Volga-Dnepr Group / Press-center / Media Coverage

Call for cargo carriers to take a long term view of the market

11/14/2008

Freighter operators are facing challenging times, but Robert Song is somewhat bemused by lamentations from his peers about being hit by a perfect storm.

Pointing to 14 the cyclical nature of this industry, the Commercial Director -Global AirBridgeCargo Airlines, argues that operators should plan from the outset for high operating costs and a slowdown in markets.

A great number of players appear to have adopted a different approach, though.

According to Song, the flurry of orders for freighters placed in recent years was largely based on the assumption that growth patterns at the time would continue. "We need a robust long-term view of the market," he declares. "We need to be a lot more careful and not jump to conclusions based on a snapshot of the market."

Song illustrates this with many operators' hangover from the China market. In his analysis, the market is still going up; it is just yields that have declined - and rightly so.

When it comes to electronics, consumer expect prices to go down, he says. Why shouldn't the same happen with airfreight yields? AirBridge's own course has not been entirely unruffled. Originally management had planned to launch North America service from Siberia on a trans-polar routing once it received the first B747-400 ER freighter.

The aircraft duly arrived last November, followed by two more, but US service is still some time away. US exports have actually performed rather well, but the drop in the value of the US dollar has created a situation where AirBridge finds it can achieve better results deploying the aircraft elsewhere for the time being, Song says.

Fundamentally, AirBridge's network is determined by the needs of its customers, Song claims. He stresses the importance of long-term agreements with block space deals, adding that the airline is in the process of extending this model across Europe. "The majority of our partners work with us on a long-term basis with block space agreements.

Unlike some other carriers, we don't have just one customer but several. This gives us a good balance," he comments. AirBridge has also striven to develop long-term alignments on the airline side.

The Russian cargo airline has built up partnerships with Nippon Cargo Airlines and Singapore-based Jett8; arrangements that give it access to new markets. JettS can feed traffic from Southeast Asia - a region with growing demand for capacity to Russia - to AirBridge, which has no presence in that market.

Song sees room for deepening the partnerships with those two carriers, not so much along the lines of joint marketing or product alignment as in the realm of curbing costs by pooling resources and buying leverage. Even with a long-term perspective, AirBridge should have reason to feel under the weather at the moment, given its contingent of B747-200 freighters in action. However, there is still room for the "Classics" in the market. "747-400ERFs are very good but extremely expensive to finance, -200s are very cheap. If you need to operate longhaul, your best bet is going to be the -400. We have a mix of destinations, some long, some medium stage length. For most of our routes from Europe to Russia and from Russia to Asia, the -200 is more economical," he states.

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