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IAG enjoys the rebound, for now

By control on December 3, 2012

A surprisingly robust peak season for IAG, the merged business of British Airways, Iberia and BMI, should not disguise the deeper problems still afflicting the airfreight sector according to David Shepherd, global head of sales at IAG Cargo.

In a media briefing at London Heathrow, Shepherd said: “Peak season has been stronger than expected and yields have hardened.” It was not just must-have technology such as smartphones and iPads that were flying this year, but fashion items too.

The demand for luxury goods had been a surprise, and he admitted that the lack of charter activity, with shippers relying on surplus scheduled capacity, may have helped utilization. “I haven’t spoken to a single customer who booked a charter,” Shepherd said. “But past the Chinese New Year, we could go back to as we were.

“The first half of 2013 will not be good. We hope the second half will be better,” he said. “Long-term concerns about the euro will dissipate, but I’m more concerned about North America. A president entering his second term has got questions about how he’s going to manage the deficit. North America has out-performed Europe but I am concerned that this could take a step backward next year, given all the capacity on the north Atlantic.”

Twenty months into its integration program, IAG Cargo will have completed the alignment of the nine cargo products formerly sold by its member airlines by year-end. The combined entity is now the world’s seventh largest carrier and serves 120 cargo destinations with widebodies–more than any competitor, said managing director Steve Gunning. “It’s not a partnership or an alliance. We are truly integrating the businesses on a single commercial platform.”

More than 140 personnel in commercial and central organizational roles in the U.K. and the U.S. transferred from BAWC and Iberia to IAG Cargo Ltd on 1 December. Their counterparts in the rest of the world will follow in the coming months. “This takes us from being a virtual business to a real one,” Gunning said. “There’s no turning back now. We’re not throwing away the BA and Iberia cargo brands but we are looking for IAG Cargo to be the pre-eminent brand in the coming months and years.”

It will take another 12 to 14 months to complete the optimization of algorithms and other technical aspects of the integration process. The IT work had been “more complex than we anticipated,” Gunning acknowledged. But he did not expect the process to have progressed so far, so soon. “We’ve managed to do it without distracting from the business of generating revenue and profit and we have grown our market share this year,” he said.

Holding open the possibility of further airlines joining the group, Gunning concluded: “We don’t have a wish list, but we know the profile of the businesses we’d like to work with. Intra-Asia would be good.” He would not be drawn on whether IAG wanted to bring in a carrier with trans-Pacific capability.

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