IAG Cargo plans a new London premium temperature-controlled freight facility, double the size of the present one
Date added: October 6, 2016
IAG Cargo (which contains 4 airlines) is to build a new £55 million temperature controlled freight facility at Heathrow, to help it grow a “higher yielding” part of its business. IAG Cargo hopes this will be completed in 2018 and that the new building will be twice the size of the current IAG Cargo Premia facility (at about 8,500 square metres). The temperature controlled facility will be for expensive “premier” airfreight, for goods like perishable seafood – making more profit than many other sorts of cargo. IAG Cargo has not been doing well for the past two quarters, with commercial revenue down compared to a year earlier – down by 12% for Q2 2016 and down -1.8% in Q1. Some of the capacity will be for exports, but it is likely that the volume of imports will be larger (though Heathrow and the freight industry never draw attention to this publicly – just talking about exports). IAG Cargo say there is an expansion in demand from China, with the newly affluent middle classes wanting more sea food. They say razor clams and salmon from Scotland and Ireland are profitable exports. Apparently about 400 tonnes of Scottish razor clams were air freighted by IAG to China. [It is questionable how environmentally sustainable it is to grow these sea foods in the UK, to ship almost half way around the world – in biological terms as well as carbon]. IAG Cargo also handles fresh fruit and vegetables that are increasingly air freighted – as imports to the UK. More air freight mean more heavy lorries and vans, powered by diesel, around Heathrow.
IAG CARGO announces construction of a new London premium freight facility
22.9.2016 (IAG Cargo press release)
IAG Cargo has today announced that it is set to build a new premium freight facility at its London Heathrow Hub. The new building will be twice the size of IAG Cargo’s existing Premia facility and has been designed around the modern demands of premium airfreight. With a larger dedicated Constant Climate Quality Centre for pharmaceuticals; new delivery and collection doors and an advanced warehouse management system that will prioritise freight. The facility is designed to support the future demands of international premium trade. Set to become operational in 2018, the building will operate alongside IAG Cargo’s existing Premia facility.
The new building will manage the flow-through of all express Prioritise shipments and passive Constant Climate shipments.
Drew Crawley, CEO of IAG Cargo said ‘IAG Cargo’s four airlines now carry more premium freight than at any point in their combined history. With the continued growth of high speed e-commerce and cool chain logistics in particular , as well as the ongoing expansion of the IAG family and network, we need facilities that are ready for the next generation of premium freight.’
‘We believe that the blend of our next generation aircraft, new freight facilities such as this one and our expanding network means that IAG Cargo is extremely well positioned in the market to meet the current and future premium freight demands of all our customers. Our new premium warehouse will be built away from existing Premia, leaving our current operation and customer service unaffected”.
Sarah Coulson, Head of Strategy and Business Development at IAG Cargo said ‘Over the past few years we have continued to see year on year growth in premium freight. Our commitment to consistently deliver a high level of service to our customers has undoubtedly influenced our strong performance in this market. We want to continue our growth and performance in this sector and our new facility will help deliver this’.
IAG is in the midst of a major fleet renewal programme, which is opening up new route opportunities and providing greater capacity on key trade lanes. The new facility will be designed to accommodate this growth, offering optimised handling capabilities and an enhanced premium proposition.
IAG Cargo has today announced its Q2 2016 results, reporting commercial revenue of €241m over the period from April 1 to June 30, 2016, a decrease of 12.0% compared to 2015. Adjusting the prior year’s figures to reflect a directly comparable operation, commercial revenue decreased 12.8% versus last year at constant exchange.
Challenging market conditions continue, on a like for like basis IAG Cargo’s volumes were flat, while yields decreased 13.4% at constant exchange.
Drew Crawley, CEO at IAG Cargo, commented: “Trading conditions have become more competitive in 2016. Flat demand for consolidated general cargo and excessive freighter capacity in the industry is causing supply to continually outstrip demand. These challenges are not solely restricted to air freight, with increasing competition and capacity coming from road, rail and sea freight, exerting significant price pressures. These challenges are not new and despite these conditions, we have grown our revenue share.
