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A sort of success

What does the current glut of supply, coupled with weak demand, mean for the capacity suppliers and operators? Airline Cargo Management talks to the ACMI crowd to find out

Most likely a temporary stall,” is how IATA chief executive officer Tony Tyler described its traffic figures for March.


Despite the fact that traffic was down 2.3% compared to the same period a year ago, Tyler said he thought “the fundamentals for a sustained improvement in air cargo volumes are in place. Business confidence continues to signal forthcoming expansion, and the solid increase in new export orders seen in 2013 should boost air freight in the coming months.”


However, his use of the conditional tense, now expressed as an art form in all forward-looking statements, belied his bullish bulletin as he went on to warn that the structural weakness of the Eurozone had re-emerged to coincide with the gone ‘off-the-cliff’ environment of US budget cuts.


What IATA seems to be saying is: who really knows what will happen this year – or next?


Meanwhile, the air cargo industry remains under the effects of deteriorating consumer confidence and economic uncertainty; the almost perennial European sovereign debt crisis and protracted period of slow growth (just ask the Spanish, Greeks and Italians); continued pressure on airlines and their investors; jet fuel prices averaging $130 a barrel for the past two years; continued upward cost pressures on airlines; a slowing in travel volumes and falling cargo demand; and no peak season cargo traffic in 2011.


There was a slight improvement in 2012, but no suggestion that the good times have returned – or indeed, ever will.


Is the industry facing a ‘perfect storm’ of little or no economic growth, coupled with too much expensive capacity and weak demand? And if so, what does this mean for capacity suppliers and operators? Who’s got the best business model for survival?


The IATA traffic figures suggest that the Gulf carriers, with their huge combination capacity, not to mention an expanding fleet of dedicated freighters, are becoming the cost/margin benchmark for other operators to follow, emulate or avoid.


But what of the standalone freighter operator? The obvious one here is Cargolux. Is the aircraft owner/network operator business model, based on a fleet of Boeing 747-8Fs or even 747-400Fs still valid?


Cargolux made money for its Luxembourg-based owners for many years with Canadair CL-44s, McDonnell Douglas DC-8s and then 747-400s. It developed a European hub and bespoke trucking network centred on Findel airport, and a sales and operational network to support its increasingly scheduled services. All good business logic. It even ‘partnered’ with the requisite non-asset forwarder to make sure all aspects of the model made sense.

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