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.
To the Middle East too the carrier is feeling the effect of the large increases in capacity by Gulf carriers, which has effectively soaked up all the available growth in the market.
Van Asch admits all this has affected eastbound yields from Europe, though he says Air France-KLM has the advantage of having a much higher frequency of main deck services than its eastern rivals, along with more belly capacity.
In contrast to these markets, Africa presents a positive picture at present, and van Asch says this has accounted for the bulk of capacity and traffic growth in recent months. Extra flights to South Africa, Kenya, Uganda and Egypt have been joined on the winter schedule by new main deck destinations such as Lagos, Cotonou and Brazaville.
The only Asian freighter destinations added were Baku and Ho Chi Minh City, though Hong Kong, Shanghai, Dubai, Hyderabad and Chennai got increased belly capacity, and a new passenger route was started from Amsterdam to Muscat.
On the capacity front, Air France is coming to the end of its rapid phase out of its B747-200 freighters, with the last three due to leave the fleet in December. At the same time a leased B747-400BCF will join the fleet from Air Atlanta, adding to three of the aircraft converted from its own passenger fleet that Air France has taken delivery of since June.
These are a bridging solution until the arrival of the first 777-200LRFs in October 2008. Air France is the launch customer for these, and will eventually standardise its entire freighter fleet on the type, phasing out both the -400 conversions and its B747-400ERFs.
The effect will be to produce only moderate main deck growth in coming years, with van Asch saying more growth will come from belly capacity. Th is is mainly due to B777-300ERs, with Air France about half way through its roll out of the aircraft and KLM due to start introducing them in February next year.
Air France-KLM Cargo admitted earlier in the year that it was in talks about a cargo joint venture with China Southern, but van Asch has nothing new to report here, despite the Chinese carrier becoming a member of the SkyTeam alliance in November. "We are still in exclusive talks and we hope to inform you more by early in 2008," he says.