A year and a half ago, IAG Cargo decided to get rid of its freighter fleet and focus instead on sharing limited freighter capacity with other carriers. In recent months, the controversial decision may be showing signs of bearing fruit as the carrier announced commercial revenues of €259 million for the first half of 2015, an 8.8 percent increase over the same period last year, as well as an expansion of its freighter partnership with Qatar Airways.
One of the key tenets of IAG’s strategy in recent months is to form freighter partnerships with other carriers, such as Qatar. This week, IAG Cargo said it was extending its deal with Qatar “indefinitely,” and expanding the original Hong Kong-to-London route to now include routes to and from mainland China, Pakistan and Kuwait. The expansion, IAG Cargo said, will be especially beneficial for the garment industry in Pakistan and electronics manufacturers around Shanghai.
With the expansion to nine routes, the IAG-Qatar partnership now includes: Hong Kong to London and Madrid; Mumbai to London; Dhaka to London; Karachi and Lahore to Doha, Dubai and Kuwait; Delhi to London; Chennai to London; Shanghai to Madrid; and Islamabad to Kuwait. IAG also said it would increase the capacity it books on Qatar Airways’ regional routes.
“With our asset-light strategy, our aim is to have a more flexible arrangement that allows us to grow or shrink our space depending on the market,” said IAG Cargo’s CEO Steve Gunning.
Following the release of the carrier’s second quarter numbers, Gunning said much of the airline’s recent success could be attributed to a favorable currency exchange and to its focus on carrying a premium product mix, called “Prioritise,” which has seen a 40 percent rise in usage over the last year.
While revenues rose, capacity for the second quarter of 2015 also increased by 2.1 percent, adding more pressure on yields, which decreased by 3 percent. Cargo volumes for Q2 also finished 2.1 percent below the previous year’s Q2 results.
This period of overcapacity and weakening yields will likely be the “new normal for our industry,” Gunning said. “We’re refreshed our strategy over the last 18 months, which is based on the premise that this is how the market will be. We have to accept that these are the market conditions that will prevail.”
Gunning also cited IAG’s simplified freight rate structure, the opening of a new route into Kuala Lumpur and the establishment two new Constant Climate cool-chain stations as other reasons for the relatively positive first-half results. In addition, he said, the carrier’s EuroConnector service, which provides 48- and 24-hour delivery service, has been expanded by an additional 47 flights.