Cargo revenue at All Nippon Airways was significantly worse than its peer group during the calendar second quarter, with the Japanese combination carrier on Friday reporting a 60% decline in sales for goods transport on its passenger and dedicated cargo jets.
International Airlines Group (IAG), the parent company of British Airways and four other carriers, experienced a 32% drop in cargo revenue, while second-quarter cargo receipts at Air France-KLM Group (DXE: AFKLM) contracted by a third year over year, according to earnings results published the same day.
U.S. rivals Delta, American and United previously said top numbers for cargo fell 37% to 40% during the three-month period. All three, plus IAG, are pure passenger airlines. All Nippon Airways has the advantage of operating nine Boeing 767 medium widebody freighters and two large 777 freighters in addition to 225 passenger aircraft.
The Japanese airline said international cargo revenue for the first quarter of the fiscal year fell 60% to 38.1 billion yen ($272.1 million) on a 20.4% drop in volume despite efforts to capture trans-Pacific traffic. Load factors decreased nearly 14 points to 54.7% and yield fell 47.5%.
Volumes were impacted by lower shipping demand for semiconductors, electronics and automotive goods.
Revenue ton kilometers, a measure that influences revenue because the price includes a distance component, declined five points more for ANA’s freighters than the fleet overall. But freighter load factors were more stable, dipping 2.6% to 63.4%.
ANA’s results are a microcosm of the challenging economic environment facing the air cargo sector, which has been in recession since the second half of last year. Air cargo demand has fallen 7% to 10% since March 2022, as ocean supply chains recovered and the global economy slowed, while capacity has steadily climbed with the reintroduction of more international passenger services in the wake of the COVID crisis. Shipping rates are 40% to 50% cheaper than a year ago.
The cargo division’s performance was slightly better when including domestic transport, which represents a much smaller share of the business.
Despite the downward result, revenue was 1.5 times higher compared to 2019 levels.
ANA said it has responded by instituting more flexible flight scheduling for freighters and targeting more interline traffic, in which cargo is transferred from one airline to another at an intermediate location and the proceeds are shared. Management projected cargo volume will be flat in the third quarter.
During the fiscal year that ended March 30, ANA’s cargo revenue fell 25%.
Earlier this month, ANA reached a final agreement with Nippon Yusen Kabushiki Kaisha (NYK Line) to acquire Nippon Cargo Airlines in a stock transaction scheduled for Oct. 1. The ocean carrier tentatively agreed in March to sell its air cargo operation because rising costs needed to sustain growth, such as ongoing requirements for new aircraft and maintenance, were more than it was willing to bear.
NCA owns and controls 15 Boeing 747 jumbo freighters: eight 747-8s it flies under its own operating certificate plus five older 747-400s operated on its behalf by U.S.-based Atlas Air and two 747-400s crewed by ASL Airlines Belgium.
The deal is a central part of ANA’s new strategy to grow its cargo business. ANA said NCA’s fleet of large freighters and focus on international service will help it better manage market volatility and provide needed capacity as passenger airlines downsize aircraft, leaving less belly space for freight.
The International Air Transport Association recently certified ANA for meeting the highest quality standards for handling perishable goods, which the carrier anticipates will help attract more customers. Proper training, handling procedures and cold-chain infrastructure are essential for maintaining freshness during transport.
Japan’s Ministry of Agriculture, Forestry and Fisheries wants to increase exports of agricultural, forestry and seafood products.
ANA’s overall performance, including a 14% gain in revenue, enabled it to achieve the first operating profit in four years for the first quarter.
IAG and AFKLM
IAG (LSE: IAG) reported cargo revenue of 280 million euros ($309.5 million) during the second quarter, a 32% decrease from the year-ago period. British Airways and Iberia deliver nearly all cargo business for the group.
IAG’s results were slightly better in the first quarter. For the first half, cargo revenue and average unit prices were down 28.5% and 37.6%, respectively. Compared to 2019, revenue increased 8.5% despite a 15% decrease in tonnage, with yields up more than a third.
IAG Cargo recently opened a $110 million cargo facility at London Heathrow Airport, its hub. The large, semiautomated warehouse more than doubles handling capacity and includes a sophisticated refrigerated area for pharmaceutical and life science products.
Overall, IAG reported it quadrupled adjusted operating profit of $1.4 billion for the quarter from a year ago. It also announced the exercise of options to order 787-10 Dreamliners from Boeing, plus six more options for the long-haul aircraft. It also converted one Airbus A350-900 option held by Iberia into a firm order. The aircraft will be delivered in 2025 and 2026.
Meanwhile, Air France-KLM said second-quarter cargo revenue was $670 million, 34% lower than the same 2022 period. Tonnage fell 10%, but the main driver behind the results was excess capacity (up 6.5%) that pressured rates, as reflected in a 43% drop in unit revenue. The fill rate for cargo space was 44.6%, down more than 7 points.
The Air France-KLM Group operates six cargo jets (KLM’s three Boeing 747-400 production freighters, Martinair’s one 747-400 converted freighter and Air France’s two 777-200s).
In early April, CMA CGM and Air France-KLM kicked off their 10-year alliance under which they will jointly market freighter capacity and combine networks and dedicated services to increase scale and competitiveness.
Air-France KLM’s enterprise operating profit increased 90% to $810 million, but the company said it expects costs to increase in the second half due to fuel and higher salaries.