Domestic freighter opportunities
Amerijet reconnects with U.S. airports to take on increased cargo volumes.
Amerijet International is getting back into the domestic freighter game.
Starting this month, the carrier, which has been running freighters internationally out of its Miami hub since the 1970s, will reintroduce domestic heavyweight service using Boeing 767 aircraft. The offerings, which are a hybrid air-truck service, will be based at Rickenbacker International Airport in Ohio and Reno-Tahoe International Airport in Nevada. From there, Amerijet will be able to reach key cities on both sides of the country.
“We recognize that customers need late cutoffs and early deliveries, so when we were looking for what makes sense in the United States, geographically, in order to pull from the high-volume cities that are driving traffic, we needed to be able to put something together in a hybrid situation that made sense,” Pamela Rollins, the carrier’s senior vice president of business development, said.
“We’re hoping that this network is a little something different than has ever really been done before because predominately everyone’s just used airplane networks strictly,” she added.
Rollins said a hybrid network, which uses a combination of freighter space and less-than-truckload capacity, fills a void for a number of customers. Currently, cargo moves through the Amerijet system domestically via truck, heading to international locations on freighters out of its Miami hub. With the domestic service, customers who were dealing with truck transit times but wanted to pay a bit more for faster freighter service can now do that.
In the mid-1980s, domestic freighter services were more common place. Domestic freight airlines, like the now-defunct Northwest Airlines, all switched to belly-hold cargo services. Amerijet was involved as well, serving shippers up and down the West Coast from a hub in Phoenix. Rollins recalled flights going as far north as Alaska.
“The Gulf War hit [in the early 1990s] and fuel prices went out of sight and things shifted to truck,” she said.
Amerijet is coming back full-time to a domestic cargo market that has changed drastically since the 1980s. Carrier officials have been flying freighters under agreements for other companies since that time, so they are familiar with the current domestic cargo landscape, but making a run at a new service is a different proposition.
“We’re familiar with the market, we’ve been dialoguing with customers, there’s been a void of pure heavyweight — a cargo operator that’s just moving that type of freight,” she said. “We were listening to our customers, watching the recovery – there has been economic recovery in the U.S.; there’s more and more business coming back into the U.S.”
In its most recent freighter forecast, aircraft manufacturer Airbus said there’s still a significant freighter market going out to 2032, with a need for more than 1,800 converted small, midsized and large freighters worldwide. In addition, the market will require 871 new midsized and large freighters to sustain demand. During the next 20 years, Airbus predicted an annual freighter growth rate of 4.8 percent, seeing the total freighter fleet balloon to 2,905 in 2032 from the 1,645 planes that were in service at the start of 2013.
Airbus noted this growth will be largely driven by emerging markets, while the recovery in mature markets will also spur some activity.
In the current market, however, freighters have been having a rough time. Freighter capacity seems to be everywhere, and carriers have been forced to send planes into early retirement because their operating costs have become burdensome. The quest to introduce more fuel-efficient planes has only increased this phenomenon. In addition, the U.S. military drawdown in Iraq and Afghanistan has left freighter companies scrambling for new opportunities, further driving down prices.
As for Amerijet’s strategic hubs, which officials have been studying since 2012, are growing. In March, the Columbus Airport Authority, which runs Rickenbacker Airport, reported 5.5 percent of its operating revenues, year-to-date, came from air freight; the authority has seen a $133,000 increase in freight’s contribution, year-over-year, due to increased air transport activity at Rickenbacker. In the first three months of 2014, Reno International Airport handled more than 28 million pounds of cargo, a 7.5-percent increase over the same period in 2013. March saw Reno’s air freight numbers tick up 3.2 percent, year over year, despite cargo-activity downturns from Ameriflight/DHL, which was off last March’s total by 4.1 percent, and UPS off 5.2 percent.
For Rollins, the best way for Amerijet to grow its services was to expand domestically. Since the service is focused on the heavy-weight market and not small packages, the carrier is not competing directly with express carriers on most cargo.
And while Amerijet is focusing on heavy-weight cargo, Rollins said customers who are seeking a different level of service might look to Amerijet instead of the belly-hold domestic carriers. She pointed out there are many types of cargo that can’t fly in passenger bellies, even if it fits the space, and that Amerijet’s faster transit times could help customers keep lower inventories.
“I believe the customers that want that price point and that transit time will be happy with that service,” she said. “I believe customers that want a different price point and a faster transit time, and some freight that goes today different ways, they will have different opportunities.”
The downshifting freighter market, and the threat these larger passenger aircraft bellies bring to the table, doesn’t worry Rollins. She’s confident Amerijet is introducing a much-needed service to the domestic market. No matter how cavernous passenger cargo holds become, she said, there will always be a need for freighters.
The market is changing, she said, “but throughout history, it’s cyclical, this happens. There’s supply and demand that changes from time to time. This is just one of those times.”
This article was published in the August 2014 issue of American Shipper.