Positive first half for IAG despite impact of weak euro

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British Airways and Iberia aircraft at Heathrow Airport on November 2010 (Picture by Nick Morrish/British Airways)

International Airlines Group (IAG) Cargo has seen a solid first half of the year, according to the carrier’s regional commercial manager for Europe, Chris Nielen.

He explains to Air Cargo Week (ACW) that for the first four months of 2015 results were positive, especially into the US, but over the last few months IAG Cargo has been affected by the weakening euro against the strong dollar. “We have seen in May and June the market is softening and in May it was especially slow,” Nielen says.

There has been positive signs and there was a slight uptake towards the end of June, Nielen notes, especially across France, Germany and the Netherlands. Traffic to the US is back to normal after the surge due to the West coast port slowdown: “The overall market is quieter, which our customers and cargo handling agents are telling us.”

Nielen says dealing with overcapacity is the principle operating challenge. He tells ACW it is a problem for IAG, and proving a barrier to even better results: “Our biggest challenge is overcapacity in the market, especially with all the additional bellyhold and freighter capacity coming in. The biggest challenge for the industry is how to deal with this extra capacity.”
New bellyhold routes launched by IAG Cargo into Latin America (LatAm), such as Cali and Medellin in Colombia, and to Havana (Cuba) have boosted volumes. The carrier’s biggest trade lanes are North America, LatAm and Asia.

IAG Cargo has now started moving cargo on low-cost airline Vueling, which it bought in 2013. “Selling the Vueling cargo capacity is very important for us and we are opening more stations all the time. This gives us one of the biggest European networks,” Nielen says. Vueling will add another bellyhold route to Munich on 15 July.

Nielen says IAG Cargo saw cargo volumes on narrowbody routes increase by 12-15 per cent in the first quarter of 2015. In his view there will be good growth in the airfreight industry in the future: “We are optimistic the global economy will grow and especially in Europe. The Dutch economy is looking good and Germany is strong. We think Europe will perform well in the rest of 2015.”

Nielen adds that IAG Cargo is focusing on its constant climate products and specialist services in Europe. It feels the strongest growth will be in transporting this cargo, especially pharma.