Cargo IT meltdown hits Air France-KLM earnings

Eric Kulisch
3 min read
0
In this article:
An all-blue KLM Cargo jumbo jet rolls down the runway under a blue sky.
A KLM 747-400 freighter arrives at Amsterdam Schiphol Airport on Aug. 20, 2016. KLM operates three of the Boeing jets. (Photo: Shutterstock/Andrew Balcombe)

Air France-KLM Group said Tuesday that the bungled rollout of a new cargo IT system in March contributed to lower revenues during the first quarter, which in turn acted as a drag on earnings for the corporation.

The joint venture reported cargo revenues fell 16.5% year over year to 562 million euros ($602.3 million) even as traffic in revenue ton kilometers — a measure of revenue generation based on how much cargo is carried times distance — increased 4%. More broadly, the company’s operating loss widened to $524 million compared to $333 million a year ago, partly due to operational disruptions and slower cargo business.

The Air France-KLM Group operates six cargo jets: KLM’s three Boeing 747-400 production freighters, Martinair’s one 747-400 converted freighter and Air France’s two 777-200s. The Air France and KLM cargo divisions also manage shipments carried by their large passenger fleets.

Lower cargo revenues were attributed to a 26% decrease in yield and problems implementing new software at Air France’s main warehouse at Paris Charles de Gaulle Airport.


Air France began migrating customers to a new cargo management system in early March but quickly experienced problems, according to a notice on the Air France-KLM-Martinair Cargo website last month. The airline was forced to stop accepting new bookings to, from and via the Paris hub for nearly two weeks. Dangerous goods and transshipments moving on passenger aircraft were embargoed from Paris for several more days because their specialized characteristics required extra programming.

Customer shipments were stranded at the cargo terminal because Air France couldn’t identify many of them while the system wasn’t working smoothly.

The situation resembled one faced by Qantas Freight in Australia last year after problems switching over to a new cargo platform caused shipment backlogs for several weeks at airport terminals.

Global air cargo demand increased 11% during the first quarter, exceeding capacity growth, behind strong e-commerce activity out of Asia and a mode shift related to Red Sea shipping disruptions. Air France-KLM said it wasn’t able to take full advantage of the positive market conditions because of low capacity in China and payload restrictions on Asian flights due to the Russian airspace closure, which forces aircraft to carry more fuel.


The cargo division’s first-quarter revenue still represents an improvement from last year, when sales fell 29%. During the fourth quarter, cargo revenue fell 23% from the same period in 2022. And it’s on par, on a percentage basis, with American Airlines and Delta Air Lines, which saw revenues decline 15% and 16% year over year, respectively. The U.S. airlines, however, don’t operate cargo jets.

Air France-KLM said load factors were essentially flat at 47%.

In January, Air France-KLM and CMA CGM Air Cargo, based in Paris, pulled the plug on their one-year alliance to share cargo capacity. They said the tight regulatory environment in the U.S. and other markets prevented the cooperation from working optimally.

Click here for more FreightWaves stories by Eric Kulisch.

Sign up for the weekly American Shipper Air newsletter here. 

RECOMMENDED READING:

CMA CGM, Air France-KLM scap cargo alliance over US access

United Airlines sets bar for Q1 cargo performance

Qantas Freight fumbles IT rollout, stranding cargo shipments


The post Cargo IT meltdown hits Air France-KLM earnings appeared first on FreightWaves.

Advertisement

Recommended Stories

  • Boeing commercial jet deliveries drop by two in April

    Boeing also reported 33 cancellations for the month, due largely to Canadian budget carrier Lynx Air's ceasing operations, which accounted for 29 of the planes, Boeing said. Boeing has said it is producing fewer MAX single-aisle jets to improve manufacturing quality after the Jan. 5 mid-air blowout of a door plug on a 737 MAX 9 jet brought the U.S. planemaker under increased scrutiny from regulators. The planemaker said it delivered 16 MAX jets, down one from the same month in 2023, when deliveries were impacted by a supplier's manufacturing defect.

  • Boeing Deliveries Slow in April

    Boeing delivered 24 commercial airplanes in April, the lowest number so far this year, as the company works through quality issues in the wake of the Alaska Airlines door plug blowout involving a 737 MAX jet. Boeing has delivered 83 MAX jets so far this year, down from 130 during the same period last year. Boeing's shares were recently up about 1.5%.

  • Boeing orders tumble as troubled aircraft maker struggles to overcome its latest crisis

    Boeing orders tumbled in April and were outnumbered by canceled sales in another sign of the crisis gripping the troubled aircraft manufacturer. Boeing said Tuesday that it received orders for seven planes last month, an unusually small number. As expected, deliveries of new Boeing jetliners were weak, at 24 in April, pushing the U.S. company farther behind Airbus, its European rival.

  • US airlines forecast record 2024 summer travel, up 6.3% over last year

    WASHINGTON (Reuters) -A group representing major U.S. airlines forecast record summer travel with carriers expected to transport 271 million passengers, up 6.3% from last year. Airlines for America said Tuesday that U.S. carriers plan to fly more than 26,000 daily flights this summer, up nearly 1,400 over 2023, or 5.6%, when they carried 255 million passengers. The summer travel season forecast is for June 1 to Aug. 31.

  • Boeing Delivers Fewest Jets Since Pandemic on 737 Max Slowdown

    (Bloomberg) -- Boeing Co. delivered 24 commercial jets in April, its lowest monthly tally since February 2022, as the planemaker slowed production of its workhorse 737 Max and 787 Dreamliner widebody to focus on improving quality.Most Read from BloombergTrump Vows ‘Day One’ Executive Order Targeting Offshore WindBiden Accuses China of ‘Cheating’ on Trade, Imposes New TariffsFlood of China Used Cooking Oil Spurs Call to Hike US LeviesHow One of the World's Oldest Hedge Funds Went BankruptMacron P

  • Sam Bankman-Fried Traded In His $35 Million Mansion In The Bahamas For A Prison Cell With 35 Inmates But Claims "He Did Not Do Anything Wrong"

    Formerly disgraced FTX CEO and Co-Founder Sam Bankman-Fried was convicted in November of wire fraud, money laundering and conspiracy, and sentenced to 25 years in prison. His high-profile trial marked a significant chapter in the unraveling of FTX, which collapsed under suspicious financial practices, leading to intense scrutiny and legal action. For the first time since his incarceration, Bankman-Fried described his daily life in a detailed interview with journalist William D. Cohan of Puck. Do

  • Charles Schwab website ‘is a mess’: Hundreds of TD Ameritrade users complain about their new online home.

    “It wouldn’t surprise me if they see an outflow of clients over the next six months,” one user told MarketWatch.

  • Homes are overvalued in much of the U.S. — with these 5 states leading the list

    Home prices are overvalued nationally, according to a new report by Fitch Ratings, led by Southern states.

  • Nvidia Recently Bought 5 Artificial Intelligence (AI) Stocks, and 1 Is Absolutely Soaring

    Nvidia is spreading some of its recently amassed wealth by investing in smaller AI companies.

  • The 3M Dividend Cut Is Here. It’s Big.

    STOCKSTOWATCHTODAY BLOG It’s official. 3M cut its dividend significantly. The materials company declared a dividend of 70 cents per share on Tuesday evening. That’s down from the prior quarter’s dividend of $1.