American Airlines Group's system cargo ton-miles (CTMs) for February 2014 were 173.5 million, up 11.2 percent versus February 2013. Year-to-date CTMs were 347.3 million, up 12.6 percent over the same period in 2013. Speaking at IATA's 8th World Cargo Symposium in Los Angeles, chief operating officer Robert Isom (pictured below) puts the airline's cargo business in perspective. This is an edited version of his speech:
Things have changed since my days as a director of Cargo Strategy for Northwest. For one, there aren't any of the major U.S. passenger airlines operating freighters -and as I've told my team, we're going to leave that business to others!
More importantly, 20 years ago, no one could have foreseen how technology would have changed the global economy and increased the dependence on efficient and reliable air transport for high value cargo. And fortunately, cargo will play a significant role in the strength of the new American.
Cargo – why it matters: For American, it is an essential part of our success. We generate over $800 million in cargo revenue, and a significant portion of that falls directly to the bottom line – a bottom line that hasn't been in the black that often in the past. While everyone knows that passenger airlines' primary business is flying people to the places they need to go, we also are committed to the role that we play in the global supply chain and logistics industry.
In my role as COO of the new American, as well as a leader of the overall integration effort, I've spent a fair amount of time pondering the issue of what's next. How do we transform and innovate? How we can smartly integrate our businesses together and achieve our overall vision of restoring American to the greatest airline in the world?
We don't have all of the answers yet, but for cargo, we know it will mean building off of a comprehensive network, one of the newest and most fuel efficient fleets, the best capabilities and the best customer service.
One of the great things about this merger is that we're bringing together two complementary networks – which means we can fly people and products to more locations than ever before.
Together with American Eagle and US Airways Express, our two airlines operate an average of nearly 6,700 flights per day to 339 destinations in 54 countries from our hubs – including our hub here in Los Angeles.
American provides more service than any other airline between the United States and Latin America with more than 900 weekly flights to more than 51 destinations in 18 countries. This market remains our strongest performing region and we expect this market to continue to grow. At the end of last year, we commenced non-stop service from Los Angeles to Sao Paulo.
We continue to focus on building our presence in Asia. American launched its first-ever service to Asia when it began serving Tokyo from DFW in 1987. And now, more than 25 years later, we will offer ten daily flights connecting the U.S. and Asia. We are proud of that growth and look forward to even more service to the region over the coming years.
On June 11, American will add a new daily nonstop flight to Shanghai's Pudong International Airport from Dallas/Fort Worth, complementing our existing service from Chicago and Los Angeles.
On the same day, we will begin the first daily nonstop service from Dallas/Fort Worth to Hong Kong. These are all in addition to our daily DFW to Seoul service, which we launched early last year.
But consider the multiplier effect of connecting all of these cities in Asia and South America. Soon we will have six destinations in Asia to connect to more than 50 different cities in Central and South America. That's more than 300 distinct routes between two continents that American can transport products over in a timely and efficient manner.
If you need to ship from Hong Kong to Sao Paulo, American can get you there. Caracas to Seoul, we can do it. Tokyo to Buenos Aires with just one connection.
In addition to Asia and Latin America, once our networks are connected, the additional wide- body capacity will increase our ability to transport cargo to almost every major commerce center in Europe. In total, we will offer more than 50 daily wide-body flights to 10 countries.
And, we're bringing in 11 widebody jets this year to fly to long haul destinations. In 2014 and beyond, we plan to take delivery of nine more B777-300ERs (one already in 2014; total of 20); three more A330-200s; 42 787s (-8s and -9s, with options for 58 more); and 22 A350-900s (beginning in 2017).
All of those will open up some exciting opportunities for cargo. For example, our newest aircraft, the 777-300ER, allows us to carry more cargo than ever before. Earlier this year, we set a new system-wide record for the total amount of cargo loaded – over 100,000 pounds. That was on a Triple-7 from here at LAX to London's Heathrow. And I can recall, when that kind of load would have been considered pretty solid for a wide-body freighter!
Our first Boeing 787 joins the fleet late this year, and its fuel efficiency and range will provide an opportunity to connect cities that aren't possible right now. And take a look at what it does for cargo. As the Dreamliner replaces some of the 767s in our fleet, we have new ways to load products into the belly of the aircraft.
Boeing has done a remarkable job to create more capacity. For example, in the 787, we can carry more pallets than the existing 767 because of the new configuration in the belly of the plane. The 787 has 28 pallet positions to the 767's 15.
Airbus has also shown us some great breakthroughs their team has made for sorting and loading in the A350 that will allow us to add capacity for more long haul flights. 22 of the A350- 900s will begin entering our fleet in 2017.
These investments are allowing us to carry more cargo to more places.
The fuel efficiency of these aircraft doesn't just help the bottom line. They also help our commitment to the environment and support IATA's voluntary initiatives to the address environmental impact in our industry.
We recently invested in a new controlled room temperature (or CRT) facility at JFK and we're finalizing one at Heathrow. We are getting ready to break ground on a new 30,000 square foot dedicated Cold Chain / Pharma facility in Philadelphia to handle temperature-sensitive products in one of the most strategic markets in the US.
We know that pharmaceutical cargo is one of the fastest growing markets – as economies evolve, they require vaccines and medicines. These are products that are time and temperature sensitive, and air cargo is the best and most efficient way to transport them. And so we want to ensure we have the equipment and capabilities in place to serve those needs.
I've talked a lot about innovation at American and where we are. I want to pivot just a bit and talk about the ways that I know we're all working hard together to improve our industry. One thing that I know many of us are working on together is the e-Air Waybill. We've been working to support our forwarders on the path to paperless operation. Last year, we signed the IATA Multilateral e-Air Waybill agreement, and we've been partnering with IATA to host workshops for our forwarders on the e-air waybill education and implementation.
At American, one of the things we're talking a lot about as we move through our transformation is the importance of collaboration. It's the only way we're going to be successful and deliver on our promises.
The importance of working together also is true within our broader industry. We're all at our best when we are able to partner and develop smart solutions.