Taking advantage: More low-cost carriers add cargo
Low-cost air carriers are increasingly turning to cargo to take advantage of available capacity and increase bottom lines. Many carriers report that business is thriving during a difficult time for the industry. Several carriers recently added cargo operations and are likely to be joined by others.
“There’s no question about it,” says Barry Nassberg, group COO of Worldwide Flight Services, which provides cargo-handling services for numerous low-cost carriers around the globe. “There’s a tremendous opportunity for them, and anyone not presently doing it should be looking at it. Whether you go the outsourcing model or whether you take it in house, it’s a worthwhile investment. Any CFO of a low-cost carrier that is presently not carrying cargo is probably putting pressure on their company to do so.”
Nassberg says low-cost carriers are increasingly realizing the potential for their empty belly space and are exploring how to adjust their structure to take advantage of it.
One of the latest low-cost carriers to enter the cargo realm is Norwegian, which announced in April that it would create a new cargo company, Norwegian Cargo AS. The new company will serve the airline’s entire route network with more than 120 destinations.
“We have always carried a little bit of cargo in the Scandinavian market, and especially domestically in Norway, our biggest market,” Bjørn Erik Barman-Jenssen, director of ground operation and in-flight services, says. “We had a cooperation with JetPack, our GSSA, for short-haul operations. When entering into long-haul operations, we obviously needed to use the capacity available to boost the revenue of the flights. That’s the main reason for establishing the cargo company.”
Norwegian entered the long-haul market May 30 with a flight from Oslo to New York’s JFK Airport. The airline also plans flights to Fort Lauderdale, Fla. and Bangkok.
“We are looking for more long-haul aircraft. The plan is to operate between 15 and 20 long-haul aircraft, not necessarily from Scandinavian bases,” he says.
flydubai is another relative newcomer to the cargo side, having launched its operation Jan. 1, 2012. The airline has been expanding ever since. This includes rapid developments in underserved markets in the CIS and Eastern European regions
“So far this year, we have announced 14 new routes compared to nine in 2012,” Mohamed Hassan, head of cargo, says. “We have also received two new aircraft with four more to come in 2013 to service these additional destinations. Demand remains for both affordable travel and cargo services, enabling people and goods to reach their destination via a single flight.”
Hassan says flydubai Cargo’s first year of operations exceeded its expectations, uplifting 2,100 tonnes a month by year-end compared to its 1,500-tonne target. The airline is on track for a successful 2013, he says.
flydubai also recently launched service to Russia. Hassan says it has been well-received with customers booking the entire capacity for six months.
“By opening up previously underserved routes with direct flights to Dubai, we are creating new avenues for business,” Hassan says. “Having goods transported via Moscow meant that all items needed a long shelf life, but with our direct services to Kazan[,Russia] and Samara[,Russia], for example, a wide range of cargo, particularly perishables, can now be sent via airfreight.”
Hassan says flydubai’s advantages include its high frequencies around the Middle East and being the only operation to many airports in the CIS, Central Asia and Eastern Europe.
“Facilitating rapid and affordable shipping has encouraged new business links, particularly for perishable goods,” he says.
Southwest Airlines and JetBlue are two U.S.-based low-cost carriers that have been in the cargo business for a long time. Both say they have advantages over legacy carriers.
Wally Devereaux, Southwest Airlines’ senior director of cargo, says Southwest approaches cargo a little differently than the legacy carriers and other low-cost carriers.
“We are a bit more restrictive in what we carry,” Devereaux says. “We carry no live animals, no mail and no hazardous cargo. We transfer cargo from tail to tail, and that allows us to fully maximize our flight schedule. We transfer everything like we do baggage.”