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Airlines' Rate of Ascent
With more aircraft than ever on the ground, air cargo carriers hope diminished downturn brings stronger yields.
In the global air cargo market, an 11 percent year-over-year decline in business in one month counts as something of a recovery in 2009, and airlines are trying to seize the opportunity.
After a year scarred by tumbling traffic, collapsing yields and shrinking revenue, carriers led by Lufthansa Cargo and Air France-KLM are moving to raise freight rates 20 to 30 percent this month, reasoning that even in a downturn, diminished inventories will press shippers to move goods rapidly to market this fall.
Others have moved even quicker with reports that top Asian carriers Cathay Pacific and Singapore Airlines hiked rates on shipments to Europe and the U.S. 10 to 15 percent in mid-September in response to a sudden surge in demand as importers replenish depleted inventories. Delta Air Lines, freighter operator Cargolux and Japan's Nippon Cargo Airlines also are increasing tariffs.
There's never been a better time to test the market with demand rising and carriers cutting capacity to the bone - airlines had grounded 227 freighters, 12 percent of the global fleet by the end of August, according to the International Air Transport Association. Other industry observers put the number higher, saying more than 400 all-cargo planes that could be flying are sitting idle.
As a result, the gap between supply and demand is shrinking, especially out of Asia, and load factors are improving in tandem. The shrunken world freighter fleet is still flying half full, but airlines say cargo is recovering, especially on Asian routes, mirroring the experience of ocean container carriers.
"We are somewhat encouraged ... by the rate of reduction in widebody freight capacity that we see in the Asia-Pacific region," said William J. Flynn, president and CEO of freighter airline Atlas Air. "As the decline in air freight demand has moderated in recent months, the rate of capacity reduction in this key air freight market has begun to approach the rate of reduction in demand."
Many carriers say capacity is coming out faster than demand is falling, and that traffic actually is edging up on a month-to-month basis. The Association of Asia Pacific Airlines said traffic fell 11.4 percent in August, but carriers reduced capacity by 12.1 percent compared to the same month a year ago.
Cathay Pacific had even better results: Traffic fell 6.1 percent in August, but Cathay sliced its capacity 14.1 percent in the same month. The result was a 72 percent load factor that is strong by any standards. Cathay's cargo flights are flying full out of Hong Kong, according to CEO Tony Tyler.
Asia-Pacific carriers' freight operations are seeing a "slow but steady recovery" from the low point last December and January, said Andrew Herdman, director general of the Asia-Pacific airline association, and other carriers report similar, halting gains. FedEx reported the smallest decline in international shipments in a year in the second quarter and forecast increased volume in the current quarter. TNT Express started a nonstop service between Europe and Hong Kong with a new 747 extended-range freighter in mid-September, and DHL is adding trans-Atlantic 767 freighter flights.
Although the market looks like it has hit bottom, there are doubts about the depth of the recovery.
Lufthansa Cargo dismisses the mild 1.1 percent dip in its August traffic following months of double-digit declines as a result of sharply lower volume in 2008 and warns there are "still no signs of a fundamental improvement in market conditions."
Even if the planned rate hikes stick, the industry still will lose money on every kilo of cargo it carries. And because the rapidly growing, government-backed Middle East carriers have yet to announce any rate increases, the industry-wide "rate restoration" effort may be short-lived.
The industry has a long way to go to return to profit.
In the first six months of 2009, the top 10 cargo airlines ran up combined losses of some $1.4 billion, and overall cargo revenue will shrink 28 percent to $44 billion this year, according to IATA.
The leading operators are taking the biggest hit. Air France-KLM's cargo revenue plunged 41.5 percent in the second quarter from a year earlier, to $773 million, and losses ballooned to $288 million. Lufthansa's second-quarter freight revenue contracted 36 percent to $626 million and last year's $95 million profit crumbled into an $87 million loss. Delta Air Lines' cargo sales plummeted 54 percent during the quarter to just $173 million as it slashed capacity by 50 percent from last year's level, and American Airlines' freight revenue tumbled 43 percent to $134 million.
Japan Airlines lost $210 million on cargo in the year to March 31, and NCA is heading for a full-year loss of $235 million on sales of $565 million.
The dire state of the cargo market is one reason Moody's cut Lufthansa's debt rating to junk at the beginning of September, and why Air Berlin, Europe's third-largest discount carrier, shelved plans to sell its $145 million-a-year cargo business after failing to get offers matching its valuation.
