“When you consider the weakened state of the global economy, we are pleased with our financial performance in the first quarter.
     “Delta Cargo held its own.
     “We are making good progress against many of our goals for the year, including market penetration for e-air waybill.
     “There has been positive feedback and good customer response to the launch of our dedicated website, www.deltacargo.com. ”
     Tony Charaf, top executive at Delta Cargo, has seen all of this once before. And no, it was not in a dream!
     Once upon a time he held the exact same position.
     Well maybe twice is the charm, but whatever the tea leaves may say, Tony is up on his toes at the task of living the dream whilst taking Delta Cargo all the way to the top.
     “Most of the primary markets are performing much as we expected.
     “Our domestic U.S. performance is strong, while markets in Europe and Asia are challenged.
     “Latin America continues to be a positive story.
     “Moreover volumes are good and CTMs are stable, however the market environment for pricing remains weak.
     “Excess capacity remains a concern.
     “While we were happy overall with our first quarter results, we saw a softening in the marketplace in April, with our CTM’s down about 3 percent year over year.
     “Looking forward, if I may use a nautical analogy in Arizona, the waters remain turbulent, and the outlook is somewhat uncertain.”
     “But being where you want to be comes into view at this point, because right now we are on-track against our goals, which is certainly positive considering the sluggish state of many of the global economies.”


     “We are excited about the freight potential thanks to new international wide body service between Seattle and Shanghai, Seattle and Tokyo-Haneda, and between Detroit and Beijing.
     “Here in the U.S., we have added transcontinental service with wide-body pallet-capable aircraft between JFK and Los Angeles and JFK and Seattle.
     “Delta will also be adding 88 Boeing 717-200 aircraft, primarily to replace 50-seat regional aircraft.
     “This move will provide additional capacity, which will be very important for cargo, especially with our focus on growing U.S. mail and our small-package express revenues.
     “First of the 717s will be in service during autumn of 2013.”


     “Technology will continue to be a major focus for Delta Cargo.
     “As mentioned at the top, we launched our updated website, deltacargo.com, in December, and we will be adding enhanced user features as part of a second phase later this year.
     “We are growing the booking capabilities with our e-freight initiative, where we continue to lead the industry.
     “Delta joined the IATA multilateral eAWB agreement last month.
     “Along with Swissair, we were the first airline to join, which demonstrates our commitment to leading the industry in this area. “


     “A major process improvement that we’ve just launched in Atlanta is our Cargo Logistics Manager. CLM, which is an industry first among passenger airlines, connects our scanning technology to our existing Webvision cargo platform.
     “CLM enhances our cargo ops team real-time visibility in one centralized location to all the freight, including US Mail, coming into or leaving Atlanta.
     “After CLM is piloted in Atlanta, we expect to roll it out to other stations later this year.
     “Leading our laser focus on strong operational performance is Scott Barkley, managing director for Global Cargo Operations.
     “Scott joined the team last August from our Airport Customer Service division.
     “He is a strong leader with a team approach and great rapport with people. “Scott is directing our goal of building a metrics-driven operation.”


     “We believe that the round of consolidations we’ve seen—United and Continental and American and US Airways—are a positive development that will help strengthen the industry as a whole.
     “This applies to the cargo as well as the passenger side of the business.”


     “The various conferences and trade shows that the industry sponsors give all of us the chance to hear from our customers and keep up with trends in the market place.
     “I think the participation we’ve had this year speaks to the value the industry places on these events.
     “For example, this year’s Boston Seafood Show set a record for attendance.
     “We are looking forward to some of the major events later this year, including Air Cargo Europe in June, the two in October, the Produce Marketing Association and the National Funeral Directors’ Association event and Air Cargo Americas in Miami.”


     “We live and work in a global economy, so the international markets are very important to us and our future.
     “Delta’s global network connects the major producing regions and primary economies of the world.
     “This means that we can serve our customers from anywhere to everywhere to support their shipping needs.
     “Additionally, serving this diversity of markets around the world allows us to weather economic weaknesses in any one area.
     “North America business is a significant portion of our overall cargo business and we are fully committed to supporting our customers and growing our business in this important region.
     “With our new transcontinental widebody service, some of the key flows in the U.S. are between Atlanta and the Northwest with mixed product lines and a lot of seafood.
     “The upcoming salmon season in Alaska will start later this month and carry us through the summer.
     “We will operate 757s from Anchorage to SLC and MSP for onward distribution.
     “The strong perishables season, notably cherries, will also be starting this month in California and moving up the West Coast to Washington.
     “All indications are that this is a strong year for cherries and other fruits.
     “Air cargo is the shipping solution for these time-sensitive perishable products, and Delta has the network and the processes in place to ensure that they arrive on time and in good order.
     “Our DASH express small package product is doing very well for us.
     “DASH touches many products including biomedical supplies, vaccines, medications, plus blood and human organs.
     “These products go everywhere within the U.S. via our strong domestic network with widebodies, many of which are pallet capable.”


