Revenue up in premium airfreight market

Following shareholder and board approval, British Airways is set for a UK£600 million cash injection intended to breathe new life into the company. Following a series of costcutting exercises, which has seen a 25% reduction in the number of management heads, the airline is now in a strong position, newly appointed regional commercial manager for Africa, Mark Stubbings, told FTW in Johannesburg last week. And every staff member has played a role in the rejuvenation efforts. Fairly controversial was the company’s Business Response Scheme which called on staff to do the most they could to help cut costs, given the fact that companies were going out of business every day – and for BA that was a real risk 2-3 months ago. The options were to take voluntary unpaid leave, work without pay for a week to a month, or hand back leave. It wasn’t mandatory but the majority of the workforce rose to the occasion, including Stubbings who chose the work without pay option. The airline is now in a far stronger financial position to confront the challenges ahead – but while Stubbings subscribes to the global view that the recession has probably bottomed out, he doesn’t expect any signs of a turnaround before 2010. From a cargo perspective the market out of Africa in general has dropped slightly, says Stubbings. “If you look at the premium market our tonnages are flat but our revenue is up by 20%. It’s an area on which BA World Cargo is focusing with its Constant Climate product.” Fewer shipments at smaller weights is the trend, and good news for the airline industry, translating into higher yield. Another positive flows from the lower oil prices. “Last year’s shift to seafreight in response to the hike in fuel surcharges has largely reversed. “And because of the supply/ demand ratio, airfreight rates have been driven down which means it’s now as cheap to put cargo in the air as on sea,” says Stubbings. But as operators fight for diminishing volumes, some players are driving rates down to ridiculous levels, in his view. “We accept that rates will suffer but some individuals are doing it at negative values – not even cost neutral. “It’s all about gaining market share – and that doesn’t just upset the airlines, it affects freight forwarders and everyone in the chain because the margins are so tight that no-one is making any money.” But it’s not all doom and gloom. “In South Africa there’s a view from the perishable market that volumes will rise over the next several months. “We’re also seeing some positive moves particularly in West Africa which is a strong route for fruit to the UK and Europe.” The airfreight industry is clearly not expecting a smooth or speedy ride out of the recession, but there are pockets of optimism which innovative carriers will be exploiting to the full.