It's also why Air France-KLM, Europe's biggest cargo carrier, is so desperate to take out any cost that it canceled the latest issue of its management magazine.
John Leahy, Airbus chief operating officer, says the cargo market is "probably the worst" he has seen.
Carriers have slashed capacity over the past year in a bid to close the bulging supply-demand gap to drive up load factors and yields. The results have been mixed: Lufthansa improved its load factor 5.8 percentage points to 66.1 percent in August, but Air France-KLM gained only 0.6 percentage points to 63.5 percent.
Yields remain under pressure, with some carriers selling below cost to generate cash at any price, but there have been signs of a pickup, with Cathay's Tyler speaking of "yield improvement" occurring in early September. The next few weeks, the start of the airlines' make-or-break peak shipping season, will demonstrate how solid that improvement is, with carriers reportedly raising rates for forwarders but freezing them for their big-ticket multinational clients.
Carriers are preparing to remove even more capacity in the winter season starting this month.
Lufthansa is grounding four of its 19 MD-11 freighters for a year, idling two more, extending "short time" work for 2,600 employees and slashing budgets by 25 percent. Air France-KLM grounded six 747-400 freighters, delayed delivery of two new 777 freighters and is cutting capacity by another 15 percent this month because of a "brutal" fall in demand. China Southern is postponing delivery of six 777 freighters by an average of a year. JAL recently suspended three weekly Tokyo-London freighter flights, and Cargolux's capacity will fall 12.5 percent after it sells two 747-400s to UPS - a deal struck two years ago. Swiss forwarder Panalpina is considering whether to continue operating a 747-400 freighter wet-leased from Atlas Air since the late 1990s.
Before the market crashed, the big carriers were boosting cargo operations. Air France-KLM closed on the takeover of Amsterdam-based Martinair at the beginning of the year after KLM acquired the 50 percent of the carrier it didn't own from Denmark's A.P. Moller-Maersk. Lufthansa kept pace with the launch of AeroLogic, a 50-50 joint venture cargo airline with Deutsche Post DHL, and retains a 25 percent stake in China's Jade Cargo International.
The attraction of cargo came because until the market collapsed, freight business was growing faster than passenger traffic as global trade accelerated on the back of China's explosive export performance.
Now there are questions about airlines' commitment to cargo, which some see as an expensive luxury at a time when their core passenger operations need surgery.
Lufthansa is digesting recently acquired Austrian Airlines and talking with up to a dozen suitors for bmi, its U.K. airline. Delta and American are in rival negotiations to invest in JAL, while Air France-KLM also is considering an investment in the struggling carrier. British Airways and Iberia are poring over the small print of a planned merger.
But Delta also is quitting freighter operations at the end of the year when it phases out the last of its 12 aging 747-200 freighters, quietly closing the doors on a former Northwest Airlines Cargo operation that once was a major force in trans-Pacific service.
Several carriers are set to follow Delta's path.
JAL, nursing a record $1.1 billion second-quarter loss, moved first, agreeing to merge its cargo business with rival NCA, a unit of Japanese shipping giant NYK, by next April. The merged carrier will have annual revenue of $3 billion, a fleet of 17 freighters and 14 more on order and 30 percent of Japan's air cargo exports. But it will start life mired in red ink.
Air France-KLM also reportedly is considering the transfer of its all-cargo operations to its Martinair unit to create a single carrier with a fleet of 29 freighters while focusing the parent airline's cargo operations on the belly-hold capacity of passenger jets.
Lufthansa Cargo denies reports it intends to ground all 19 of its MD-11 freighters, which account for half of its total cargo volume. But CEO Carsten Spohr admits it might come to this if Frankfurt airport, its home hub, implements a ban on night flights. Spohr is deadly serious, Lufthansa Cargo spokesman Stefan Hartung said, because forwarders who require full service will decamp to Paris or Amsterdam where they can load cargo into freighters and passenger aircraft through the night.
Even if upcoming rate increases hold, many European, Asian and U.S. carriers will see the extra revenue flow straight to European Union coffers as Brussels trustbusters are expected within weeks to hit them with hundreds of millions of dollars in fines for their role in a worldwide price-fixing cartel from 2001 to 2006.
