EUROPEAN AIR CARGO~ Volumes up at Air France-KLM, but not revenue

Increased competition and rising costs are constraining revenue growth even as volumes grow at Air France-KLM.

A strong euro, increased competition from Asian and Middle East carriers and high fuel prices which have led to a modal shift of some air freight to sea freight have put downward pressure on the revenueof virtually all European carriers.

And Air France-KLM is no exception as it posted a 3.8 per cent rise in cargo traffic in the six months to 30 September, but without a corresponding boost to its finances.

Cargo revenues, in fact, fell by two per cent to €1.4 billion during the half year, while operating profits tumbled into a €29 million loss. Unit revenue per freight tonne kilometre was down 5.7 per cent and per available tonne kilometre down 3.6 per cent.

The fall of the dollar against the euro was only partly to blame for this, depressing revenues by about three percent. Eelco van Asch, vice president marketing, communications and e-distribution for Air France-KLM Cargo, says the high euro might soon start to hit the export of consumer goods to Japan and SouTheast Asia, but says the shipment of investment goods to China continues to show strong growth regardless.

The problem on these routes, however, is that Air France-KLM is facing greater competition from Asian carriers, with a number of new freighter services starting to Scandinavia, Eastern Europe and Amsterdam in the past year. Competition from sea freight also continues to be high, with shippers switching modes due to the high cost of aviation fuel.