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Ncfc99
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Joined: Tue May 31, 2005 2:42 am

Cargo Revenue?

Wed Nov 13, 2013 9:51 am

A question or two I have been trying to get my head around for a while-

What is the ballpark %of airline income that comes from carrying cargo in the bellies of pax aircraft?
What is the rough $ cost of abusing an aircraft with high payload/capability on routes that do not need that capability?

I'll use the pending EK 777-9 order as an example (maybe LH could be used aswell, I'm not sure I understand thier 779 order considering thier earlier statements). They are rumoured to be ordering around 100+frames of the 779 which is a long range high payload aircraft, with suggestions that they will eventually have 200+ of them. I can see a use of 50ish frames with high payload/range for the long range flights to LAX etc, but with another 150ish frames being abused on flights that don't need such good capability. I look at the EK routes and fleet and wonder weather they would be better off adding a fleet of 78J's or push Airbus for the simple streatch 35K's, or simply more 35J's to cover the many routes that don't need the extreme payload range, but has 90-95% of the pax capacity and still some payload to carry cargo.

I see many post stating that it is down to cargo revenue, and I agree airlines need to grab as much income as possible, but how much income do they actually get from cargo against the extra costs involved in abusing an airframe. I cant get my head around the benefits of abusing 150ish 779's (fuel, purchase costs, landing fees etc) over using an airframe better matched to the routes flown.

I apologise if the above seems a bit of a ramble, but I hope you get the jist of my questions and thank you in advance for any replies.
 
PanHAM
Posts: 8530
Joined: Fri May 06, 2005 6:44 pm

RE: Cargo Revenue?

Wed Nov 13, 2013 10:40 am

Many routes are adding the additionbal revenue to make that particular flight viable.

When Austrian gave up the Australia services they inherited from Lauda, they stated that the flight was loss making as reason. They forgot however to include the freight revcenue in their calculation. Fact is, OS gave up an overall profitable route.

EK is dumping capacity in many markets, not only freight but seats as well. They have an aggressive sales force, same for their neighbours, to fill the capacity anbd succeed. If they net a US$ per kg on each Segment (most freight is connecting through DXB) they might be lucky, more than US$ 2,00 per kg after ground Handlung would be extremely difficult to achieve.

LH OTH has no longer the Intention to be the largest cargo carrier in the world. Income is more important than market share. I see no difficulty for them to fill the capacity, whereby, the average load factor is at 69%. This low figure is explained by the fact that most pure freighter and long distance flights achieve 80%++ average loads whereas European and especially domestic flights drag that figure down.
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roseflyer
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RE: Cargo Revenue?

Thu Nov 14, 2013 12:04 pm

Quoting ncfc99 (Thread starter):
What is the ballpark %of airline income that comes from carrying cargo in the bellies of pax aircraft?

For international airlines without dedicated cargo operations, the % of revenue from cargo tends to be about 3%. Emirates, Lufthansa, Korean, etc have cargo divisions, which changes the picture. Those airlines derive as much as 10-15% revenue from cargo.

It is very rare for cargo to make a big difference in deciding fleet choice and route choices for flights operated by passenger airplanes. There are some routes, but for 99% of passenger airplane flying, routes are determined based on passenger schedules and demand. International cargo demand does not need daily nonstop flights to the hub. Cargo is better transported via multi-stop long haul routes that are less than daily. Justifying a passenger route on cargo is very difficult. Cargo is great incremental revenue, but airlines truly dedicated to cargo have the flexibility to use freighters as well.

There are some exceptions. For US airlines Lima is an exception due to agriculture. You see airlines operating 767s and A330s there because of the high cargo demand whereas the passenger demand is closer to a 757.
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Viscount724
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Joined: Thu Oct 12, 2006 7:32 pm

RE: Cargo Revenue?

Thu Nov 14, 2013 11:01 pm

Quoting roseflyer (Reply 2):
For international airlines without dedicated cargo operations, the % of revenue from cargo tends to be about 3%.

AC cargo revenue for 2012 was 4% (per 2012 annual report).
 
sunrisevalley
Posts: 4950
Joined: Tue Jul 06, 2004 3:26 am

RE: Cargo Revenue?

Fri Nov 15, 2013 12:05 am

Quoting ncfc99 (Thread starter):
I apologise if the above seems a bit of a ramble, but I hope you get the jist of my questions and thank you in advance for any replies.

You are raising a topic dear to my heart ! A clue on belly cargo yields is in the recent Aspire article on the 777X where they touched on the importance of belly cargo to CX. A gross margin of 60% was quoted. It isn't too difficult to calculate fairly closely the incremental fuel burn for the cargo component. What I have no clue on is the incremental revenue. There is a TATL carrier who hauls 24t each and every day on a 77W . Do they pocket 2.00kg or 3.00kg or 50cents a kg. I simply don't know. I do know that the incremental fuel cost is probably between 35 to 55c a kg depending on the sector time.

I was pitching the idea of the 777- 8LR as an ideal combo machine for the Asia to Atlantic coast of USA city pairs. The modern twins are volume restricted , that is there is no way in most cases that they can load to MZFW. A study done a few years ago set the density value for belly cargo at ~ 163 Kg M^3. On this basis the -8LR is good for ~56t for a 16 hour sector . Of this 22t could be belly cargo. The A35J hits its 58t ( cargo 33t) at 13.5hrs sector time and the 777-9X its 65t (cargo 39t) at 13hrs sector time.

In 12 to 15 years there are going to be large fleets of these aircraft with their big bellies with the ability to haul large tonnages for little more cost than the incremental fuel, some engine wear because of higher take off thrust and tire wear because of higher take off weights.

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