(UPDATED Dec. 20, 2022 12:52 PM EST)
CMA CGM Air Cargo, the startup airline of France-based shipping giant CMA CGM, abruptly dumped logistics customers and stopped selling its own service in the U.S. so it can lease the aircraft to other cargo airlines in an apparent effort to achieve profitability faster amid weakening market conditions, FreightWaves has learned.
Officials at the parent company confirmed that CMA CGM Air Cargo is no longer selling space to freight forwarders on its own cargo jets operating to Chicago and Atlanta from Europe but declined to give a reason for the sudden change or explain how the freighters are currently being used.
But a review of fleet and aircraft data on aircraft tracking site FlightRadar24 shows that several widebody freighters registered to CMA CGM are currently flying for DHL Express and Qatar Airways Cargo.
With six total aircraft, CMA CGM Air Cargo is a relatively small freighter operator still trying to gain a foothold in a market it entered a mere 20 months ago.
The immediate cutoff of service was a shock to logistics providers moving regular amounts of freight with the carrier and jeopardized delivery commitments made to their own customers.
“From a commercial standpoint, and from a branding standpoint, it’s incredibly damaging, because we’ve been promoting a service that no longer exists,” said an executive for a U.S.-based freight forwarder who asked to remain anonymous.
The shift in strategy comes as the new airline tries to build a book of business amid a global downturn in airfreight traffic this year. CMA CGM executives seemingly calculated they could turn a profit faster by leasing the aircraft for a flat fee.
“As a customer-centric company, we permanently adapt our offers to provide tailor-made services to our customers,” CMA CGM said in a statement provided to FreightWaves. “To adjust to our clients’ needs, we have made the decision to temporarily suspend our connections with Chicago and Atlanta. Our customers have been kept well-informed throughout this process.”
Ceva Logistics, a global warehousing and freight management company owned by CMA CGM, was also impacted by the sister company’s pause in service.
“Through regular communication with our carrier partner, we were aware in advance of CMA CGM Air Cargo’s decision. As a result, we were able to secure sufficient capacity with other partners in our carrier network and will continue to serve our customers needing air transport solutions to and from U.S. markets,” Ceva said in a statement.
The move is potentially risky if it turns off customers or creates uncertainty about whether the airline is a reliable partner. Still, collateral damage may be minimal. More than a dozen freight forwarders contacted said they were unaware of any stoppage in service because they did not have long-term contracts with CMA CGM and only placed occasional ad hoc shipments with the carrier.
Outsourcing Transportation
CMA CGM launched its air cargo airline in early 2021, part of a strategic plan to invest huge shipping profits in logistics capabilities and become a provider of turnkey services to large multinational companies interested in reducing supply chain complexity. The company recorded a $9.2 billion operating profit in the third quarter with a 46% profit margin, on par with last year’s stellar results.
The company purchased four used A330-200 freighters from Qatar Airways, set up a base in Liège, Belgium, and outsourced the flying to Air Belgium — until then an exclusively passenger airline. Two of its earliest routes were to Chicago and Atlanta. Last summer it received two factory-built 777 freighters from Boeing. CMA CGM operates the 777s from Charles de Gaulle airport in Paris after obtaining an air operator certificate in France last summer that allows it to use its own pilots. It is repatriating the A330s from Air Belgium to its own operating authority, with the final one scheduled to change over on Feb. 10, an Air Belgium representative said.
Several days after this story was published, a CMA CGM said through a spokesperson that the transfer of the A330-200 to the French air operator’s certificate was the reason for the pause in U.S. operations. “For each aircraft to be repatriated, there is a technical and administrative process to go through which requires downtime. Due to the logistics of this operation, CMA CGM AIR CARGO had to temporarily interrupt its services to the U.S. for several weeks. This suspension was only temporary, and CMA CGM AIR CARGO will resume its cargo flights towards the United States in the coming weeks.”
In September, CMA CGM Air Cargo began flying five times per week between Paris and Hong Kong utilizing one of the large 777 freighters. But Chicago O’Hare and Atlanta are not currently part of the airline’s network.
Instead, one of the 777 cargo jets and an A330 are currently in service for Qatar Airways’ cargo division, shuttling between various European airports and Doha. And two of the A330s are under contract with European Air Transport, a registered cargo airline of DHL Express. The DHL flights are operated by Air Belgium between Brussels Airport and DHL’s North American air hub near Cincinnati, and between Brussels and Miami, a regional DHL hub, according to FlightRadar24 data.
A fourth A330 was operating for Qatar Airways for a short period but has since stopped. Tracking sites show the plane making infrequent trips between Paris and Nimes, in southern France. On Wednesday, the freighter made a Paris-to-Cairo round trip.
‘Fantastic’ deferred air service
CMA CGM Air Cargo’s decision to pull out of the U.S. market on short notice left forwarders that purchased bulk cargo space on future flights scrambling to find alternative arrangements for goods they already committed to move for their clients.
The withdrawal was even more disappointing because CMA CGM provided a “fantastic deferred air service” that allowed logistics companies to consolidate in Chicago shipments from the Rocky Mountains to Appalachia in the east and ship them to Western Europe at attractive rates, according to the logistics executive. An airfreight service that was slower than direct flights but faster than ocean shipping appeals to many cargo owners, especially with container lines canceling some sailings, chassis shortages at ports and other sea freight constraints.
“It was a great overall service offering that was marketable to our existing customer base and for prospective business in the [industrial] verticals that we were selling in,” the source said. On rare occasions when there were service glitches, such as a data error involving the ground handling agent, CMA CGM representatives quickly got involved and resolved the issue. “It was one of the best experiences I have had with an airline in my career” — until the rug was yanked out, he said.
The source said the freight forwarding company is finalizing negotiations with a major carrier to support a consolidation program to replace the one it had with CMA CGM Air Cargo. Until then, it continues to piece together the necessary volume with multiple carriers on an ad hoc basis.
CMA CGM breaks out earnings for its container and logistics businesses but does not provide any details about air cargo.
In October, the French shipping conglomerate named longtime ocean executive Guillaume Lathelize to head air cargo, replacing Olivier Casanova, who returned to the parent company after little more than a year to resume his prior role as deputy CFO.
Earlier this week, CMA CGM began selling capacity for the first time on a digital marketplace. CargoAi said the airline joined its electronic booking platform, which will be available to customers in five countries – France, Germany, Belgium, the Netherlands and Hong Kong.
Click here for more FreightWaves/American Shipper stories by Eric Kulisch.
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