Bulky or Belly – What’s Best for the Bottom Line?

As airlines continue their fight to reach acceptable bottom line results with their cargo products, the question also arises as to whether bulky or belly cargo is the better solution to them getting acceptable all round yields and thereby bringing the cargo product positively back into the board room discussions.

Air France Cargo operates two 747-400ERF to transport a wide range of products / source: hs
Air France Cargo operates two 747-400ERF to transport a wide range of products / source: hs

CargoForwarder Global recently reported on the upcoming importance of the growing pharmaceutical industry as a money maker for the world’s airline cargo products.
Even if the pharma explosion continues as expected, this will not fill the bellies or main decks of all freighter and passenger aircraft.
A healthy mix of belly and bulky cargo, on top of the above mentioned, could bring revenues and yields back to some semblance of normality.

Bulk decline?
It’s no secret that carriers who have invested in the past five years in freighter aircraft are duly worried as to whether the investment will bring rewards or an acceptable return on capital they have to invest.
Freighter fleets need to be in the air for at least 15 hours daily in order that operations can be seen as break even.
To do that, you need a lot of cargo on the main deck - much of which should be of a bulky nature, with volume weight surcharge on top.
The world energy markets, be it oil or gas, still see the need for using freighter capacity. This is mainly due to the urgency of components needed on site.
The winners is this market segment are not necessarily the traditional freighter operators, but more so, those such as Volga Dnepr due to the size of single shipment which have to be moved at short notice.

 

However, is there “still” enough bulky cargo on hand and the demand for freighter space remains somewhat acceptable.
But! - is this enough for freighter operators to warrant an increase in their fleets?
According to statistics on hand - probably not!

Facts of life

  • There are about 240 wide body freighters on order for delivery in the next couple of years.
  • The wide body variants are now restricted to the B777F, B747-8F and some A330Fs.
  • Many carriers who have reduced or even got rid of their all cargo fleets, don’t seem to be crying after them and have not made any indication of considering a re-entry into the all freighter fleet market.
  • Purchasing or leasing one of these newer generation freighters has become more expensive and quite often cannot guarantee even a bottom line break even for the operator.
  • Boeing and Airbus had “once forecasted” that freighter aircraft in service would double over the coming 15-20 years. The opposite has happened and growth has been stunted.
  • The airfreight statistics of the past five years show a negative growth throughout most parts of the world, with slight signs of improvement in the 1% to 2% range.
  • Will the economy recover enough in order that the Boeing and Airbus wizards can justify their old predictions?

It does not seem so!

Brussels Airlines uplifts all cargo consignments in the holds of their passenger aircraft  / source: SN
Brussels Airlines uplifts all cargo consignments in the holds of their passenger aircraft / source: SN

Belly up?
Freighter operators are duly worried as to whether other modes of transport (train/sea) may become stronger and dilute away larger shipments towards these forms of transport.
The big worry for all is whether the world economy will in the coming 10 years or so ever gets back to where it was in the past decade.
The money maker months for freighters were traditionally always between September and November with the influx of goods from the Far East into the USA and Europe.
There’s no guarantee of this anymore.

Belly capacity rise is unstoppable.
Whereas all freighter orders decline, wide body passenger aircraft orders are shooting through the roof.
This is due to the highly expanding passenger transport demand and brings with it an enormous increase in belly cargo capacity along the world’s trunk routes also served by freighters.
Is this going to be the final way that freighters are forced off the market?
It’s hard to pin down exactly how many of these wide body passenger aircraft are on the world’s carriers order books.
A good guess would be at least 2,500 over the coming 5-10 years.
All of which, with the exception of the Airbus A380, offer a belly capacity of between 15 - 35 tons per aircraft depending on flight sector range.
Put all that together, then you have an additional capacity on a daily basis which would be the equivalent of almost 500 freighters.
A great mix for the airlines.
Up top full with pax and bellies volumed out - best case scenario!

Air France-KLM, among others, are shedding themselves of their freighters and it is interesting to note that their spokeswoman mentioned that present load factors in their B777 pax bellies is still around 50% and that their priority lies in getting those filled first.
Will this become the general trend for carriers operating a mixed fleet of freighters and passenger aircraft?

This still leaves us with the all freighter carriers such as Cargolux, who, if the above mentioned trend becomes reality, may then still be the only ones carrying bulky cargo with hopefully a good mix of high paying pharma goods.

We have regretfully seen the demise of many good cargo carriers during the past few years.
A disappointing development which may be due to the uncertainty of today’s world economy may just become routine.
We hope not.

John Mc Donagh

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