Ultra-low-fare airlines - the cargo risk

For Malta, an island state, good air cargo links are essential. This also, if not particularly, means the possibility for small shipments to travel along in the cargo holds of regular passenger flights, combining high frequency with affordability for those who occasionally ship 20 or 200 kilogrammes, and not 20-tonne loads for which one might charter an aircraft.

Air Malta's route map offers many destinations to ship light cargo to, and there are several flights a day to/from Britain. At least as valuable are the capacities of the cargo holds of, for example, Lufthansa's scheduled daily flights, connecting to a global network of freighter and passenger airliners.

How do the aspiring ultra-low-fare airlines fit into this?

They reject cargo. For their business model it is absolutely the right decision: Handling of cargo needs time, money and care. Without loading processes, they can secure ultra-short apron times, thus increasing productivity.

While this is beneficial for shareholders and low-fare passengers, it is not so for cargo shippers. If classic scheduled airlines offering light cargo transportation are knocked out, this means higher costs for today's just-in-time production, such as in the high-tech industry (firms would really think twice before setting up in Malta), with small spare parts for factories and important medical goods, etc. which would have to be flown in on a chartered private jet instead of travelling as a comparatively cheap express air freight parcel aboard the next scheduled flight. This is not to mention the post sacks that travel through the big international hubs like Heathrow and Frankfurt.

Having monopolistic scheduled airline survivors that have to see how to make ends meet will certainly not make cargo rates fall.

A daily large freighter flight such as the MD-11 (90-tonne payload) or even a medium-sized A310 (ca 50-tonne) would be wonderful but, seriously, a solely Malta destined/sourced market appears far too small for that.

Air Malta offers a daily Fokker 27 flying Rome Ciampino-Malta-Tunis return (capacity ca. five tonnes, including transit cargo) operated by Farnair/Miniliner, and a 40-tonne freighter Boeing 757, operated by European Air Transport (DHL Airways) to Frankfurt, once weekly.

In order for Malta to remain competitive as an industrial investment location, one would require roughly the same frequency as today's scheduled passenger services to leading airports but just with dedicated freighters, hence not regular passenger aircraft taking a few kilogrammes or a tonne of cargo along with them if required, but an extra plane. An integrator like FEDEX or DHL could be a choice, meaning that only one central airport in Western Europe would be serviced from which everything would then be redistributed onto other aircraft or trucks. However, this requires a sufficiently big market.

A daily B757 freighter to Frankfurt, London, etc. will hardly work if one only has Malta-destined or sourced freight. The five to seven-tonne class Fokker F27, the ATR 42/72, the Antonov 26/32 etc. are slow and, maybe except for the Antonovs, require refuelling. The 10- to 12-tonne class Lockheed Electra (40 years old) and Douglas DC6 (50 years old) are bound for aviation museums. Boeing 737 freighters (still very rare), B727Fs (being phased out), Lockheed Hercules (quite rare) and Antonov 12s (30-40 years old yet still going strong) have speed and range but a capacity of 12-20 tonnes. Is there the demand for the five- to seven-tonne class?

Currently, integrators pack express Malta parcels onto scheduled passenger flights, perhaps because this comes cheaper and faster, given the small volume.

Given limited cargo volume, if ultra-low-fare airlines make scheduled airlines reduce capacities or get out, one would have:

¤ either an integrator;

¤ if scheduled passenger services remain, freight rate hikes to maintain cost coverage (works however only with inelastic demand;

¤ a basically subsidised air cargo line (why not by the integrator?) with loss coverage guaranteed, thus subsidies not only for the ultra-low-fare passenger airlines requiring "marketing aid", "incentives" etc. for their willingness to fly to Malta (devastating business for the two local airlines and foreign tour operators, charter airlines and network carrier connections), but also a subsidy for a sometimes not exactly full dedicated freighter. Currently passenger and cargo flights work with zero subsidies.

Today, if an enterprise ships, say, eight tonnes of cargo from/to Malta from/to Frankfurt or transiting to beyond, Lufthansa sends a larger Airbus A300 instead of the usual smaller A320 and takes the cargo along, just like that (it does not happen that often, mind you). For smaller, non-bulky shipments, be it 20, 200 or 2,000 kilogrammes, one has a choice between Air Malta and Lufthansa (or British Airways, Alitalia). If ultra-low-fare carriers erode passenger revenue, there will either be an increase in cargo rates and fares for those passengers depending on conventional flights (those depending on public transport, business travellers, disabled passengers, transit passengers) to compensate the losses, or services will be stopped altogether. Certainly, a dedicated freighter would see more business, but customers would have less choice. Freight flights to Ciampino airport have connections, by air and land, within Europe, though not at the speed of spare parts or just-in-time components taken up in London, Manchester, Frankfurt etc in the afternoon and arriving in Malta during the late evening so that production can resume next morning, or, if packed during early morning, arriving at noon. Plus, there is the intercontinental connection question.

Passenger airlines focus on passengers, taking cargo along only as an addition. They only launch dedicated freighters if demand justifies it, if at all. With significantly fewer passengers and equal amounts of cargo, even general flights become unviable. Air Malta's subcontracted freighter flights might be understood as part of their public enterprise commitment to providing an infrastructure for Malta's economy.

As much as freighter services are to be encouraged with their additional capacity and opportunities, cargo capacities on scheduled passenger flights of Air Malta and the network carriers should be appreciated. It would hurt industrial competitiveness and infrastructure if they are reduced or gone due to certain ultra-low-fare passenger airlines "invited" to operate in parallel. A small island with no frequent, reliable and affordable air freight capacity is totally uninteresting for modern industrial investors.