It’s no secret that the world’s airlines, almost without exception, are not happy with bottom line results from their air cargo revenues.
The whys and wherefores are many and have been the subject of discussion for the past five years or so.
Too much capacity, increased fuel prices, higher operating costs and other factors are the reasons behind a certain re-thinking at airline board room level as to the sustainability and
feasibility of their cargo operations.
Unnecessary thinking, one might say, as carriers had some years ago come to terms with the fact that a streamlined cargo product, especially in the bellies of their passenger fleets, brought much needed revenue and added positively to the operating bottom line.
On top of this, the economic slowdown has considerably affected cargo flows and shippers willingness to pay the rates needed by the carriers to at least “break-even.”
Fact is, they (carriers) need cargo, especially in the holds of the passenger aircraft.
Many are operating with long range aircraft such as the Boeing 777-200ER and Airbus A330, both of which, even with full loads on the passenger decks, have enough space and weight available for cargo.
General cargo rates have dropped - forcing those willing to take the initiative to look for higher paying cargo flows.
“Cool” products are on the way up!
Some time back many carriers shunned the idea of carrying flowers, fruits and vegetables as this was either considered as too much work, or in the case of cut flowers, too bulky.
The transport of these products was basically left to the “all freighter aircraft.”
This thinking has changed.
“Cool” has become “Cool” and enormous sums are being invested by carriers and handlers alike in order to accommodate for the carriage of anything which requires low temperature transport. So called Cool Chain Operators are springing up on a regular basis, intending to be at the forefront of this fast expanding market segment.
Temperature Controlled Systems - this is what’s becoming foremost in the air cargo scene.
Why? - not just for perishables but simply because the world demand for pharmaceuticals and suchlike products has grown so fast, that delivery is almost always demanded by air freight.
China is now positioning itself to become a large player as an exporter of pharmaceutical products.
It is well known that China is probably the world’s third largest consumer of pharmaceutical products, with much of this originating in the United States and being flown in on a regular basis by both U.S. and Chinese carriers.
Now, the shoe is also on the other foot.
China will increase pharmaceutical production in such a way that they will end up as the world’s fifth largest exporter by the end of this decade.
And, it’s not just China!
Take San Juan in Puerto Rico, for example.
There, enormous amounts of medical products are made and it comes as no surprise that Panalpina, in conjunction with Cargolux, will start a weekly B747F service to Luxemburg to carry this highly sensitive and well paying cargo.
The list can go on and on.
Almost all of the top carriers have invested heavily in their own Temperature Controlled Services or Cool Chains.
Be it for example, IAG Cargo, Cargolux, Cathay, Lufthansa, Emirates - all have brought their cool centers up-to-date and many are busy investing in brand new facilities around the world just to cater for the demand.
- Cool trucks which can take the cargo directly from the aircraft to the consignees.
- Airport cooling facilities designed purely for the storage of pharmaceuticals.
- Aircraft being designed with sophisticated and far better temperature controlled bellies to ensure the cargo remains at the desired temperature in flight. The best example so far being the Boeing 787.
- Special Cool Chain conferences are being held worldwide aimed at pushing the carrier, handler and shipper products.
Lucrative biz segment
It’s also a fact that these highly sensitive products are expensive and that higher air freight rates demanded by the carriers are being paid by shippers.
Most of the investment in equipment needed for this transport comes from the carriers and handlers.
Therefore, they deserve to have the cream on the cake.
It’s a lucrative business and one which seems to have come at the right time so that airlines can boost their cargo bottom lines.
It will expand by at least 10%-15% per annum and the demand seems endless.
So, will it bring more money in the long term for the hard hit airlines?
We certainly hope so and if the shippers are clever they will not try to push carriers down on rates.
The investment is too high and it’s only airlines and handlers who invest prudently in this market segment, who will remain on top.
John Mc Donagh