“We continue to concentrate on the growth of our premium products, strong cost control and precision management of our capacity and yields. Despite the weak demand for general cargo, our premium products are consistently seeing strong tonnage growth and we are further investing in our premium portfolio.
“Our customers continue to value our extensive network, which was recently augmented with the addition of Aer Lingus. With our continued focus on smart partnerships and interline agreements, such as those with Finnair and Qatar, we are in the best possible position to compete effectively and offer our customers worldwide network reach.
“We have successfully launched several new South American routes this year, which are proving to be strong cargo destinations. These routes have been well received by our customers, with volumes being driven from pharmaceutical and perishable sectors in particular. Our new Madrid to Shanghai service commenced last month and we will also be adding several new routes to our network, such as, London to Santiago, as well as Madrid to both Tokyo and Johannesburg.
“The IAG Cargo platform, alongside our partnerships and premium focus, place us in a strong position to compete effectively in the current market.”
Challenging market conditions continue, on a like for like basis IAG Cargo’s volumes were down 1.8%, while yields decreased 6.9% at constant exchange.
Drew Crawley, CEO at IAG Cargo, commented: “These are respectable results in the face of a challenging market. The trading conditions experienced towards the end of last year have continued into 2016. The industry is also cycling over the west coast port strike that dominated the start of 2015, producing an unusually strong start to last year. Despite this high benchmark, the numbers reported today show that a relentless focus on premium products, strong cost control and precision management of our capacity and yields is helping our business to withstand these headwinds.
Our focus on premium products continues to pay off with double digit growth in tonnages of our Constant Climate and Prioritise products.
Our network expansion over the coming months will also be welcome news for our customers as we expand into strong cargo markets, we have announced routes from Madrid into both Shanghai and Johannesburg this year. Our expansion in South America to Lima, San Juan and San Jose will see new flows of perishable and pharmaceuticals enter our network. Meanwhile our new North American service into San Jose, California will enable hi-tech products to enter and exit one of the world’s leading innovation capitals.
Q2 will also see our integration of Aer Lingus Cargo pass several major milestones, bringing new routes to our network from Dublin to Hartford, Newark and Los Angeles this year.
The IAG Cargo model and strategy remains unchanged and we are confident that this is appropriate for the current market conditions our industry is experiencing.”
Scottish (environmentally damaging) salmon, farmed by non-British company, are main Heathrow air freight export by weight
November 25, 2015
An article in the Telegraph takes at face value the blurb put out by Heathrow on its air freight exports. As Heathrow and its backers never ever mention imports, people may be led to believe there are only exports and no imports going through Heathrow. The reality is very different. Heathrow’s figures show the total tonnage of exports in 2014 was 345,575 tonnes, out of the total of 1,501,906 tonnes. That is 23%. The other 77% by weight was imports. The value of exports via Heathrow in 2014 was £48 billion, out of a total for air freight of £101 billion. So the value of exports was 47.5%. Never mentioned by Heathrow. The Telegraph focuses on the exports of Scottish salmon by Heathrow. It is deeply odd, not to mention highly unsustainable, that Scottish fish are not exported from Scottish airports – and why they are flown to London, for their onward journey. It is also ironic because Scottish farmed salmon not only cause serious problems for the few remaining wild salmon, but also for the waters where the farms are located. And the farms are largely owned by foreign companies, so not British at all. The largest grower is the massive Marine Harvest Scotland, based in Norway. So Norwegian company damages Scottish environment, to ship fish by air to London, and then across the world. And Heathrow wants another runway so it can do more of this sort of thing. Weird world …
Food for thought as airlines eye greater yields by developing new product lines
By Ian Putzger (The Load Star)
What next after pharmaceuticals and perishables? As yields for general cargo continue to disappoint, airlines are looking to develop more special segments with juicy margins.
Even Cargolux, which for decades steadfastly eschewed defined products, now has a line-up of defined services targeting pharmaceuticals and hazardous materials to live animals, fine art and a service covering cars, engines and helicopters.
“Focusing on this new portfolio of products will significantly boost our support of the businesses of our customers and their customers and strengthen the good relations we enjoy with our partners in the industry,” declared Niek van der Weide, executive vice president for sales and marketing, when the cargo airline unveiled its new line-up.
