Cargo joint venture faces dramatic oversupply, disastrous yields

The announcement by China Southern Airlines and Air France KLM that the airlines have entered into exclusive talks to launch a joint venture cargo carrier in China, merits some close analysis, because it comes at a time when main-deck and belly-hold capacity have fl ooded the market and as a result rates and yieldsare under […]


The announcement by China Southern Airlines and Air France KLM that the airlines have entered into exclusive talks to launch a joint venture cargo carrier in China, merits some close analysis, because it comes at a time when main-deck and belly-hold capacity have fl ooded the market and as a result rates and yieldsare under extreme pressure.

In this month’s Supplement – pages 46 -54 – most of the leading players in the Chinese market acknowledge that capacity has outgrown demand and profi tability on the once lucrative routes from China has become questionable, to say the least. Indeed, several players have reduced frequencies or pulled out of the market altogether.

The question therefore is justifi ed why an airline, such as Air France KLM, which already is facing the same abysmal rates and yields as all the other carriers operating in this highly competitive – some say impossible – environment, has decided to seriously look into establishing a cargo joint venture with a (well-respected and experienced) Chinese carrier.

To be sure, we are talking here about merits of a cargo joint venture which, if the talks are successful, will compete with the likes of Cathay Pacifi c, which last month unveiled details of a cargo airline it plans to operate in partnership with Air China. Or the already operational venture between Lufthansa and Shenzhen Airlines in Jade Cargo International, or Korean Air, which intends to launch a joint venture cargo carrier with Chinese logistics fi rm Sinotrans this year.