Uncertainty is the only certainty in the current airfreight market, according to Kenji Hashimoto, the new man in charge of American Airlines Cargo.
“It will come as no surprise to hear that we’re under-performing against budget, but I feel we are in a relatively OK position against the competition. We’re all suffering,” he told Air Cargo World in a one-on-one interview at London Heathrow during a whistle-stop tour of Europe.
Despite the industry’s high hopes for smartphone shipments, Hashimoto says customers are unclear whether they will see a peak-season dividend this year, let alone what their prospects are heading into 2013. “There is no ‘bow wave’ for the fourth quarter, no influx of orders,” he said.
American announced this week it is reducing its flight schedule by up to 2 percent for the rest of September and October — mainly domestic, Hashimoto said — and has notified more than 11,000 personnel that they could potentially be laid off.
In the past two years, the carrier had cut a bit less capacity than its main U.S. rivals. This partly reflects the fact that it had been more judicious on growth, even to the extent of being capacity constrained on some sectors, and therefore had less fat to cut, he insisted. Nonetheless, as American heads toward a year in Chapter 11, streamlining — not least by reducing head count — is a key focus. The unions may see some irony in this, given the vast amount of new metal that’s on the way. The carrier announced orders for 100 Boeing 737 MAX aircraft and 260 Airbus A320 variants, together with 465 options, in July 2011.
More significant from the cargo perspective, the first of 10 777-300ERs enters long-haul service at the end of this year. These offer 30 percent more cargo capacity than the -200ERs; the first will be deployed from Dallas/Fort Worth to Sao Paulo, a destination Hashimoto claims has been under-served in cargo terms. As of February 1, American will be flying -300s five times a day into Heathrow, with two services from DFW, two from JFK and one from Los Angeles.
A fleet of Boeing 787-9 Dreamliners (42 firm orders with 58 options) is meanwhile set to enter service in late 2014, replacing around half of American’s 767-300s. “That will enable us to deepen our presence in certain markets and hit new markets,” Hashimoto said.
He is not specific about where those new routings might be, but admits that the largest blanks on the map, the Middle East and Africa, could be on the radar. There could also be extra capacity heading south. “Our Latin American network is very strong – it’s a bright spot in terms of premium product performance,” he told Air Cargo World. He refers specifically here to temperature-controlled shipments. Appointed president of cargo in May, Hashimoto immediately sought the opinions of customers. “The feedback that we have good operational control and a service mentality,” he said.
This reflects in the growth of actively refrigerated shipments this year. American now has Envirotainer’s QEP accreditation at 56 stations. Passive temperature control, a niche the carrier believes it is exploiting more successfully than its competition, is growing faster still, and is suitable not only for fresh produce but even for some pharmaceutical lines, provided monitoring and control is good enough to maintain the integrity of the supply chain.
AA’s flown-as-booked percentage, for all cargo, is in the high 80s to low 90s. Hashimoto claims some competitors are in the low 80s. But perhaps a more meaningful measure of performance is claims payments. “They have shown a double-digit percentage decline in the last year as our operating teams get smarter at what they do,” he said.
Hashimoto joined the cargo side of American Airlines after three years as vice president of strategic alliances, where he led efforts to expand the Oneworld Alliance and develop joint business agreements with Japan Airlines, Qantas, British Airways and Iberia. The relationship with JAL is particularly close and extends to onward connections over Tokyo via its partner, including the Expedite TC temperature-controlled service.
“It’s very manually intensive in cargo compared with the highly automated passenger process, and takes a lot of phone calls and messaging,” he said. “You have to have clear, standardized operating procedures for how you deal with bookings and handling. We do more interlining than many of our competitors, but we don’t offer temperature-controlled interlining with all our partners.”
There is no cross-selling or code-sharing, and cargo booked with American almost always flies the main leg on one of its own aircraft. Hashimoto accepts that major technological and cultural issues still stand in the way of passenger-style revenue-sharing agreements – yet envisions the possibility for cargo in the longer term. “One day,” he said, “there may be an opportunity to offer a broader network as if it was our own.”