AirAsia: looking to belly freight to increase profits
- Friday, 09 February 2007
Proving that the LCC model can deliver profits on cargo if built around a clear strategy and realistic operational structure, AirAsia has come to an agreement with Leisure Cargo GmbH to handle cargo services on its regional routes based on the KUL hub.
The partners are upbeat about the possibilities, with Leisure Cargo guaranteeing a fixed monthly revenue of RM1 million to AirAsia plus a profit share for revenue above this level.
Until now, AirAsia has put only limited emphasis on freight haulage but ongoing network development, enhanced frequencies, the changeover to A320 equipment and the ready availability of belly space not utilised for luggage have driven the carrier to re-think cargo as a profit centre.
The partnership came about because AirAsia management were aware that LCC operations are not readily suited to hard-sell development and full servicing of cargo logistics.
The Leisure Cargo tie up is thus seen as a win-win scenario, utilising the airline’s core resources while a specialist service provider looks after sales, cargo acceptance and delivery and complementary ground services.
Relatively low baggage storage requirements on most of AirAsia’s regional routes mean that a solid chunk of the A320’s 2.5 tonnes belly space is available for cargo.
AirAsia is currently well into a re-equipment and fleet expansion program, replacing its B737 aircraft (which had a belly uplift limited to 1.5 tonnes) to a schedule that will see all flights from the KUL hub operated by Airbus A320s by July.
Pointing to the steady growth in cargo capacity as the A320 delivery program continues, AirAsia’s regional cargo director Abdul Nasser Abu Kassim described the arrangement with Leisure Cargo as an important development.
“As the leading and largest low cost carrier in Asia, cargo is an integral part of our ancillary income and we foresee cargo to be one of the key drivers, with significant contribution towards the company’s bottom line.”
Leisure Cargo is no novice in providing cargo services to LCC and other leisure carriers. It was spun off in 2000 from the cargo operations of the German holiday airline LTU, adapting LTU’s innovative approach to the needs of other carriers.
“We are now a very strong family in the Central European market, serving short, medium and long-haul routes to the benefit of the entire Leisure Cargo network, its agents and customers worldwide,” said Ralf Auslaender, Leisure Cargo’s managing director.
“In an extremely competitive market, mainly in Europe, we have been able to cope with the pressure and the volatility typical for our niche market in delivering respectable profits, hence we look forward to bringing our business to greater heights with AirAsia.”
Leisure Cargo was responsible for a freight uplift of 47,238 tonnes in 2006, an increase of 16.9 per cent over 2005.
AirAsia is Leisure Cargo’s first Asian client and is likely to be the foundation of a regional division of the company, looking after several carriers.
A Leisure Cargo Asia executive recently suggested that the company might look towards later investment in freighters to fly under the AirAsia banner. This is, however, only a concept at present and no formal proposal has been made to AirAsia.
On the web: www.airasia.com.my
