Despite filing for bankruptcy in late November, American Airlines is in expansion mode, AA Cargo President Dave Brooks told Air Cargo World. Brooks, who also served as a discussion panelist for the “Doing Business with Latin America” session at AirCargo 2012, revealed that Latin America and Asia are key regions of focus.
As part of AA Cargo’s restructuring process, airline officials have called for 20-percent growth over the next seven years, Brooks said. “And I would venture to say that virtually all of that growth will come internationally, and it will come in the markets that are growing: Latin America and Asia,” he told Air Cargo World.
Although it’s too early to determine the specifics of the routes — Brooks said expansion could still be a few years off — he knows the aircraft that will be deployed on them. AA Cargo is set to acquire nine Boeing 777-300ERs aircraft and up to 100 787s in the next five years. 777-300ER deliveries are slated to begin in November, Brooks said, and will be crucial to the development of long-haul routes from North America.
He has especially high hopes for the carrier’s routes to South America. Since the mid-to-late 1980s, AA Cargo has operated a hub out of Miami International Airport, which Brooks said has served the carrier extremely well and has been instrumental to economic growth in Latin America.
“A number of [Latin American] countries — whether it was for cargo on American or cargo on another carrier’s airplane — basically got their economic engines started as a result of having air access out of the region, and we certainly played a part in that,” Brooks said. He points to Peru’s booming asparagus export industry and Chile’s thriving seafood sector as examples of bright spots in the region.
One thing that doesn’t look so bright, Brooks admitted, is the sky-high fuel prices the industry is facing. Like other carriers, AA Cargo has been hit hard by the added costs of fuel, he said, although the airline takes a unique approach to its finances. “The trick to making money in the air cargo business as a carrier is to make sure that you’re handling the right freight,” Brooks said. “You have to recognize the difference between good airfreight and crappy airfreight.”
He lumps “fluffy, financially unsatisfying” cargo into the latter category. Although Brooks acknowledged that AA Cargo does make some exceptions — namely, if the shipper or forwarder provides a balanced mix of cargo — he said that AA Cargo officials avoid selling freight space that is economically unsound.
Not that such measures completely offset fuel increases, he explained. “The fuel problem doesn’t go away because you’re smart about what freight you take; it’s still very much of a problem,” he said. “It’s just a matter of being competitive and making sure that you have the right mix of freight on the airplane and saying no to cargo that doesn’t make sense for you to carry.”
Brooks cited pharmaceuticals as profitable freight for AA Cargo. He envisions the demand for pharmaceutical transportation only increasing in the next few years as drug patents expire and generics rise. These generics will be heading to developing countries because of the lower price points.
After pharmaceuticals, the commodities to watch are perishables, fruits and vegetables, and seafood, Brooks said. Contributing to this growth is the fact that various nations, particularly those in Latin America, have discovered what they can effectively harvest, he explained. “And with the middle class, globally, becoming wealthy, there’s a greater demand for different kinds of fish and different kinds of produce,” Brooks said.
It’s a demand AA Cargo will address on its upcoming freight routes. Brooks expects such routes to contribute to AA Cargo’s future profitability.
Even amid a full-scale restructuring, Brooks said he’s optimistic about the carrier’s future — an attitude he attributes to his “extremely supportive” customers and “committed” team. The latter group is especially deserving of praise, Brooks told Air Cargo World. “I’m so proud of my team because in the face of all the distractions of the restructuring, they’re keeping their noses down and their butts up, and they’re staying on top of taking care of our customers,” he said.