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| Leisure Cargo—A European Original
Every
time one of the leisure-cargo big birds rolls onto its position at Puerto
Plata in the Domenican Republic a B 737-Freighter comes “alongside”
for about one hour. Well planned exchange of loads from Europe to Panama,
Costa Rica as well as several other Central American places and from
the same region to Europe respectively take place.
Since WWII, sun-hungry Europeans have successfully sought out beaches for their annual vacations. The tidal wave of people in search of a bit of bright seashore has gone global, whether one is in Italy, Spain, Greece or the Mediterranean and its many islands. Now, long-haul aircraft coupled with the growing professionalism and marketing skills of tour operators and their respective contracted carriers has created cargo capacity in the clouds aboard a multitude of pure, leisure airlines. Leisure airlines’ demand for passenger seats continues without pause, and as aircraft get bigger and flights more plentiful, it is not surprising that the bean counters have finally noticed that empty cargo holds on these “leisure flights” are not being maximized. Two things we can count on for sure in 2005: Rust and accountants never sleep! Back in 1990, Ralf R. Auslaender, an old-line air cargo dreamer and doer who had worked with Emery Airfreight, had an idea about air cargo and leisure flights. LTU-management embraced Herr Auslaender’s initiative, and thus cargo riding in the ever-growing bellies of the German vacation airline began. LTU (for you nimrods out there) was founded in Düsseldorf as one of the very first European holiday carriers. LTU operated on a charter basis-only until liberalization. But let’s get back to the narrative. It became apparent that cargo was adding some luster to LTU’s commercial performance; in fact, cargo was fast becoming the carrier’s other leg to stand on. LTU Cargo made its way into the European air cargo market, often connecting the mainland with destinations that no other airline served. Innovation, creativity and hard work became pillars of LTU Cargo success. Two examples: We are off to Male in the Maldives. Upstairs we have a full consignment of holiday seekers, while down below luggage and consignments of goods both high-tech and otherwise reside. So what’s the backhaul? Coconuts? Actually, the logisticians at work have arranged a connection from Sri Lanka; every time the long-haul LTU plane is on ground, it is being fed from chartered freighters bringing in textiles bound for Europe from nearby Sri Lanka while also picking up machinery, chemicals and electrical works brought in from Germany. The other remarkable cargo-driven creation is Puerto Plata in the Dominican Republic. As there is no cargo for Europe on the island, a chartered B737 freighter from COPA Airlines flies roundtrip from Panama to Puerto Plata. Same story, different location. LTU Cargo is making something out of nothing, while building the bottom line with inventive air cargo combinations. Elsewhere, European tourist carriers have received the message and the first workable airfreight alliance amongst the leisure airlines of Europe has taken wing and gained importance. “Leisure Cargo” offers shippers new solutions quickly at www.lesiurecargo.com. But what lies ahead? Günter F. Mosler travels to Düsseldorf to talk to Ralf R. Auslaender.FT: There is no doubt that Leisure Cargo has had an impact on the international market. GM: As you and LTU took the driver’s seat from the very beginning, could you, for a moment, return to “once upon a time”? RRA: A carrier with really empty bellies decided to establish a cargo organization. The move was far from rocket science. I joined LTU Cargo in July of 1990. We caught the interest of agents, shippers and importers as a straightforward, reliable service with affordable rates. Good value for money was a simple formula then, and guess what? It still works. Today we have a fully realized, worldwide, cargo network that services about 160 destinations and comprises 70 different independent partners around the world. We provide main line, full-time catering to professional air cargo needs. Cargolux supports LTU online via an Internet-based reservation system, “Champ”. Born as an idea whose coming was long overdue, we simply felt – why market LTU alone if the same pattern and knowledge could apply for other tourist carriers as well? Leisure Cargo now represents 14 carriers on a worldwide basis. In 2004 Leisure Cargo moved 32,000 tons of air cargo and delivered gross revenues of EUR 41 million. The operation has delivered excellent commercial results for shippers and great profits for carriers. GM: We assume that there must still be thousands of flight operations with available space and unused payload capacity; lost opportunities. RRA: Yes, that happens. But most carriers are unable to market these capacities on their own. High start-up costs, necessary human resource work, a good reservations system, lack of market knowledge and the fact that this venture is not part of their