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Air France-KLM will continue freighter business

By control on October 11, 2013

He avoided specific reference to the growth of the Middle Eastern giants, which prompted Air France unions to write to the French government in September complaining of unfair competition. But it is clear that the rise of Emirates, Etihad and Qatar Airways, together with the Chinese carriers, could put a permanent dent in AF-KL’s revenues.

“The yield loss we’ve seen in the last two years can stabilize,” Varwijk said. He pointed out that only 50 percent of the group’s cargo business is general cargo, while the rest comprises specialist products such as secure, pharmaceutical and live animal shipments.

These specialist niches are “a different proposition” in terms of the customer care required and AF-KL is seen as a market leader, Varwijk insisted. But he accepted that even specialist products can lose their premium over time and turn into commodities. “There is always smart competition who follow you,” he said.

AF-KL is the largest passenger operator between Europe and China, with the most destinations and the most frequencies. By reducing its freighters, the group is behaving no differently than other carriers in Europe and especially in North America, where there is now no freighter capacity at all outside of the integrators.

On paper, only 10 percent of the airfreight shipped globally, by nature of its dimensions or hazardous characteristics, needs to be carried on freighter aircraft. However, operational logic—the possibility of multi-stop “milk runs” or the need to carry cargo to places passengers simply don’t want to go—suggests that 30 to 35 percent of the market is better suited to a freighter operation.

Thus, even with a smaller fleet, AF-KL is looking at new freighter destinations. A weekly flight to Curitiba, Brazil, begins in winter season, while Shanghai, covered only by passenger services since July 2012, is to be reinstated. This, however, is more in response to the introduction of A380s on the Shanghai route, reducing belly-hold capacity, than to genuine enthusiasm about recovery in the market.

Alain Malka, exexutive VP of Air France Cargo, explained that the freighter network will be rearranged so “it is not a question of closing destinations”. For example, Mexico is served by freighter seven times a week but current volumes do not merit this frequency. “We need four or five,” he said.

In an interesting initiative, AF-KL is trying to counteract the trend toward cargo becoming less dense as more packaging is used to protect pharmaceuticals and IT products, for example.

This has penalized carriers because, while underlying cargo charges are calculated on a weight and volume basis, the important fuel surcharge is based on weight only. From 4 November, AF-KL will be taking volume into account in its fuel surcharge

If it succeeds, the tactic will boost revenue. The group hopes it can shift customers away from the all-in rates that have become prevalent by keeping the process transparent. Varwijk said forwarders had responded “positively”, but accepts that only time will tell.


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