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Cargo

American dream

American Airlines’ freight division is in the process of implementing a new cargo management system and fleet expansion, and e-commerce will be crucial for driving growth, as Ian Putzger reports
 

In late March, American Airlines (AA) expanded its reach to three offline markets with the appointment of GSAs in Croatia, Slovenia and Kuwait. The alignment with regional GSA R-BAG in the Balkans brought the US carrier’s footprint in Europe to 18 cities in 12 countries. Freight from Croatia and Slovenia is trucked to European online stations, while traffic from Kuwait is fed through interline partners to AA’s gateways in London, Paris, Madrid and Rome.

 

The airline is also boosting its online presence in Europe this year. Flights from Philadelphia to Budapest and Prague and from Chicago to Venice were due to commence in early May, to be followed with the launch of a Dallas/Ft Worth-Reykjavik service on June 7. In Asia, a major focus for AA’s expansion, the airline started Los Angeles-Beijing flights last November, using B787-8 aircraft.

 

American’s 787 fleet is set to grow, thanks to an order for 47 more planes of that type placed in early April. This order – for 22 B787-8s and 25 B787-9s – will bring incremental growth in cargo capacity, as the 787-8s aircraft will replace B767-300s, while the 787-9s will come in for A330-300s and older B777-200s. The airline currently has 35 787s in service flying to points like Tokyo, Sao Paulo and Paris.

 

The expansion of the airline’s network strengthens the position of its cargo division. Rick Elieson, who was promoted to President of AA Cargo in March 2017, regards the breadth of the network as a key strength. His outfit has a strong focus on transit traffic, notably intercontinental flows connecting Latin America with Europe and Asia.

 

“Out of Asia we have a good network. Is it the best? No. But from Asia to Latin America we have the best network in the world,” he comments. “Similarly, Europe to Latin America we are uniquely well positioned.”

 

Usually airlines have found better margins on selling individual sectors, but this does not apply to the current Asia-Latin America market, according to Elieson. “I’d rather turn down volume from Asia to the US in lieu of Asia to Latin America,” he says. “My yield US to Latin America is not that strong.”

 

He adds that most conversations with clients are not limited to one route but look at the customer’s needs and how working together can resolve these, while improving the overall revenue picture.

 

The door is open for further expansion in Latin America after the Brazilian authorities gave their blessing to open skies with the US, which had been one of the conditions set by the US government for its approval of a joint venture between AA and LATAM Airlines.

 

At this point AA has not unveiled any plans to ramp up its flights to Brazil. The joint venture plans with Latin America’s largest carrier are driven by the passenger business and neither side has revealed any plans or immediate desires in the cargo sector for joint activities.

 

There is an undeniable appeal in LATAM’s capabilities, but Elieson wants to identify first how such an alignment would affect AA’s ability to serve its clientele better: “We don’t want to jump into bed with a partner just because they look attractive. What matters is what this means to our customers,” he remarks.

 

Interline arrangement with other carriers make up a considerable chunk of AA’s business. “We have a lot of interline relationships that are very important to us,” says Elieson. “There are parts of Southeast Asia that American does not serve at all but they are very important to us.”

 

The emphasis on transit traffic entails a strong focus on the transfer points in the network and widebody connections between them. Besides the obvious hubs, especially Miami and Dallas/Fort Worth, (DFW) this also extends to points like Chicago, Los Angeles and Philadelphia. Recently, AA deployed a widebody between Los Angeles and Philadelphia, which has a number of European connections.

 

“There is not much local traffic in Philadelphia. Most of it is transit,” says Elieson.

 

The installation of a new cooler facility at AA’s DFW base last year was a key step for the development of further perishables flows from Latin America to Asia. While this segment accounts for a large portion of the volumes that AA slots through the facility, the cool chain infrastructure at its hubs is also a vital plank for the pursuit of more pharmaceutical traffic. AA is underscoring its attention to this with the pursuit of CEIV accreditation at its major gateways that handle pharmaceuticals.

 

“CEIV is a great initiative. We’ve been working in that direction for some time,” says Elieson. He stresses however, that rather than the certificate itself, this is about being able to provide value to AA’s customers. Moreover, a CEIV badge cannot replace a dialogue with customers. Contracts that have grown out of tripartite discussions with forwarder and shipper, involving staff from the sales, operations and customer service groups have been the most effective, he explains.

 

“They tend to be most fruitful when they deal with problems, find solutions,” he adds. >>

 


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