     “Our key markets out of Atlanta include LAX, SFO, SEA, SLC, JFK, and DTW.
     “The exciting news this year is that we are truly connecting our gateways with widebody pallet-capable service timed to make connections around the globe.
     “Our summer schedule is starting up and will add more destinations and frequencies.”


     “In general the domestic market is flat right now, but it remains strong. Mail is a large and still-growing component of our business.
     “Latin America continues to be a top growth market for us, on the passenger as well as cargo sides of the business.
     “Between 2011 and 2012 we increased our capacity to South America by 5 percent.
     “Brazil is a good example.
     “During the past five years Delta has grown its capacity there by 56 percent, and passenger traffic has increased 62 percent.
     “In Sao Paulo we offer service to three gateways—Atlanta, JFK, and Detroit—all with widebody pallet-capable service.
     “Last year marked 15 years of uninterrupted service to Brazil, which means we have been a consistent, reliable partner for shippers there.
     “Delta Cargo plays a significant role in Delta’s overall strategy, and the company remains committed to the cargo operation.
     “We have an extensive global network with abundant cargo capacity; we are focused on operational excellence; and Delta has the financial strength and resources to remain a viable partner to the cargo industry.
     “With our extensive global network Delta’s cargo capacity affords us an incredible customer offering with speed and efficiency.
     “For example, Delta carries more cargo today from Japan than we did in 2009 when we operated freighters in that market.
     “We are a passenger airline, but one with an essential belly component that makes cargo an integral part of Delta’s corporate business model.”
Geoffrey/Flossie

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RE: Bellies Versus Freighters

Geoffrey,
     As always, interesting debates in FlyingTypers, and I noted the dialogue re: Issa's comments and Bill’s remarks.
     I think the debate is just about over re: freighters; they definitely have a future, as the integrators will always need them in bespoke logistics solutions for the product lines they have and want to develop over the coming years.
     Here we should note their heavy push into "General Cargo," the backbone of the scheduled airlines revenue, by the integrators as a reality check.
     What the conversation should be about is the role of freighters for the scheduled airlines whose primary client base is the freight forwarder.
     This is often overlooked in all the journals when people talk about freighters still accounting for plus 50 percent of the lift.
     What does that figure look like when you take the integrators out?
     There is still room for one, maybe two, global dedicated all cargo carriers to serve the freight forwarder market, but that’s it. And they will exist because savvy freight forwarders will divert cargo to them so there is always that option.
     Who will these carriers be?
     I have my opinion, but you should make your own choice.
     The vast majority of general air cargo traffic can be handled by all passenger airlines, who we can differentiate by those that have freighters, and those who do not.
     A recent analysis of the wide body all passenger aircraft deliveries in the coming few years shows the belly equivalent of plus 400 x 777F in capacity!
     That will handle any growth prospects, and also keep yields down, which will make freighters an even more perilous choice.
     So I would like to (with the greatest of respect) disagree with both gentlemen.
     1) Belly capacity is not precious and should not be priced higher than freighters, those 777-300's, 787, A330-350, etc., are cargo-hungry machines and we need professional cargo managers in these airlines to exploit that capacity in a potentially very profitable way.
     2) Airplanes should not dictate the price; it should be dictated by the service you deliver to the client, and the ease and simple way you deliver it. In other words, add value.
     3) The days of passenger baggage taking priority over cargo are still there as a rule, but the modern aircraft of today still have a huge capacity for cargo even at max passenger loads; this is just not an issue anymore except on ultra long haul routes, i.e., Shanghai to Chicago non stop. And this is where the passenger airlines operating freighters steps in. The aircraft is used to satisfy customer demand, and keep the bellies full on the bulk of the fleet. This is why the Asian carriers in particular are freighter heavy; it ensures export-driven economies have the lift the governments insist on to keep the machine rolling.
     Skilled management, through trained staff and revenue and capacity optimization tools available today, know exactly what they can sell, how much space they have, and how to make money from cargo.
     Using the "contribution margin" methodology, it’s also easy to calculate the true contribution of cargo on your pax aircraft.
     Margins of between 30 and 60 percent are normal here.
     When the cargo manager has support from savvy CEO's, the addition of freighters can be professionally analyzed to ensure the entire fleet is contributing to profits, but it will be a hard sell going forward.

Stan Wraight
Executive Director
Strategic Aviation Solutions Int'l
www.sasi.com.hk

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