Martinair Cargo MD-11 freighters axed

04 / 09 / 2014

  • Erik Varwijk, managing director of KLM

    Erik Varwijk, managing director of KLM

CONSISTENTLY poor demand following the global financial economic crisis six years ago has forced Air France-KLM to phase out its five MD-11 freighters by the summer of 2016, writes Thelma Etim, deputy editor.

The decision taken by the group’s board of directors following a strategic review, which began in March this year, stopped short of selling off Martinair Cargo altogether.

The reasons given for the stay of execution include the entity’s “very good reputation (branding) in a number of markets, such as Africa and America" – and its long-established traffic rights.

However the reduction in capacity will have an affect on the organisation, says Marcel de Nooijer, managing director of Martinair. “[But] we believe with a reduced number of aircraft, we can make money.”

Job losses will be avoided. “We aim for solutions to be found within the group,” he adds.

Erik Varwijk, managing director of KLM, echoes his comments: “We don’t want to fire people. Our intention is to offer alternatives to all our staff.”

The board looked at four options: investing in new aircraft for Martinair; ‘writing-off’ the existing aircraft to cut costs; entering into partnerships; and selling off Martinair.

“After looking at all these options, we came to the conclusion that none of them was a viable long-term solution,” he remarks.

By the end of 2016, AF-KLM Martinair’s freighter fleet will have been cut to two B777Fs in Paris (CDG) and three B747ERFs based at Amsterdam Schiphol.

Varwijk reveals that challenging market conditions, resulting in capacity outstripping demand, modal shift, as well as shippers shifting production locations, have collectively heavily influenced the decision to reorganise the freighter fleet.

“Since 2008, we have seen drastic changes in the world of air cargo. Cargo has suffered structurally from the global economic crisis,” he reflects.

On the other hand, Varwijk notes that passenger increases are basically driving fleet growth. “We are seeing bellies become more prominent in the world air cargo business.”

This increase in belly capacity has had "a negative effect on the bottom line of our freighters and not only our freighters but on the freighters of every carrier in the world,” he adds.

“For example, if you look at the Canada-Europe [market] there is six times more supply of capacity than the demand for air cargo. This, of course, has a serious effect on the load factors of the bellies but also of the freighters.”

There is less need for freighters than in the past. 25 years ago, cargo markets were growing faster than the passenger markets. “This overcapacity has had a negative effect on unit revenues so everywhere across the world you see constant pressure on unit revenues.”

He does reveal though that the group has witnessed a recovery in volumes and some stabilisation on unit revenues this year.

Under the new plan, there will be a gradual shift of capacity levels. “Where today our freighters consist of 30 per cent of our total production, in the future this will be 15 per cent – partly because we have reduced our freighters and partly because we have increased our belly capacity. Our freighters will serve specific markets we believe we can find a decent return on.”

On the niche cargo front, there will be continued strong focus on specialised products such as pharmaceuticals and express products and, despite this latest development, Varwijk is quick to underscore the importance of maindeck capacity.

“The net contribution of cargo to the group is a billion euros. Cargo remains of utmost importance. As you remember, last year we reported a loss of €200m. Half of that consisted of the losses that we have on our freighters.

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