Air France-KLM Group will continue to reduce its all-cargo capacity as it confronts persistent weakness in demand that doesn't justify the cost of keeping the current level of main-deck capacity in its fleet.
The company, the world's largest "nonintegrated" air cargo operator—meaning it does not operate a proprietary air-ground network supported by in-house information technology—will phase out five Boeing MD-11 freighters positioned in Amsterdam during 2015 and 2016. That will leave the company with three B-747 freighters in Amsterdam and two B-777s in Paris. Air France-KLM had 14 freighters in 2013.
Air France-KLM said it has weighed various options for its cargo business for several months. These options included withdrawing from the business or identifying a partner or partners. The group today said demand has been recovering less quickly than anticipated.
Air France Cargo and KLM Cargo joined forces in 2005, about a year after the respective parent airlines completed their merger.
In a statement, the company said it "will remain a major player in the cargo sector in Europe through its extensive belly network effectively supplemented by a limited number of full-freighter aircraft." It called the freighter reductions "part of a broader strategic vision designed to increase cargo contribution to the group." The carrier said it will explore the potential of carrier partnerships and focus on moving specialized, high-value goods like pharmaceuticals.
For years, demand has stalled for full freighter services operated by airlines that otherwise generate most of their revenue from passenger operations. Businesses depending on global fast-cycle distribution have increasingly migrated to the integrator model executed by FedEx Corp. and UPS Inc. These carriers operate their own physical distribution networks supported by their own technology. Price-sensitive shippers, meanwhile, are using less-expensive ocean freight services, lured both by low rates and by improving seafreight carrier performance.
Caught in the middle are carriers like Air France-KLM, which operate disparate air and ground networks as well as separate information technology systems. These siloed operations have come to be perceived as too slow and inefficient for the fast-cycle shippers, yet are priced too high for businesses that are willing to use sea freight.