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Air Atlanta's freighter dilemma

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Air Atlanta's freighter dilemma

March 1, 2007 by PLA Editor

Not so long ago it seemed as ACMIoperator Air Atlanta Icelandic wouldneed to make a rapid transition fromB747-200Fs to more modern freighters.Now, however, the picture is lessclear.

True, the carrier is looking carefullyat the 12 -200Fs that form the bulk ofits fleet, and looks almost certain to sellthe two of them it actually owns whentheir leases expire in the middle of thisyear. But the future of the remainingten ¨C dry leased from their owners, andthen wet-leased to airlines ¨C remains tobe decided.

Current customers include MalaysianAirlines, which has four, due forrenewal in 2008; Cargolux, which hasone on a yearly renewable lease; andLufthansa, which sold and leased backthree to Air Atlanta, but currently hasone parked. Cathay Pacific sent back itslast -200F in December, however.

Giving Air Atlanta hope for futuredemand are two new contracts signedfor -200Fs last year: one for a year forSaudi Arabian Airlines and one forYangtze River Express. Air Atlanta’s vicepresident sales and marketing, Johann Onfjord Karason, in particular hopesthat China could be a future market forthe -200Fs, saying Air Atlanta’s qualityservice record may help persuade theauthorities there to allow airlines towet-lease its aircraft.

The future of the -200Fs also dependson external factors, however,including whether fuel prices soarback up to their 2006 highs again ¨C afactor which would weigh against thenot particularly fuel-efficient -200F;and on contract negotiations with theaircraft’s owners. “If they want to keep their aircraft in the game, then they will have to adjust their dry lease rates,” Karason says ominously.

High rate expectations from ownersare also influencing the B747-400Fmarket. Needless to say,Air Atlanta is keen tosource these aircraft, butKarason says many ownerswant dry lease rates thatare simply not realistic.

The fact that fuel priceshave slipped from their2006 highs is also reducingthe fuel efficiency savingsof the -400F and makingthe -200F look moreattractive again. “That still leaves the -400F as a more reliable aircraft with a slightly higher payload, but that is not enough to justify the dry lease rates we are seeing,” Karason says.

All of this matters because of AirAtlanta’s business model, which untilnow has exploited the difference betweenthe rates it can dry lease aircraftat and what it can get for them on the ACMI market.

Increasingly, however, it seems tobe shifting towards owning its ownaircraft, in a more normal ACMI operatorfashion. An example are its firsttwo B747-400Fs which have recentlyjoined its fleet. One, which arrived inNovember, is an aircraft Air Atlanta hadbeen operating in passenger configurationfor two years, but which has nowbeen converted to a freighter by IsraelAircraft Industries.

A second -400F, which arrived inJanuary, was purchased outright fromAsiana by Air Atlanta’s sister company, Avion Aircraft Trading (AAT).

Both of these -400Fs are now flyingfor Cargolux. Four more -400s fromANA are also currently being convertedto freighters, with the first due for deliveryin September, and one a year thereafter.The involvement of AAT in Asianatransaction points the way forward forAir Atlanta. Set up as part of the AvionGroup ¨C now snappily re-titled EimskipafelagIslands; AAT was created as anaircraft-purchasing outfit. It placed anorder for eight 777-200Fs last year, fordelivery from 2009 onwards, and inFebruary ordered six A330 freighters,for delivery from 2010.

A twist to the tale, however, is thatin October last year, 51 percent of AATwas sold to a consortium that includedAir Atlanta founder Arngrimur Johannssonand its former CEO HafthorHafsteinsson.

This means that while AAT and AirAtlanta still expect to work closely together,the purchase of aircraft by theformer does not necessarily mean theywill end up operating with the latter.

For example, Karason speaks withenthusiasm of the 777F as a replacementfor the -200F, pointing out that itcould fly non-stop from Asia to Europeor the US, with the same load as the-200F but as much as 30 percent lessfuel burn. But he has to admit that notall of the eight on order will necessarilybe put at Air Atlanta’s disposal.”AAT could offer them for dry leaseelsewhere or place them directly,” hesays.

On the A330 freighters, the agreementseems even looser, with Karasonexpressing more hope than certaintythat they will be operated by Air Atlanta,pointing out that this deal was madeafter the change in AAT ownership.

However, he is clearly enthusiasticabout this freighter type. “It will bevery much in demand,” he says. “A lotof the operators we have spoken tohave said they would like to have thisaircraft in the future.” Among Asianroutes on which it would be ideal areChina to the Middle East or the MiddleEast into Europe.

One last aircraft typein Air Atlanta’s strategicplan is the A300-600. Ithas four now, three flyingfor Etihad and one for AirFrance, and has for sometime been seeking morewithout success.

Again owner expectationsare the problem. “Wehave had some discussionswith owners who are askingfor miraculously high drylease rates, or requiring10-12 year commitments.This does not sound rightto us at the moment,” says Karason.

Other Topics: Air & Cargo Services, air cargo, Air Cargo Asia, air cargo freight, Air Forwarding, air freight, Air Freight Asia, Air Freight Logistics, air freighter, air freighting, Air Logistics Asia, Air Shipping Asia, airlines cargo, airways cargo, asia cargo news, cargo aviation

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