More passenger routes help sustain IAG’s Q2 air cargo revenues

Cargo business tailed off during the second quarter at International Airlines Group, parent of British Airways and Iberia, in line with overall market softening due to inflation, pandemic lockdowns in China, the Ukraine invasion and airport congestion.

The three-month period ending March 31, nonetheless, was positive as the company returned to profitability for the first time since the pandemic. The company made 113 million euros ($115 million), although it lost $665 million during the first half.

Group cargo revenue dipped 1.9% to $418.4 million even with a 4.6% increase in tonnage versus 2021 because shipment yields (-2% adjusted for currency fluctuation) and chargeable distance were lower, the company reported Friday. The more important measure of freight business, cargo ton kilometers (CTK), fell 5%, signifying that IAG (CXE: IAG) flew cargo on shorter, less lucrative routes.

Cargo revenue per CTK, a measure of price, increased 3.3%.

Compared with 2019, cargo revenue increased 51.6%. Last year was historic for the air cargo sector, making year-over-year comparisons a challenge.

For the first half of the year, cargo revenue grew 9.6% despite IAG airlines only operating 395 cargo-only passenger flights compared to 2,677 during the first six months of 2021. The recovery of passenger travel and wide-scale restoration of passenger routes provided more capacity for cargo in aircraft holds, reducing the need to fly temporary freighters. Yields increased 4.8% as supply chain disruptions continued to constrain airlift capacity.

British Airways, Iberia and sister carriers Vueling, Aer Lingus and Level do not have any pure freighter aircraft. 

IAG now offers more destinations into North America from London-Heathrow than pre-pandemic. It recently opened new service to Portland, Oregon, from London, and new services into Dallas and Washington from its Madrid hub, while restarting service into Pittsburgh. Madrid now has eight more international destinations than in 2019.

IAG Cargo said it has transported more than 3,300 tons of baby formula to the U.S. as part of the government’s Operation Fly Formula program to alleviate a domestic production shortage. 

An extensive route network enables greater global goods movement, especially when flights connect at hub facilities.

“While there are undoubtedly challenges facing the entire aviation industry, our results today show that our investments in route expansion and digitalization are paying off,” IAG Cargo Managing Director David Shepherd said. “The return of global passenger travel is facilitating additional cargo capacity, our pre-pandemic schedules are returning and we are launching new routes for customers.”

In June, IAG Cargo began using Freightos WebCargo’s new payment tool that enables freight forwarders who book shipments on the freight marketplace to also pay for transport in a single transaction. 

IAG said passenger capacity ended the quarter at 78% of the 2019 level, up 65% from the first quarter. Passenger revenue yield was up 10.6% from three years ago.

Performance continues to be harmed by massive congestion at Heathrow and other European airports due to staffing shortages. IAG and other airlines have canceled flights and scaled back schedules. Heathrow officials recently capped passenger numbers until the end of October so they can replenish ground staff.

The situation limited British Airways’ capacity at Heathrow to 69% in the quarter. The airline plans to increase capacity there to 75% in the current quarter.

CEO Luis Gallego said the company sees no sign of weakness in passenger demand. The company issued guidance for significantly improved adjusted operating profit in the third quarter and for full-year profit. 

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Source: freightwaves - More passenger routes help sustain IAG’s Q2 air cargo revenues
Editor: Eric Kulisch