25 / 03 / 2013
When American Airlines announced on 14 February that it was to merge with US Airways, it marked yet another milestone in the recovery of the US bellwether which, since 29 November 2011, has been in Chapter 11 bankruptcy protection.
As usual, the process has involved reducing debt, fixing new contracts with unions, streamlining management and restructuring leases on 400 of the 900 aircraft in its fleet.
In American’s full year 2012, results seem to be paying off, with the carrier making an operating profit of US$107m versus a loss of $1.05bn in 2011 on a 3.7 per cent rise in revenue. It still made a net loss of $1.88bn, but that was largely due to $2.2bn in restructuring costs.
Following the retirement of Dave Brooks last July there is also a new cargo president – Kenji Hashimoto, who has worked in consulting, run an educational non-profit organisation and been with Hewlett Packard for a year, as well as having 14 years with American.
Much of his time at the airline has been in finance, sales planning and revenue management, with his most recent role being in charge of global passenger alliances.
Not a typical cargo background then, but Hashimoto is impressed with the warmth with which he has been received in cargo. “It is a great business, a lot of fun. Dave and his team built a great business, and we have a lot of interesting plans going forward. It is not just the American Cargo team, but the whole cargo industry that has welcomed me, and I am very grateful.”
One thing Hashimoto has had to adjust to in cargo, however, is the much smaller role alliances play. “In the passenger world they are definitely a key part of the strategy,” he says, and goes on in detail to explain how they evolved from interlining to through-ticketing to codeshares and mutual recognition of frequent flyer programmes.
“But in cargo there are a lot of challenges in even establishing interlining,” he concludes wistfully. “Cargo cannot walk from terminal to terminal, so it requires a lot more manual intervention. You have to design products much more carefully.”
That doesn’t mean that it can’t work, however, and as an example Hashimoto highlights American Cargo’s successful and long-running partnership with Japan Air Lines.
“We have even coordinated our Expedite TC [temperature controlled] product with them,” he says. “We have evolved procedures so that we can present our entire network in the US to JAL customers. We don’t offer that product with other partners.”
Other interline relationships include Emirates – a carrier that must seem a lot less of a threat to an air-line based in Dallas than it does to one in Frankfurt or Paris – and, in general, Hashimoto says American Cargo does a lot more interlining than its competitors.
“But we try to keep it to a small group of carriers. If you are not careful, you can lose the focus on quality.”He also says interlining must be done only if it makes sense for customers – a favourite mantra of his. Asked what his key priorities are for the coming year, he says customer focus and operational integrity.
“If you remain focused on these, then revenue follows. The big story at American Cargo in the coming year will be building on the customer focus and the operational integrity we have and extending from there.”
He says he was impressed when he took over at cargo by how much the carrier already achieves in its customer service. “For example, at CNS more than one customer made unsolicited comments to me about how good our customer claims team is.
Every carrier has claims issues – we are not alone in that – but to hear customers talk about how well our claims process works shows that the customer focus is really ingrained in us.”
While Chapter 11 restructuring was taking place at American there was relatively little route growth – its available-tonne-kilometres rose by only 0.7 per cent during the year.
But, on January 31, a new era of expansion started with the launch of a Dallas to Såo Paulo flight using the first of 15 B777-300ERs that the carrier has on order. The -300 replaced a B777-200ER on the route and, according to Hashimoto, boosted cargo capacity by 10 pallet positions.
“That is a really exciting opportunity for us,” he says. 10 of the aircraft will be delivered by the end of the year.
London Heathrow is another early beneficiary of the B777-300ER service, and the roll-out of the aircraft will mean a whole raft of new routes in coming months, including Dallas to Lima, Miami to Martinique, Chicago to Dusseldorf, JFK to Dublin and the carrier’s first ever flight to Seoul.
Later in the year, Dallas to Bogota, Miami to Curtiba and Miami to Port Alegre are on the cards. (Not all of these routes will be operated by B777-300ERs: some will get B777-200ERs released from other routes by the arrival of the -300ERs.)
The airline also has 42 B787-9 Dreamliners on order, but with its rival United suffering from the grounding of its Dreamliner fleet due to the Japanese battery fires, American must be relieved to be not taking delivery of the first of its order until the end of 2014.
Air Cargo News was talking to Hashimoto before the announcement of the US Airways tie-up – and at press time the carrier had not spoken about how it would affect the cargo side, but one benefit will almost certainly be to strengthen American’s presence in Latin America, a market it has long dominated.
The carrier already serves more cities in Brazil than any other North American carrier, and has added serv-ices from Dallas to Manaus and JFK to Såo Paulo in the last year.
Overall, the market for American Cargo has shown a cautious uptick in recent months. Hashimoto says November and December were better than a few months previously, and says the US market picked up a bit in the fourth quarter.
“Unemployment figures have improved a bit, and so has the house market and consumer confidence. That has translated into some improvement in cargo revenue,” he observes.
One of the hallmarks of Dave Brooks’ time as head of American Cargo was also its expansion into the pharmaceuticals sector, and this seems to have continued despite the economic downturn. Hashimoto reports steady growth during 2012, and describes it as one of the ‘strongest verticals’ for the carrier.
Building up this business has taken a lot of patient work, with the launch of first a packaged product – Expedite TC Passive – and then a dry ice and battery product using Envirotainers – Expedite TC Active, which was rolled out in September 2011.
“We chose our time to do this carefully. We wanted to get the product right,” says Hashimoto.
“We trained our employees, so it gets the right handling even in faraway locations, and we have tested it across our network.
“On Expedite TC Active we are now a QEP, a Qualified Envirotainer Provider, in 56 cities.
“We have also ensured that we have the right kind of ambient temperatures in our warehouses to support our passive products.
'We have controlled room-temperature facilities now at our stations at JFK, Chicago, Dallas, Miami and San Juan and this is an important part of the passive product.
“It is not just about packaging; it’s about the right handling.”