AF-KLM blames overcapacity for poor cargo results – and warns of 2020 costs

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Air France KLM expects a hit from coronavirus of up to €200m, it said as it announced its full-year results. Total cargo revenue for the year fell 5.9% to €2.1bn, with a 2.3% drop in volumes, to 1.1m tonnes. Its cargo load factor was also down, dropping 2.3 percentage points on 2018 to 58%.

AF KLM blamed overcapacity and weak demand.

“Substantial cargo industry capacity additions in 2019 led to the worst traffic versus capacity trend for the last 10 years, driven by opportunistic growth strategies after the strong cargo market in the second half of 2017 and full-year 2018. This caused substantial (belly) overcapacity, particularly on the North Atlantic routes.

“On the demand side, at the year-end, worldwide air freight volumes had fallen for 14 consecutive months, caused by geo-political uncertainties resulting in weak global air freight demand, trade tensions impacting especially ex-Asia volumes and a strong decline in demand from the automotive industry.

In this context, the market share of Air France-KLM Cargo proved resilient, with the growth realised in alternative flows partly mitigating the ex-Asia losses.”

You can see the full results here, and a report by Reuters here.