Market for Freighters Still ‘Compelling,’ Says McNerney

AIN Air Transport Perspective » October 29, 2012
Boeing 747-8F
Boeing delivered the first 747-8F ever based in Japan to Nippon Cargo Airlines during the third quarter. (Photo: Boeing)
October 29, 2012, 10:40 AM

Following up on Boeing’s recent bullish 20-year forecast for freighter aircraft demand, CEO Jim McNerney acknowledged that the market for freighters looks soft in the near term. Nevertheless, during the company’s third-quarter earnings call last Wednesday he noted that the company has “pretty much” filled all of next year’s delivery slots for its newest freighter–the 747-8F–and that, in the long term, the case for a robust freighter market remains “compelling.”

“We’ve moved the skyline around,” said McNerney. “I think as Atlas [Air] found some challenging business conditions, they did want to defer and cancel, in one case, a couple [of] airplanes, but we’re in good shape through 2013.”

So far this year, Boeing has delivered 24 of its 747-8 freighters. “We expect additional orders and commitments for both [the 747-8F and Intercontinental passenger version] by year-end,” said McNerney.

“While we are closely monitoring softness in the near-term market for air freight, our view that air freight remains a compelling long-term growth market hasn’t changed.”

Offering an independent view, John Grant, executive vice president with market data specialist UBM Aviation, told AIN that fragmentation among carriers has worsened the overcapacity problem in the air freight sector. “It is easier for people to be opportunistic to move into markets that they weren’t in 12 months ago, moving [freighter] capacity around to gravitate to those areas that are still somewhat profitable,” he said. “There are lower market-entry barriers in air cargo [than in the passenger sector] and the market is less regulated [in terms of route access].”

In his view, the air freight industry needs to make more intelligent use of available capacity and place itself better to match shifting demand. The AFRA software offered by UBM’s OAG Cargo division collates air freight rates from carriers and distributes these to the freight forwarder community globally. The company claims that at a time of air cargo overcapacity this service provides a useful option for carriers to offer rates that will make better use of otherwise unused capacity. Grant maintained that better use of market intelligence can make all the difference between profit and loss at a time of tight margins–such as now. “It’s all about the commoditization of the product and, while passenger airlines have become much better at revenue management, the cargo operators have found it harder to rationalize and consolidate,” he concluded.

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