The decrease of air freight, an opportunity for commercial airlines?

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Air freight : situation and players

It is a bad time for air freight. In June 2019, the world traffic fell by 4.8% in tonne-kilometer (TKM) compared to the same period in 2018 (1). The International Air Transport Association (IATA) attributes this decline to rising kerosene prices, Sino-American trade tensions and protests in Hong Kong – forcing world’s first cargo airport to shut down temporarily.

Contrary to public opinion, the decline in traffic affects both commercial airlines and all-cargo airlines.

Indeed, close to 70% of world air freight (in TKM) is transported in cargo decks of commercial aircrafts. Moreover, the top 10 freight carriers are occupied by 7 commercial airlines against 3 cargo specialists only.

Freight constitutes 10 to 20% of commercial airlines revenues. To compensate the freight deceleration, the latter will have to capitalize more on passenger revenues in order to ensure their growth.

Cargo decks of commercial planes are becoming an additional source of revenue to leverage.

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(2)

The innovation offered by Airbus and Safran

In March 2018, Airbus and Zodiac Aerospace (now Safran Cabin) announced a partnership for the development and launch of passenger units located on the lower decks of A330s – space previously reserved for passenger luggage and cargo.

The partnership glimpses sleeper units, lounge, areas for children and meeting rooms. Safran Cabin which already produces rest units for on-board staff, would like to extend its services to passengers until 2020. This additional comfort feature arises with the return of ultra long-haul flights, made possible with planes capable of covering previously unattainable distances (A350-900 ULR and 777-8X).

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© Airbus SAS 2017 – All rights reserved.

The passenger units will be easily interchangeable with the regular freight containers and will constitute an alternative to compensate the vacant lower cargo deck led by the decrease of cargo freight. These new services, sold as a paid option, are very timely for airlines which want to optimize each square meter on their planes.

© Airbus SAS 2017 – All rights reserved.

In addition to being a source of alternative revenues when cargo demand is low or not profitable enough on some routes, the pods allow airline companies to differentiate their offers and “upgrade” their service level at lower costs, without structural modification of the seats and the cockpit.

The concept raises a clear business interest – AirFrance-KLM is interested in equipping its A330s – however it must be validated by the European Aviation Safety Agency and the American FAA. Therefore, the units will become an additional profitability lever in an industry where average profit per passenger per year (6.12$) doesn’t exceed the price of a Big Mac in Switzerland. (3)