Air Transport
with Jon Ross
Russia-based all-cargo operator AirBridgeCargo Airlines, a division of Volga Dnepr, has been seeing increased air freight demand to and from the United States since July 2014.
To take advantage of that demand, the carrier is developing service between Los Angeles and China this year, according to Robert Van De Weg, ABC’s senior vice president of sales and marketing. The carrier may also add routings to Atlanta.
In 2014, it added brand new routings between Frankfurt and Dallas, and it increased service to Chicago.
Van De Weg said the carrier is a major cargo player between Europe and Asia, and that it hopes to repeat its success between its markets in Europe and Asia to the United States. He said the carrier’s tonnage between the United States and Germany more than doubled in 2014, and volumes between the United States and Amsterdam are also increasing steadily.
“I believe there is still plenty of market share to go for, and ABC has all it takes to repeat its Asia-Europe success,” he said.
This push to U.S. cities goes hand-in-hand with ABC’s overall growth in demand, which resulted in a tonnage increase of 17.6 percent in 2014. While beefing up its Chicago service, the carrier added increased offerings to Amsterdam, Milan, Hong Kong, Seoul, Shanghai and Tokyo. New routes were added to Leipzig, Munich, Basel and Malmo. Hanoi is on tap for ABC service this year.
“We are trying to be flexible in our network planning and to be able to quickly respond to ad-hoc opportunities, should any arise due to the market situation or other carriers’ decisions,” Van De Weg said. “Our job is to fly not where it is more convenient for us, but where our customers want us to. And this is the only way for an all-cargo operator to survive and develop.”
Some of the most recent demand growth to the United States has been directly related to the maritime port slowdown on the U.S. West Coast. The protracted contract negotiations between the International Longshore and Warehouse Union and Pacific Maritime Association left shippers looking for available air cargo transport, and ABC was more than happy to offer its freighter services. Now ABC is preparing to take advantage of predicted long-term U.S. tonnage increases, according to Van De Weg.
Last summer, the carrier expanded by 75 percent the amount of freighters flying in and out of the United States, and it increased frequencies to the country from Asia and Europe during the winter, adding 42 percent more capacity. Van De Weg said freighter routings between the United States and Germany have seen steady demand. ABC’s tonnage between the United States and Europe, overall, rose by 95 percent last year.
In an interview before the ILWU and PMA reached a contract agreement, Van De Weg said stable demand to the United States would continue regardless of the port situation.
“The underlying demand to the USA is simply strong due to the performance of the U.S. economy,” he said. At the time, Van De Weg had predicted the congestion issues having a larger impact in 2015 than they did last year, but even with the issue resolved, there’s still a positive demand outlook for U.S. air cargo.
Yet with the positive effects of the rising worldwide economy and the temporary boost the U.S. West Coast port congestion handed air freight, Van de Weg said the market is still struggling. Air cargo has seen average tonnage growth for the past couple of years, but the market is still “relatively flat,” he said. According to the latest figures from the International Air Transport Association, the worldwide air cargo market grew 4.5 percent in 2014, when compared to 2013. In the first month of 2015, air freight expanded 3.2 percent year-over-year.
Van De Weg said one of the main issues is overcapacity. The availability of air cargo, which has risen without a subsequent rise in demand, comes primarily from the growth of Persian Gulf carriers and a continued increase in passenger planes. ABC’s freighter fleet is growing, too. In February, ABC took delivery of its fourteenth Boeing 747 freighter, and it will add another 737-400F in April for service in Russia. Another 747-8F could be on the way in September, Van De Weg said.
But capacity outstripping any growth in demand has been a storyline in air cargo for a few years. The shaky value proposition of freighters, and the retirement of older all-cargo planes or the decision by some carriers to get out of freighter operations altogether, is also nothing new.
“On the other hand, there are good signs emerging as well,” he said. “First of all, volumes seem to still be there, which tends to push increases in yields on some niche traffics. Besides, last year’s [tonnage] growth surpassed the [capacity] growth for the first time in several years.”
ABC’s Russian association and the swirling trade sanctions surrounding the nation haven’t caused the carrier any harm. As Van De Weg explained, since Russian cargo isn’t a huge part of its business, the impact of recent political moves has been minimal.
“From the middle of last year, we have seen a decrease in overall volumes to Russia, not only from the United States,” Van De Weg said. “However, this trend is driven more by the decrease in oil prices and fall of the Russian national currency, which unfortunately results in lowered purchasing power. We have not seen a major impact on our growth opportunities since ABC is a global air cargo carrier, and volumes to Russia constitute less than 20 percent of our business.”
Van De Weg would like to focus on ABC’s emerging value as an international carrier and a premier freighter operator to the United States.
“Our core business,” he said, “is trans-continental long-haul routes between Europe, Asia and the USA.”
Ross, a former American Shipper editor, writes about air transport and freight issues. He can be reached by email.
This column was published in the April 2015 issue of American Shipper.