Tail and AKEs

IAG Cargo has denied that this week’s five-day long strike at Iberia will severely disrupt freight operations. Iberia will operate 85% of its long-haul flights and 62% of its medium haul this week, while freighter operations will continue as normal with only minor changes.

“The Iberia strike will have an impact on customers, but we are trying to communicate with them where necessary,” said IAG Cargo managing director Steve Gunning. “We will rebook and reroute freight. Customer reactions have been pretty positive, but yes, there will be some degree of disruption. In the longer term I’m not concerned – it’s essential that Iberia is sustainable.”

BA’s Unite members will also demonstrate against the proposed 3,800 job redundancies on Wednesday outside IAG’s offices at Heathrow.

IAG Cargo, which released its fourth quarter and full year results on Thursday, bucked the downward trend among European airlines to see revenues and yield rise in the full year 2012, despite lower volumes. Its full year results show that commercial revenues rose 2.3% on the previous year, to €1.2bn, while cargo tonne kilomertres fell 1.2%. Capacity rose 3.5% for the year.

“We had a solid set of results in a difficult market,” Mr Gunning told The Loadstar.

Rachel Izzard, CFO, added: “In the full year, yield was up 3.6%. We are holding market share even though volumes are down.”

Comparisons with Air France – KLM, which posted a €222m loss on full year cargo revenues of €306bn are inevitable, and point to a tighter ship at IAG, which is enabling it to hold on to market share.

“Our market share in interesting,” said Mr Gunning. “It held flat – but with the exception of two Middle Eastern carriers, others declined.”

The management declined to break down the financial results into British Airways World Cargo and Iberia Cargo, pointing to the increased integration between the carriers. “We do break down the figures, but we are cross-selling now – so, for example, freight on a flight to Lima is partly on BA and partly on Iberia,” explained Ms Izzard. “The overall focus is on IAG. We are very keen on sales and customers looking at the overall network.”

IAG itself made a €997m pre-tax loss on revenues of €18bn, down from a €503m profit for 2011, as it took on €545m in restructuring charges related to Iberia and €351m in losses at the Spanish carrier. Air France KLM made a €1.19bn loss on revenues of €25.6bn.

Mr Gunning said that splitting off the cargo division into a separate subsidiary of IAG had benefited the team. “Being a separate division has made a lot of difference, increasingly so. There is a different feel to the business. We have a better share of the voice and more autonomy than we did in the past. We are a young, new company.”

He also said that the carrier wasn’t considering buying freighters, despite the good prices currently available in the market. “We like the flexibility of the ACMI model. We would incur more costs if we had our own aircraft, and ACMI is the most appropriate for us.”

IAG Cargo will this year “continue to drive through the integration, finish the single revenue management system and enhance IAG cargo.com. There are lots of changes we need to keep making”. Mr Gunning added that it will also invest in infrastructure and premium handling, especially at Madrid, noting that these were key business areas. “There is a blurring of lines that used to exist. Everyone’s keen to take the parcel, mail and temperature-sensitive products business.”

Meanwhile IATA, which this morning released its air freight market analysis for January, pointed to continuing weakness in Europe which was driving down growth in world trade and limiting air freight growth. It also revealed that figures showing a 5% rise in air freight demand for January, year-on-year, were skewed by the February date of Chinese new year. After adjusting for seasonal factors, air freight volumes were about 2.5% higher this January compared with last year.

In a statement, Tony Tyler, IATA director general and CEO, said: “The air freight business is showing some encouraging signs. But it’s too early to be overly optimistic. While the decline has stopped, overall volumes are still below the levels of 2010 and 2011. Load factors are low. And the global economy is fragile. Our forecast remains for modest demand growth of 1.4%. But with weak load factors, yields are going to continue to be under severe downward pressure.”

European airlines meanwhile reported demand growth of 1.2% year-on-year while capacity rose 2.4%. Middle eastern and Asian carriers enjoyed the best results, with January demand rising 16.3% and 7.1% respectively – although with the adjustments made for Chinese new year, Asian carriers saw just 3% growth. Latin American carriers were the only ones to register a drop in demand, of 1.6%, set against a background of a 10.2% increase in capacity.

According to WorldACD, global yields fell 1.1% year-on-year, while chargeable weights rose 8% in January.

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