PC Interview
PETER CONWAY interviews...
Antero Lahtinen
At a time when some combination carriers are pulling back from their freighter operations, Finnair Cargo has just started one. The managing director of Finnair Cargo explains why and what potential he sees in it
AT a time when several passenger airlines have got out of the freighter business, it is gratifying to see one moving in the opposite direction. Finnair Cargo started services with an MD-11 freighter to Seoul and Hong Kong in mid May – each service twice a week – and will be adding a third frequency to Hong Kong in late August.
A second MD-11 will go to conversion in September and should be in operation before the end of the year. Antero Lahtinen, managing director of Finnair Cargo and a member of the board of management of Finnair plc, talks of developing a “balanced route network” for the aircraft, including other new destinations.
However, closer investigations show there are some details that are yet to be pinned down, and there is some suggestion that the scale and final form of an all-cargo future has not finally been decided on by the carrier’s top brass.
For a start, Lahtinen admits that the two freighter conversions – the last of eight passenger MD-11s that Finnair has been phasing out of its fleet since 2005 – were not originally agreed upon with Finnair Cargo in mind, but with the aim of selling them on to another carrier.
Nor does Finnair actually own the aircraft any longer. On 28 July the parent carrier announced that they had been sold to a US leasing company, Neff Air, which will take possession of them at the end of this year.
Lahtinen falls short of confirming that Finnair Cargo will definitely lease the aircraft back from Neff. “They are a good opportunity for us, but we also have other opportunities,” he says. “We could have a mix of freighters, or some operations done by a partner.” He can’t even confirm whether the plan would be to wet or dry lease the freighters, saying discussions about this will take place shortly.
But on the other hand he says that the sale of the freighters should not be taken as a sign that Finnair is cooling on the idea of operating them. “It does not matter whether we own the aircraft or lease them. We have a mix of owned and leased aircraft on the passenger side, and from a Finnair plc point of view it is a perfectly normal thing to do.”
A dry lease would also be eminently possible as Finnair still has pilots who can fly MD-11s, and a maintenance facility that is experienced in the type. And on top of that, Lahtinen expresses great enthusiasm for the freighter. “It is a good aircraft and the right size for the markets we want to serve,” he says.
He is also quite sure that there is a demand for the new capacity. In fact, he insists that it was the needs of customers rather than the availability of the MD-11Fs that persuaded Finnair Cargo to operate the freighters.
The move was not without precedent, as over the years Finnair has consistently worked with other partners to get access to main-deck lift. In the 1990s the partner was Polar Air Cargo, and then in 2002 Finnair Cargo started taking space on Emirates freighters from Gothenburg to New York, an arrangement that lasted until relatively recently. From 2004 until 2009, it also shared a weekly Cargolux flight to Hong Kong via Helsinki.
Taking space on the flights of others in this way has advantages for a smaller carrier, but Lahtinen is clearly excited by the greater control the current set-up provides. “With our own freighters, there are more tools in our hands,” he says. “We can fly on the days our customers want and our schedule can better accommodate their needs.”
Finnair Cargo will also be able to spread its wings in terms of destinations served. One immediate priority is to serve more Chinese destinations, if traffic rights can be obtained, and Lahtinen is also looking at other markets not served by the passenger network.
One example might be Vietnam, which he describes as “a growing cargo destination, with a lot of manufacturing and plenty of air cargo”, and another could be the Gulf region – Dubai and so forth. “It would not be a major sector for us, but there would be demand for some flights to that area,” Lahtinen speculates.
But why have a freighter at all? The answers lie partly with the strategy of the passenger business, which has seen Finnair re-focus its long-haul business onto Asia since 2001. It now has nine destinations in the region, and in the last five years has added services to Nagoya, Tokyo, Osaka, Seoul, Delhi and Mumbai to a roster that already included Hong Kong, Bangkok, Beijing and Shanghai.
Mumbai has since been “temporarily suspended”, but Singapore is to be reinstated in May 2011 after a gap of a few years. It used to be an extension of the Bangkok route, but will now be served direct.
The Singapore flights will be operated by two further A340-300s, which are being leased from ILFC. They will join five existing A340-300s in the passenger fleet and seven A330-300s, with one more of the latter also due to be delivered before the end of the year. Apart from the new Singapore route, the extra capacity will be used to boost frequencies on existing routes.
