japan, could complement IAG’s service model tremendously, Gunning explained.

After all, he said, Japan is a key market for IAG. “Clearly there have been challenges in Japan over the last 12 months, but it’s always been an economic powerhouse, and I think it will continue to be one,” he said. “So JAL is an important partner for us.”

IAG has also been in talks with JAL to determine how to best complement one another from a cargo perspective, Gunning added. Such discussions highlight the carrier’s commitment to growth, he explained.

Gunning also envisions IAG incorporating more than just BA and Iberia’s operations in the future. “I would hope over time there will be more airlines coming into [IAG],” he told Air Cargo World. “From a cargo perspective, as those airlines come in, their cargo capacity will come into the IAG Cargo business. So the overall business model is one of growth.”

The carrier also saw considerable growth in 2011. Freight volumes for IAG’s combined cargo segments rose 4.2 percent, year-over-year, according to a press release. Yield also surged 4.2 percent, year-over-year.

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