Saturday 17th Aug 2019 - Logistics & Supply Chain

Air France-KLM cuts air cargo capacity

Air France-KLM is cutting air cargo capacity by 11 per cent following a sharp drop in cargo traffic in its fourth quarter – the second quarterly fall in a row.

Excluding Martinair, which the group took over in January 2009, traffic was down 21.3 per cent for capacity down 9.8 per cent. Consolidating Martinair, traffic was virtually stable (+0.2 per cent) with capacity up 11.5 per cent.

Passenger traffic fell 5.8 per cent though the company managed to reduce capacity by 2.7 per cent.

This resulted in a operating loss of 574 million euros for the fourth quarter, while in the full year to 31st March the group produced a loss of 129 million euros compared to a profit of 1.4 billion euros the year before.

Looking ahead, the group said: “Although we have experienced some signs of stabilisation in our operating environment in recent weeks in both the cargo and passenger activities, it is too early to tell whether they indicate the start of an economic recovery.

“We therefore continue to take appropriate measures to protect our business, including a reduction in capacity of 4.5 per cent in passenger and 11 per cent in cargo for summer ’09 and a reduction in the initial investment plan of 2.9 billion euros to 1.4 billion euros.

“We have also increased our cost-savings target to 600 million euros, including the adaptation of our workforce in line with current activity levels.”

Chief executive Pierre-Henri Gourgeon said: “Visibility remains low, even though we have seen some signs of stabilisation in recent weeks. We will therefore continue our strategy of adapting capacity and costs, while at the same time reinforcing our fundamentals, notably via the strategic partnership with Alitalia and the North Atlantic joint venture with Delta.”

* British Airways World Cargo has reported £673 million in sales (flown revenue plus fuel surcharges) for the year beginning April 2008 to March 2009 – a 9.4 per cent increase against the same period last year.

But Volumes of 4,638 million cargo tonne kilometres (CTKs) for the full year represent a 5.2 per cent drop compared to the previous year. Cargo capacity for the same period was down 5.1 per cent.

Overall yield (commercial revenue per CTK) increased by 15.4 per cent versus last year, driven by higher levels of fuel surcharge. Excluding the impact of exchange rate movements, yield increased by 6.6 per cent.

The fourth quarter saw a 15.5 per cent drop in volumes versus last year – the largest quarterly volume decline on record.

Sean Doyle, financial controller, BA World Cargo, said: “Demand for cargo was strong for the first half of the year, underpinned by excellent operational performance through our London Heathrow hub. As the global crisis hit in the second half of the year, demand for general freight declined significantly across key export markets including the Far East and Northern Europe, though our premium volumes were hit less hard. While general freight volumes fell less dramatically out of the US, UK and Indian markets, yields continued to drop due to declining fuel surcharges and industry overcapacity.”

Steve Gunning, managing director, BA World Cargo, said: “The marked decline that we saw in December has, as expected, continued through to the end of the financial year and while we have seen some stabilisation over the past couple of months there are no signs of an imminent recovery. The major challenge we now face across a number of markets is the imbalance between capacity and demand which has led to unsustainable price pressures. The industry clearly needs to reduce capacity to better align with demand if it is to achieve a sustainable equilibrium.”

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