This passenger growth has put Finnair Cargo firmly into the business of Asia to Europe cargo, and according to Lahtinen it has found a solid niche on this sector serving the Nordic countries, the Baltic states of Estonia, Latvia and Lithuania, the part of Russia adjoining Finland and other parts of northern Europe.
He insists that all this area is now Finnair Cargo’s “home market”, and the carrier serves it through an established set of road feeder services that, for example, transport salmon from Norway to Helsinki in 24 hours to connect directly to Finnair flights to Japan, or reach to St Petersburg and Moscow.
Even the increase of main deck capacity to Sweden in recent years, which saw carriers such as Cathay Pacific, Korean Air and China Airlines start freighter services to Stockholm, has not diminished this market, according to Lahtinen.
“Our market share has actually increased in Sweden in the last five years,” he says. “Obviously the new capacity had an impact, but we have an extremely high quality product in terms of transit times, handling and road feeder services, and that is well accepted in the market.”
He even reckons that the presence of the Asian carriers vindicates his current strategy. “Helsinki has been an empty spot for freighters. The fact that other carriers to Stockholm and Copenhagen has been successful proves it is right to now do it in Helsinki.”
It has to be said that one advantage Finnair has had over the Asian freighter operators was that it was offering frequent belly capacity in competition with all-cargo flights that only operated once or twice a week. That advantage won’t apply to the MD-11F operations, but Lahtinen still reckons there is plenty of demand to go around, with Finnair offering a much more direct service than the major European carriers who route cargo to and from Asia via their home hubs.
Helsinki’s location, in fact, is an excellent one for freighter operations to Asia, saving one or two hours flying time to Asia and so allowing the MD-11F to operate at optimum payloads. Even with the headwinds on the westbound legs, flying times are just 7.5 hours from Delhi, 8.5 hours from Beijing, 9.5 hours from Seoul and just over 10 hours from Hong Kong or Japan. Lahtinen reckons this can give the MD-11Fs loads up to 20 tonnes better than if they were flying on to central Europe.
It would also be possible to fly the MD-11F to New York in eight hours, which might be an option given Finnair Cargo’s previous history on the main deck side. But Lahtinen dismisses any prospect of Asia to US traffic. “That would be two long sectors and there is a lot of direct competition from Asia to the US. Our core business will remain Asia to North Europe, and we are happy to remain in that market, which is the one we are known for.”
Like most carriers, Finland had a sharp dip in cargo traffic in 2009, but is now back up to 2008 levels, and expects to be exceeding them by the end of 2010. Not surprisingly, Asian traffic has driven the recovery, with intra-European traffic lagging somewhat.
As to whether the recovery in yields has matched the recovery in tonnage, Lahtinen says it is a bit too early to form an opinion. “How much the good start to this year in that respect will continue in the second part of the year remains unknown,” he says cautiously.
Lahtinen is also managing director of Finnair Cargo Terminal Operations, the company’s ground handling arm, which was split off from the cargo business in 2007. (Finnair Cargo became a wholly-owned subsidiary of Finnair plc in 2001). This runs the Finnair cargo terminal at Helsinki airport, whose 15,000 m2 of warehouse space is getting close to capacity due to Finnair Cargo’s expansion.
Lahtinen got approval on 3 August for an upgrade to the terminal that will see various investments to improve throughput, including some new truck docks. But a completely new terminal is also being planned, subject to board approval.
Detailed plans for the new facility will be put forward within six months, and Lahtinen says that if approved it could be ready in two or three years. The facility would be anything from 25,000 to 40,000 m2 and would be built on a new site – space not being a problem in a country of five million people living in a territory the size of Germany.
On the IT front, Finnair Cargo replaced its legacy system in 2007 with eChamp, the hosted service offered by Champ Cargosystems, and in April it signed to upgrade that to the Cargospot system that is also now owned by Champ. Lahtinen says initially it will be applied on the handling side.
Adopting e-Champ finally enabled Finnair Cargo to start trialling both the IATA e-freight programme, and also Cargo 2000. Both are currently under test at the carrier.
Lahtinen says it is too early to say what the conclusions might be, but he says there is a definite aim to implement both widely as soon as it is feasible. “We definitely want to expand it,” he says of e-freight. “It is definitely the way to go.”