Perishables have emerged as the second holy grail after pharmaceuticals, with more and more airlines offering special services to move consumable perishables, especially high-end food.
“Airlines are really aggressive with the perishables market. It is high volume, and they do want it,” noted Alex Strohmeier, manager of Kuehne + Nagel in Halifax.
Over the last two years he has seen several airlines mount freighter flights to the Canadian east coast to haul seafood to Asia and Europe.
A year ago Cathay Pacific highlighted the fast-rising thirst of Asian consumers for choice wines with a special service called Wine LIFT. Besides using teams with experience in handling fragile and valuable cargo and CCTV-monitored facilities for security against theft, the service offers temperature-controlled containers and storage to protect the precious liquid from temperature variations that might affect its quality.
“In recent years Hong Kong has grown to become one of the world’s leading wine-trading centres. Cathay Pacific Cargo has developed the Wine LIFT product in response to the increased need to ship wine in secure, controlled conditions,” commented Mark Sutch, general manager of cargo sales and marketing.
No other airline has followed Cathay into the wine cellars, but there has been lively interest in moving live animals, both among airlines and airports.
A new animal facility is taking shape at New York’s JFK airport, Calgary built one a couple of years ago and Luxembourg recently upgraded its animal set-up. Carriers like Qatar Airways and AirBridgeCargo have pushed aggressively into this segment, especially the carriage of race horses.
Others see changing retail and consumption patterns as the most promising avenue for growth in special segments. “I think e-commerce is the game changer over the next five years,” remarked Tim Strauss, vice president of cargo at Hawaiian Airlines. For the most part, this traffic increasingly moves from local warehouses to destinations all over the world, he noted. “If you want this in five, six or seven days, you need air transportation.”
China Southern Airlines underscored its focus on this arena with the launch of a cross-border e-commerce platform in early September. Interestingly, this is not a vehicle to move shipments of Alibaba and other e-tail giants but a platform that targets Chinese consumers who purchase goods from overseas. Trials for this venture reportedly commenced at the beginning of the year and generated some 1,500 tonnes of parcel traffic for the carrier in the first half of the year.
Within the broad range of items ordered online, some segments promise attractive yields. Tigers Inc., a Hong Kong-based logistics firm with a heavy focus on e-fulfillment, took over WorldLink this summer, a $50 million logistics firm from Australia that specialises in perishables. One major focus has been the shipment of lobster to China.
Tigers CEO Andrew Jillings sees increasing demand for B2C [business to consumer] deliveries to China and other Asian countries and points to the growing appetite for fresh food among the rising middle classes in these countries. Besides consumers, restaurants in China are keen on a steady flow of e-commerce flows of lobsters to meet their daily needs rather than buy from middlemen, he says.
IAG Cargo also has its sights on Chinese palates. Daniel Johnson, manager of global products, reported huge demand from Chinese consumers for premium seafood from Europe, such as crabs and razor clams and other crustaceans.
Unlike fruit and vegetables, which make up the bulk of perishables flows, this type of perishables offers better yields and shows good growth momentum, he added.
Japan Airlines Cargo has been an early mover in this segment. In co-operation with Japan Post, the carrier offers a premium express service to a number of major metropolitan centres in the Asia-Pacific area. This product, which uses special cooling containers which were designed specifically for this venture, allows consumers in markets like Singapore, Hong Kong and Taipei to order high-end Japanese food items, such as designer-grade sushi, directly from Japan. The pair face competition from Japanese parcel giant Yamato Express, which offers an express service for Japanese food to major Asian markets in partnership with All Nippon Airways.
For airlines, partnerships are the ticket to prosper in the e-commerce segment. “Our target customers for e-commence are post offices who have a key strategy targeting the e-commence segment,” remarked Mr Sutch. Cathay provides the linehaul from airport to airport, while the postal operator manages the delivery.
“We are never going to be an integrator,” Mr Sutch said.
Stan Wraight, executive director of Strategic Aviation Solutions International, stressed the importance of handlers in the equation. For the development of special services and the maintenance of elevated performance levels, their role is critical, he noted.