Bold steps for Europe’s big two cargo carriers

Desperate times often call for desperate measures, but for cargo carriers battered and nearly beaten by the harshest air cargo environment in history, it’s more likely bold and innovative action that will see them through. Donald Urquhart and Peter Conway examine how two of Europe’s biggest air cargo groups – Air France-KLM and Lufthansa – are confronting the crisis.

Air France/KLM capacity reduction cost-cutting measures global economic crisis Lufthansa Martinair

The magnitude of the global economic crisis-induced crash in the air cargo market is, by now abundantly clear to all. A 20 per cent free fall in volumes with only a five to eight per cent cut in industry capacity has seen precious yields drop by 20 per cent in the first half of 2009. The resultant impact vaporised nearly 40 per cent ofthe industry’s total revenue stream.

“When you are planning networks and capacity growth in 2008/09 and suddenly you are back at 2003 levels, you are hit hard,” says Michael Wisbrun, EVP KLM Cargo and chairman for AFKLM Cargo.

For Wisbrun and his Air France counterpart – Florence Parly, EVP Air France Cargo and deputy chairman AF-KLM Cargo – much of the problems cargo carriers now find themselves in is a result of simply being too slow and/or too reluctant to cut capacity deeply enough.

“We are not responsible for the crisis, but we do feel extremely responsible for how we react to it,” says Wisbrun to journalists in Amsterdam last month as he and his top cargo executives explained in detail the cargo group’s unique strategyfor dealing with the crisis.

Drastic capacity cuts
Parly, highlighting the need for greater industry discipline in managing capacity emphasises that the AF-KLM group were front runners in reducing capacity – taking action as early as the beginning of last winter and not waiting for the full impact of the downturn to do it.