core business are all reasons why it is so hard to break into the cargo field. GM: What is the outlook for 2005? RRA: In 2004, we had to cope with a highly volatile market. During those 12 months we gained nine start-up carriers, but lost eight at the same time. Still, the results were excellent, thanks to a profit driven approach and the professional partners in the network. I see 2005 as the year the amateurs will be clearly separated from the pros in our field of airline cargo marketing. With new clients like Air Madrid and Neos Airlines, Leisure Cargo’s presence will soon manifest in Spain and Italy. Leisure Cargo represents a total of four carriers in Italy and Spain, which gives us a good grip on the market development. New Air Madrid destinations such as Lima, Bogotá, Cartagena, Quito, San José and Buenos Aires will make 2005 a very interesting year in terms of sales GM: How do low-cost airlines influence the policies of your member carriers? RRA: Typical low-cost airlines operate between secondary airports with little or no cargo operation at all. We started with V-Bird in 2004 and actually achieved good results, but this was driven by direct flights to Copenhagen and Helsinki. Unfortunately, V-Bird closed down last October. Genuine low-cost carriers are hampered by operational profiles such as 20-minute turn-around times - which is simply too short a time to accept cargo. Also, operating with airports that do not generate local cargo is a killer for any airfreight plan. Attempting to build Road Feeder Services is also prohibitive due to the fix costs involved. Still, there is always plenty of belly space available. Fortunately for us, it’s kind of like a law of nature; a real low-cost carrier will most likely offer professional cargo services soon, maybe even as early as 2005. GM: On many routes in the holiday market there is little or no revenue cargo to be generated. Do you accept a few cents per kilo as a “welcome contribution”? RRA: Our contractual commitment toward the carrier always includes full responsibility for all cargo-related costs. If achievable revenue does not allow for a profit after handling cost, road feeder services and overhead – we simply do not close the sale. The widespread philosophy that “any cent generated out of cargo is a good cent” belongs to the fairy tale world and does not apply to our business concept. We go with creativity to produce cargo volumes through demand-creation on previously empty routes. We don’t attract business through unreasonable rates. GM: Can you select one or two example airlines and share the benefits of teaming up with Leisure Cargo? RRA: Well, there is Euro fly of Milan-Naples, a former Alitalia subsidiary that had 100% unutilized cargo capacity. Leisure Cargo took over cargo sales & services and marketing, and after one year the monthly production was around 400 tons, with an upward tendency. Cost for the carrier lies in the additional fuel consumption required to move the cargo – nothing else. Air Madrid, a Spanish start-up airline, has been on board with us since November 2004. Air Madrid flew with 100% empty bellies; now monthly loads exceed 300 tons. And the extra cost? Again - additional fuel consumption, nothing more. GM: This is quite attractive for any cost-conscious airline. Is the relatively new Lufthansa subsidiary Cargo Counts a set-up, using Leisure Cargo as blueprint? RRA: Cargo Counts GmbH looks like our ideas have taken the right direction, and somebody else has noticed them and emulated them. It’s too bad that you cannot (yet) put a patent on creative service concepts! GM: Is Cargo Counts a threat to Leisure Cargo? RRA: It is my feeling that both organizations will move in different directions in the future. The overall market potential is substantial enough that it should allow growth without jeopardizing market position. Nevertheless, competition will increase on certain routes. Leisure Cargo looks forward to achieving the best commercial results for its client airlines. These results will ultimately determine the success of any sales organization. GM: Both sales & service elements require thorough planning and handpicking in each single market. You select the best potential partner available in the two fields, correct? RRA: Our entire network is profit driven. We can come up with margins only as long as our market approach is service-oriented and professional. We work with partners around the globe who have adopted the same philosophy. We are a small outfit that is able to cut down on response times for shippers and consignees. Decisions are made instantly. Rates are quoted in less than 30 minutes. Our 24/7 availability cuts the pie, separating Leisure Cargo from the rest of the crowd. GM: We would like to learn about some exotic places where you do cargo business… locations that we would all like to visit for sunny vacations? RRA: There are many beautiful beaches that can be found in the 140 destinations we serve, where cargo traffic meets tourists – Mauritus, Mexico, Cuba, Sri Lanka and Kenai, Thailand and the Maldives. Take your pick. |
