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Feature: profiting from cargo

12 October 2010

Peter Morrell of Cranfield University looks at the financial performance of air cargo carriers.

Tags: Peter Morrell  |  FedEx  |  UPS  |  DHL  |  Lufthansa Cargo  |  Cargolux  |  Singapore Airlines Cargo  |  LAN Cargo

The airline industry is not noted for its profitability or return on capital and the cargo side of the business is no exception. Making a profit from carrying air cargo whether on dedicated freighters or in cargo holds of passenger aircraft is challenging, but there are some successful business models.

Those airlines that carry only freight have often struggled to stay afloat financially, not least because of the frequency of major industry downturns. Many new entrants have failed in spite of the strict financial fitness tests that are often applied by licencing authorities.

This does not seem to deter potential further start-ups and capital has been surprisingly forthcoming, given the patchy financial performances. The availability of suitable aircraft on operating leases has encouraged new entrants because of the reduced capital requirements.

The recent overall financial performance of cargo airlines compares favourably to the industry as a whole. Based on published...

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