Friday 21st Oct 2016 - Logistics Manager

Air cargo rates rise but airlines struggle with losses

The rapid rise in air cargo rates is highlighted by results from two of Europe’s largest airlines.

At British Airways World Cargo, commercial revenue rose almost 60 per cent faster that traffic volumes in the last quarter, while at Air France KLM freight traffic in the  in the same period rose only 0.7 per cent against revenue up 12.3 per cent.

But while the quarterly figures show a improving yields, the full year picture is a lot less rosy for the airlines.


BAWC reported commercial revenue (flown revenue plus fuel surcharges) of £550.3 million for the full year beginning April 2009 – a decrease of 18.2 per cent against the same period last year. And excluding the impact of favourable exchange rate movements, commercial revenues were down 26.1 per cent.

Volumes of 4.5m cargo tonne kilometres (CTKs) for the full year –  down 2.2 per cent. Cargo capacity for the same period was down 4.2 per cent. Overall yield (commercial revenue per CTK) decreased by 16.4 per cent versus last year, driven by lower levels of fuel surcharge and underlying market conditions.  Excluding the impact of exchange rate movements, yield decreased by 24.5 per cent.

The fourth quarter in comparison saw an increase in revenue of 9.2 per cent compared to the same quarter in the prior year. This quarter benefited from an increase in volumes of 5.8 per cent.

Rachel Izzard, financial controller for BA World Cargo, said: “Demand for cargo continued to improve in the fourth quarter, following the high unanticipated peak in the third quarter, led by demand for additional capacity out of China and South-East Asian markets. These markets continue to maintain a high level of demand for air freight and our decision to maintain our freighter routes enabled us to build upon this recovery. Demand for our premium products has also remained strong with volumes maintained in spite of the ongoing global economic turbulence.”

At Air France KLM, cargo traffic declined by 13.7 per cent  for the full year 2009-10 but it managed to reduce capacity by 16.5 per cent enabling the load factor to gain 2.2 points to 66.5 per cent. Total cargo revenue was down 27.5 per cent to 2.3bn euros for the year.

The airline started restructuring the cargo business in the third quarter and said that this had started to bear fruit, and coincided with an upturn in activity.

As a result the load factor gained 8.9 points to 69.2 per cent on the back of traffic up 0.7 per cent and capacity down by 12.2 per cent. Unit revenue per available ton kilometre (RATK) rose strongly (+28.9 per cent and +30.9 per cent on a constant currency basis).

Revenue increased by 12.3 per cent to 674 million euros.  However, the company said that despite rigorous cost control, “the business remained in the red (-63 million euros) but showed a marked improvement on the previous year (-164 million euros at 31st March 2009). Excluding the impact of pre-2009 fuel hedges, the operating loss of the cargo business would have stood at 39 million euros.”

Overall, Air France KLM made an operating loss of more than 1bn euros last year and chief executive Pierre Henri Gourgeon said: “2009-10 will go on record as our annus horribilis.”

And British Airways, which is now facing a series of strikes by cabin staff, reported an overall operating loss of  £231m.

Chief executive Willie Walsh said: “To be in the midst of the biggest economic downturn in 60 years and produce the same operating figure as last year shows the hard work that has been put into steering our business through the recession. Total costs are down by almost £1 billion, comprising a £597 million reduction in fuel costs and a £390 million reduction in non-fuel costs.”

BA signed a merger agreement with Iberia in early April, and Walsh said it was on track to complete the merger by the end of 2010. The merged group will be known as International Airlines Group. Walsh expects it to deliver annual savings of 400m euros by year five.