Two airlines, two freighter strategies
Friday, December 21, 2012
By Eric Kulisch
Delta Air Lines, the world’s largest passenger airline, and fast-growing Emirates of Dubai exemplify the different attitudes towards freighter aircraft among passenger airlines that also haul cargo.
Atlanta-based Delta has no freighter aircraft and quickly decommissioned more than 10 jumbo jet freighters it took possession of when it acquired Northwest Airlines in 2009. The move was made at a time when the air cargo market was slumping in the wake of the recession and fuel prices were soaring. The Boeing 747-200s in Northwest’s fleet were fuel guzzlers and officials said shutting down freighter operations yielded $60 million in savings, most of which went straight to the bottom line.
Emirates operates more than 180 wide-body passenger planes and nine freighters, two of which are 747-400s. In November, it took delivery of its sixth B777 freighter. Scheduled freighters now operate to 36 destinations, including a weekly Dubai-Japan-Korea service that commenced in September.
Interviewed Oct. 2 on the sidelines of The International Air Cargo Association’s biennial forum and expo in Atlanta, Delta Chief Executive Officer Richard Anderson maintained that Delta values cargo business but has no interest in reviving its freighter fleet.
“Main-deck freighters don’t work in a combination airline, at least a U.S.-combination airline. It may in other places,” he insisted.
Delta’s business model is based on having a strong cargo and passenger operation fill each plane.
“I don’t think that for most passenger airlines around the world that in five to 10 years you’ll see them operate main-deck freighter(s)” because shippers and logistics companies want to manage the whole supply chain from pick-up, tracking, security to final delivery, Anderson said.
Freighters aren’t needed for most high-value cargo because it’s less than 100 pounds and passenger carriers don’t have the trucking and warehouse assets to support end-to-end shipment control as done by express carriers.
“With the passenger operation we’re able to offer a very good product to shippers and forwarders, and to UPS and FedEx. So we serve everybody in the room,” he said.
Delta’s extensive network and high frequency of flights give shippers the speed and coverage they need, the airline executive added.
Cargo accounts for $1 billion in revenue for Delta.
“Freight is core to what we do. It’s core to how we buy airplanes, it’s core to how we staff our airports and it’s core to the overall profitability of an airplane,” Anderson stressed. Cargo is run as a distinct business line with its own set of overhead costs and profit calculations.
Emirates views freighters as the glue that makes its SkyCargo network work, Ram Menen, senior vice president of cargo, said on the show floor.
Seventy percent of Emirates SkyCargo’s business is transported in passenger bellies. The freighters provide supplemental, or “belly flex,” capacity that helps balance the freight flows so the passenger aircraft are fuller.
“If we didn’t have freighters we wouldn’t be able to optimize utilization on our bellies,” Menen told American Shipper.
Planes, for example, frequently carry large cargo volumes from Asia to Europe, but much less on the return leg because Asia produces more for Europe than it consumes from there. Freighters can feed extra goods from other parts of the world into a hub such as London or Dubai to fill the slack capacity. In real terms, that might mean an extra 60 tons for a flight that normally carries 40 tons to achieve 100 percent asset utilization, he explained.
Freighters also allow the airline to get business from shippers of heavy, oversize cargo and fly to locations not served by passenger planes, Menen added.
“We’re in the cargo business. (They) allow us to carry everything and anything,” he said.