Cargo B grounded by the recession

3.7.2009   (IFW)

Belgian cargo carrier falls victim to plunging rates

Cargo B Airlines has become the latest victim of the recession, forced out of
business by falling rates, delayed aircraft deliveries and a failure to attract
new investors.

Commercial executive VP Niek van der Weide told IFW the Belgian freighter operator’s load factors had been on target, but yields
were lower than required to make the business viable.

The airline’s problems had been compounded by the late delivery of a second B747-400
freighter because of last year’s strike at manufacturer Boeing.

This had forced Cargo B to relaunch its Africa services in May – at the end of
the perishables season and close to the air freight industry’s slow summer season.

Rates for the carrier’s markets – EuropeAfrica and Europe-Latin America – had
declined by 20-25% since October, meaning rates and revenue figures for April
and May were “less than we had hoped and expected”, van der Weide added.

“Looking at the next two to three months, it was difficult to see any improvements
in the short-term, ” he added.

He said Cargo B had been optimistic of returning to profitability in the autumn,
but had been unable to persuade investors to provide additional working capital.

“It is not the easiest time to ask people for money, ” he said.

NYK – parent company of Nippon Cargo Airways – bought a 10% stake in Cargo B
last year, injecting around US$10m into the carrier and leasing it two of NCA’s
new freighters.     But sources said NCA’s own financial challenges had limited
NYK’s willingness to invest any more money.

Last month, NCA announced a severe downgrading of its own expansion plans.

Van der Weide said there were no plans to revive Cargo B if the market recovered,
but believed a niche independent European cargo airline could be viable in more
normal economic times. “It has just been a matter of unfortunate timing, ” he

Robert van de Weg, senior VP for sales and marketing at Cargolux, said the markets
Cargo B operated in were not as bad as some, but all markets were depressed and
very difficult to make money in.

“They [Cargo B] had an additional problem because they only had two aircraft
and had only limited economies of scale, ” he added.

The removal of around 600 tonnes per week of Cargo B capacity would help other
carriers, he added.

But there was still overcapacity in both the Africa-Europe and Latin America-Europe
markets, and so it was unclear whether Cargo B’s withdrawal would be enough to
bring new competitors in.