Improved margins, increased commercial revenues and – even more importantly – strong profits: IAG Cargo, the combined air freight unit of British Airways and Iberia is more than content
with the operational and financial outcome of 2014. And 2015 could end up even better.
In an interview with CargoForwarder Global IAG Cargo’s helmsman Steve Gunning speaks of a “very pleasing 2014.” The load factor went up 3.2 percent, volumes grew substantially, while leaping
particularly in Q4 by 16 percent year on year, and the capacity deal with Qatar Cargo is proving to be successful.
This is surprising at first sight because cargo revenue for the year was down 7.5 percent or 6.6 percent at constant currency. However, when leaving aside the long-haul freighter ops, volumes measured in cargo ton kilometers (CTK) went up 6.7 percent totaling 5,453 million ton kilometers on a like-to-like basis, while capacity increased by 2.3 percentage points.
It’s been a year of landmark decisions, illustrated by IAG Cargo’s exit from all freighter operations, the carrier’s capacity purchase agreement with Qatar Cargo, the expansion of the Euro-Connector model and the cargo unit’s increased efforts to push special products even further ahead.
Over the moon
Against the backdrop of a difficult market environment Steve Gunning was over the moon when presenting and commenting on his division’s results. What particularly pleased him and his entire team was the very strong performance of IAG Cargo’s high-yield premium products, shown by a remarkable 55.5 percent increase of goods flown under the label of ‘Constant Climate’ and an increase of 8.5 percent of express and other ‘Prioritize’ branded preferential shipments for whose transport the carrier offers a performance guarantee. “Meanwhile, we extended the number of global stations certified for the special handling of temperature sensitive products to about one hundred,” states Steve.
And what about profits or losses?, an issue that’s completely left out in their release. Being asked by CFG Steve delivered this explanation: “Our result is included in IAG’s annual figures. As IAG Cargo we don’t release separate financial data.”
So for the second time: was the cargo unit profitable or not?
His unequivocal but still general answer to this: “We achieved strong profits!”
Partnering with QR Cargo paid off
Referring to the block space agreement signed with QR Cargo almost a year ago he pointed out that exiting the own long-haul freighter business proved to be the right step. This is proven by both additional tonnage and revenues generated through the utilization of QR Cargo’s main deck on the route from Hong Kong to London via Doha. The deal gives IAG Cargo access to five weekly QR operated Boeing 777 freighter flights, amounting to about 400 tons a week.
Asked if there are any plans to expand the ties with the aspiring Gulf carrier on other routes for securing his division additional main deck capacity without investing own cash in assets Steve states that so far there are no new plans on the agenda in this direction. “We go on exploring feasible opportunities but at the moment we’ve got nothing to particularly announce.” He adds to this that QR Cargo is operationally acting very professionally. “Our mutual relationship is working well,” he exclaims. Among others this is documented by operational improvements compared to times when Atlas Air’s subsidiary Global Supply System was deploying three Boeing 747-8Fs on behalf of IAG Cargo. In addition, IAG Cargo has just decided to follow the step of QR Cargo, Emirates and some other carriers to introduce all-in rates.
IB Cargo is progressing positively
Steve also pointed out that Iberia Cargo added substantially to the performance improvement and the revenues generated. With their dense network to and from Latin America IB Cargo ideally complements BA Cargo’s own global reach.
As to the newly announced cooperation with Finnair he stated that this is very much in line with IAG Cargo’s strategy to expand its own reach by partnering with other carriers. Besides Finnair this pact meanwhile includes Avianca, Japan Airlines, Qatar Airways and American Airlines. “They have access to our capacity, we have access to theirs,” he states. He denies that there are any plans to establish joint ventures and introduce a common cash box, a model favored by Lufthansa Cargo and ANA Cargo.
Summarizing 2014 Steve speaks of the “strongest performance we had in the last 2 to 3 years.” He’s determined to continue this positive trend all through 2015. “We are convinced that 2015 will develop for IAG Cargo into a very positive manner,” Mr Gunning concludes.