BA, Air France-KLM and others that have already paid hefty fines in the U.S., also face class-action compensation claims. If the EU finds the carriers guilty, it will "set off the largest civil claims for cartel damages ever seen in Europe," said Peter Koutsoukis of Dublin-based Claims Funding International, who is already talking with aggrieved shippers.
For carriers that survive the slump, the outlook for cargo is relatively healthy.
Airbus forecasts the market will grow 5.2 percent annually over the next 20 years, requiring 3,440 additional freighters, of which 850 will be new planes. Boeing is going for 5.4 percent growth over the same period, with Asian carriers adding about 750 freighters, or 27 percent of global demand, and second only to the slower-growing North America market.
Those are optimistic projections given that since 1995, worldwide cargo traffic measured in freight ton-kilometers flown has grown at an average annual rate of 4.3 percent, and just 3.1 percent a year from 2001 to 2008.
The Journal of Commerce Magazine, Oct 5, 2009
Asia Air Cargo Reaches 2009 High
Traffic grows 4.7 percent from August to September in best showing since November 2008
Asia's air carriers saw their strongest signs yet of recovery in the air cargo business, reporting their busiest month in nearly a year in September, according to figures released by the Association of Asia-Pacific Airlines.
Although freight traffic fell 6.5 percent against the same month last year, the year-over-year decline was the slimmest the AAPA has reported since August 2008 and shipping grew 4.7 percent from August to September.
Traffic reached 4.06 freight metric-ton kilometers flown, the highest number the AAPA has reported since November 2008 and nearly 28 percent better than the low point of the downturn in February.
The improving demand also came as the air carriers got dramatically more efficient. The AAPA said airlines cut their freight capacity 11.2 percent compared to September 2009, pushing the freight load factor to 68.7 percent, the highest it's been in more than two years.
Industry analysts say air carriers have grounded more than 200 freighters over the past year, and many were working in the Asia-Pacific market.
The Journal of Commerce Online, Oct 26, 2009
United Reduces Losses
Cargo revenue drops 43 percent on weak Pacific exports
UAL Corporation, the holding company whose primary subsidiary is United Airlines, reduced net losses 92.8 percent to $57 million, compared with a loss of $792 million in third quarter 2008.
Operating revenue fell 20 per cent to $4.4 billion, but the airline cut expenses 28 percent to $4.3 billion as fuel costs fell by more than half.
Cargo revenue for the quarter decreased 43 percent year-over-year to $125 million as a result of lower volume and continued pressure on yields due to the weak economy, the company said. Pacific exports, which make up a large portion of United's cargo business, have been hit particularly hard by the global recession.
The Journal of Commerce Online, Oct 22, 2009
Vietnam to Launch First Cargo Airline
Aviation authorities in Vietnam granted Trai Thien Air Cargo a license to provide air cargo services in the country, according to Vietnamese press reports this week.
The carrier, which is expected to begin operations early next year, would become the first cargo airline in the country.
Trai Thien Air Cargo will initially provide services using a 737-300F aircraft, according to the reports. The company plans to add four new aircraft to its fleet and then expand service to Northeast and Southeast Asia, according to the reports.
The private airline, with charter capital of $28 million, reportedly received approval from Vietnam Prime Minister Nguyen Tan Dung last month. Government officials admitted that demand for air cargo is relatively low but have encouraged development of the cargo sector there for some time, the reports said.
The Journal of Commerce Online, Oct 19, 2009
Air Cargo Decline Eases in Germany, UK
Frankfurt, BAA report single-digit year-over-year drops in September
Frankfurt airport handled 5.4 percent less cargo in September than a year ago, the third consecutive single digit monthly decline at Europe's top freight hub. For the same month, BAA, the British airports group, said cargo volumes at its seven UK hubs shrank 6.3 percent in September, the smallest decrease since November 2008.
Frankfurt handled nearly 189,000 tonnes of freight in September, taking volume for the first nine months of the year to 1.3 million tonnes, down 16.6 percent from the same period in 2008.
The fall in September traffic followed on a five percent year-on-year drop in cargo volume in August, the lowest monthly rate of decline in 2009, according to Fraport AG, Frankfurt's owner.
Fraport said cargo traffic at its five airports, including Frankfurt and airports in Bulgaria, Turkey and Peru, declined 4.9 percent in September from a year ago to 189,000 tonnes.
