Starting a cargo airline is a risky business. Many carriers launch into the market with bold plans and a second hand freighter, only to quietly disappeara few months later.
For Cargoitalia to be coming to the end of its first year and to have some 14 destinations worldwide up and running is therefore already a notable achievement. And if, as its CEO and managing director Massimo Panagia claims, it also manages to break even by the end of the period, he will with justice be ableto claim that it is “quite astonishing”.
Formerly head of cargo for Alitalia, Panagia used to be described by forwarders as “the right person in the wrong airline”. Now he is able to shape Cargoitalia the way he wants it. Certainly since the airline started services in June 2006, he has seemed to have aclear idea of where he wants it to go.
Rather than setting up one or two routes and then seeing how they bed down, for example, Cargoitalia has moved rapidly to set up a broad network. Eastbound it already has two flights a week to Shanghai, three to Chennai and Mumbai, two to Dhaka, and two to Dubai, while across the Atlantic it flies four times a week New York JFK, two each to Chicago, Houstonand Mexico City.
These routes were joined in mid May by flights to Ho Chi Minh City in Vietnam, and Panagia says other routes in the Middle East and Africa – most likely North and West Africa – are on the cards. The carrier also flies its freighters on feeder flights twice a week to Munich and Barcelona, two destinations one would more normally expect to be served by truck from its Milan Malpensa base. Going for a broad network in this way is a deliberate strategy. The idea is not just to tap into origin and des-tination traffic from Italy – which has historically been under-served by cargo carriers – but also to create interestingnetwork connections.
Panagia points to the pairing of New York and Chicago on the one hand and Mumbai and Chennai on the other.“That creates a number of different trafficlanes,” he says. “There is US to Italy,US to India, India to the US and Indiato Italy.” Making such connections hashelped Cargoitalia to achieve average75-80 percent load factors across itsnetwork, and boost yields by 20 percentsince it started, he claims.
The carrier raised eyebrows when it started services by opting for two DC-10 freighters, a type seen as obsolete in most other airlines. Panagia concedes that the aircraft proved inappropriate on at least one route – to Osaka inJapan.
Cargoitalia was flying this route twice a week over the winter, but suspended the service at the end of April. It is due to be resumed in next winter’s schedule, but only once an MD-11 freighter is available to fly it. In fact, Panagia insists, the idea always was to start services with MD-11Fs, but since these were unavailable DC-10s were leased instead. In November, that situation was partly rectified when Cargoitalia replaced oneDC-10 with an MD-11F.
But despite getting its second MD- 11F in April, with another due in October, Panagia still plans to retain the remaining DC-10F, and perhaps even add a second one. “It is a good cargo airplane – an extremely reliable large wide-body with the right contour and fully compatible with the MD-11F,”he says.
“It is definitely not the greatest airplane if you want to fly long distances but on a route from four to six hours flying time it is still a very good freighter.” When the remaining MD-11F comes, will Cargoitalia be thickening any of its routes? For example, isn’t twice a week to Shanghai a bit limited?
Panagia insists not, saying that a midweek and weekend flight creates a basic service that meets its customer’s needs. That being said, he does not rule out extra frequencies to Shanghai and other Asian destinations if trafficdemands.
“But it is a matter of balancing scale – the number of frequencies we fly to any one destination – with scope – having a large enough network. So for sure we will grow in China, but we will also keep that equation in mind,” he says. When plans for Cargoitalia were announced, questions were inevitably asked whether Italy or Europe needed another cargo airline, especially given the fierce competition for cargo on eastbound flights to Asia.
Panagia’s answer here is that the outbound market from Europe is in fact holding up better than one might think, and that many carriers make the mistake of competing on price, not quality. He insists that Cargoitalia, by contrast, has taken a quality approach, which is another factor in its better thanexpected first year results.
One example is CQS – the Cargoitalia Quality System – which proactively provides status messages to forwarders, rather than expecting them to go online and ask for them. Updates are provided by email, SMS or fax on five key stages in the shipment’s journey – booking confirmed, received in warehouse, on board aircraft, ready for delivery, and proof of delivery. Panagia claims this is unique in the air cargo industry and says a future version will include a digitalphotograph of the shipment.
Once its third MD-11F has come and the new routes planned for it have been started, Cargoitalia will come to the end of what Panagia calls “the first phase in the industrial cycle”. In the second phase, from 2009 onwards, he plans to have a whole new cargo fleet, but is saying no more about that at present beyond that his team is“working very hard on it”. He does alsoreveal that after the success of its firstphase, the airline is not short of financialbackers. Those investors include variousItalian industrial groups who he insistsare in it for the long term. “They won’tjust bite and run away, and that is whatmakes us a different case,” he says.