BAA said cargo traffic at London Heathrow dipped 6.2 percent in September from a year ago to 110,244 tonnes, boosting volume for the first nine months of 2009 to just over 914,000 tonnes, 14 percent down on the same period in 2008.
London Gatwick posted a 21.7 percent decline to just 5,959 tonnes as long haul carriers shifted services to Heathrow. The airport, which BAA is in the process of selling, handled 51,121 tonnes of freight in the January-September period, nearly 40 percent less than in the first nine months of 2008.
London Stansted, BAA's freighter and express hub, handled 16,253 tonnes of cargo last month, down 8.4 percent from September 2008.
The Journal of Commerce Online, Oct 13, 2009
Global Sectoral Approach - A Global Framework for Aviation and Climate Change
New Delhi - The International Air Transport Association (IATA) reiterated its call for a global sectoral approach led by the International Civil Aviation Organization (ICAO) to handle aviation's emissions in the post-Kyoto period.
"We need a global solution that can encompass all of aviation-incorporating the differing situations of airlines from developed and developing nations. The best hope of this is through ICAO which has a proven track record," said Giovanni Bisignani, IATA's Director General and CEO.
In a speech to an event jointly hosted by The Energy and Resources Institute (TERI) and IATA, Bisignani referred specifically to the effective work of ICAO in handling the introduction of quieter aircraft. "ICAO developed a global framework to deal with noise. The noisiest aircraft were phased out between 1995 and 2002. The global solution took into account the difficult situation of some developing nations with an extension to 2005," said Bisignani.
The remarks are particularly timely as the global climate change debate is increasingly stalled on the principle of common but differentiated responsibility that underpins the United Nation's Framework Convention on Climate Change in the run-up to climate talks in Copenhagen this December.
At the recent ICAO High Level Meeting on Aviation and Climate Change, governments agreed to continue to address aviation and climate change through ICAO and to work closely with industry. They also laid the foundations to developing a global sectoral approach-a global framework developed through ICAO.
IATA defines such a sectoral approach as:
- Accounting for emissions at a global level, not by state
- Making aviation fully accountable and pay for its emissions once, not several times over
- Giving access to global carbon markets until technology provides the ultimate solution
"Such a global approach would take advantage of the aviation sector's proactive approach to addressing the issues of climate change. We are the only industry with a united strategy and targets across the whole value chain. These are tougher targets than even our regulators are prepared to administer," said Bisignani.
Aviation has committed to three sequential targets:
- Improving average annual fuel efficiency by 1.5% to 2020
- Stabilizing emissions with carbon-neutral growth from 2020
- An aspirational goal to cut net emissions in half by 2050, compared to 2005
Bisignani recently met the UN Secretary General Ban Ki-moon to present the industry strategy and targets. In the meeting, the UN Secretary-General commended the aviation industry's commitment to contribute to the global fight against climate change and encouraged that these commitments be followed by concrete actions. He stressed the importance of addressing emissions from international aviation and shipping if the world is to achieve its goal of reducing global greenhouse gas emissions to a level that avoids dangerous climate change.
Bisignani singled out sustainable biofuels as an example of optimism in future reductions. "The three biggest opportunities for emissions reductions are technology, infrastructure and sustainable biofuels. Of these, sustainable biofuels are the most exciting because for the first time air transport has the possibility of an alternative to traditional jet fuel. Our attention is on camelina, jatropha and algae which do not compete for land or water with food crops but have the potential to reduce our carbon footprint by up to 80%. Because they can be grown in almost any soil condition or in salt water or even waste water they have the potential to create new industries and livelihoods by bringing sustainable energy production jobs to many of the least developed parts of the planet," said Bisignani.
Four test flights with sustainable biofuels have proven that they meet the technical and safety standards for use in commercial aviation. Moreover, they can be blended with jet fuel and used in today's aircraft and engines. "Progress is going at a much faster pace than anybody anticipated. Three years ago sustainable biofuels were a dream. Now we expect certification no later than 2011," said Bisignani.
Bisignani took the opportunity to comment on the EU's recently announced policy framework for Copenhagen. "The most important development is their explicit support for a global approach through ICAO. They have set some targets which are more political than technical. As such they are neither credible nor achievable with the timelines described," said Bisignani
"The most important outcome from Copenhagen for aviation will be agreement to treat aviation as a sector under the leadership of ICAO and working with industry. This should be the focus for all governments seeking to effect real reductions in CO2 from the global aviation sector-from India and China to the EU and the US. If not, we face the risk of uncoordinated competitive government taxation that won't reduce emissions but will be harmful to global economic development," said Bisignani.
23 October 2009
Headline
Ilyushin Il-76
The Ilyushin Il-76 is a multi-purpose 4-engined strategic airlifter that was first planned as a commercial freighter in 1967. The Il-76 was designed for delivering heavy machinery to remote, poorly-serviced areas of Russia, which has since seen military versions of the Il-76 widespread use in Europe, Asia and Africa, including its use as an airborne refueling tanker.
An extensive use of the Il-76 has been seen as not only a commercial freighter for ramp-delivered cargo, especially for outsized or heavy items unable to be otherwise carried, but also for emergency response during civilian evacuations or deliveries for humanitarian/disaster relief aid around the world, especially to undeveloped areas due to its ability to operate from unpaved runways.
A water-carrying version of the plane has been effective in fire-fighting and it is also used for zero-G training.
Military and Civil operators in 38 countries have operated with over 850 Il-76 in large numbers. While Russia is the largest military operator of the Il-76, followed by Ukraine and India, Belarus' TransAVIAexport Airlines is the largest civilian operator.
Design & Development
The aircraft was first conceived by Ilyushin in 1967 to meet a requirement for a freighter able to carry a payload of 40 tons (88,000 lb) over a range of 5,000 km (3,106.8 miles) in less than six hours, able to operate from short and unprepared airstrips, and capable of coping with the worst weather conditions likely to be experienced in Siberia and the Soviet Union's Arctic regions.
It was intended as a replacement for the An-12. Another intended version was a double-decked 250-passenger airliner but that project was cancelled. The Il-76 first flew on March 25, 1971.
Production
Production of Il-76s was placed in Tashkent, Uzbekistan (then a republic of the Soviet Union). Some 860 of the basic transport variants were made.
In the 1990s, modernized variants were developed, with a cargo compartment sized 20 m (length) x 3.4 m (width) x 3.4 m (height), but were not produced in significant quantity due to financial problems of the major user, the Russian Air Force.
The prototype of the longer variant Il-76MF, with greater capacity, first flew on 1 August 1995, but ceased factory production around 1997.
Some commercial aircraft were modernized to the Il-76TD-90VD version, starting from 2004, using new PS-90 engines to meet European noise limits.
Operational history
The first aircraft were delivered to the Soviet Air Force in June 1974, which next became the main Soviet strategic transport aircraft, operated by Aeroflot lines.
Between 1979 and 1991, the Soviet Air Force Il-76s made 14,700 flights into Afghanistan, transporting 786,200 servicemen, and 315,800 tons of freight.
The Il-76 carried 89% of Soviet troops and 74% of the freight that was airlifted. Building on that experience, the bulk of the Canadian Forces equipment into Afghanistan is flown in using civilian Il-76.
The Il-76 is also in use as an airborne tanker, otherwise known as a refueller and a waterbomber. Its airframe was used as a base for the Beriev A-50 'Mainstay' AWACS aircraft (some 25 were made).
On August 29, 2005, the day before the levees of New Orleans gave way to the forces of Hurricane Katrina, the Russian Federation offered humanitarian aid to the United States, a first time mission flown to North America followed by a second emergency, first-aid shipment to Little Rock, Arkansas.
India follows Russia's response by flying an Il-76 to deliver immediate aid in 2005 for Katrina victims.
Specifications
| General characteristics |
| Crew: |
5-7 |
| Capacity: |
88184.9 lbs (40,000 kg) |
| Payload: |
45-47 tons |
| Length: |
152 ft 10 in (46.59 m) |
| Wingspan: |
165 ft 8 in (50.5m) |
| Height: |
48 ft 5 in (14.76 m) |
| Empty weight: |
159,000 lb (72,000 kg) |
| Max takeoff weight: |
346,000 lb (Il-76) (157,000 kg) |
| Performance |
| Speed: |
900 km/h (250 m/s), 560 mph (490 km/h), mach 0.82-1.17 groundspeed depending on altitude |
| Range: |
3,650 km |
| Service ceiling: |
42, 7200 ft (13,000 m) |
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