Recovery not fast enough for Nippon Cargo Airlines to avoid loss

AIR freight movements for NYK's unit Nippon Cargo Airlines (NCA) have begun to pick up, but remain 20-30 per cent below 2007 highs, according to the group's annual report.

For NYK's fiscal 2010, NCA cargo revenue was down 21.2 per cent to JPY62.6 billion, representing an operating loss of JPY15.4 billion (US$1.7 million), said the Japanese shipping giant's results.

"In the first half of the fiscal year, NCA was hit by a sluggish air cargo sector that persisted after the fall of 2008. From the second half, however, air cargo movements recovered, rising 30 per cent year on year," said the report.

Efforts were made to collect surcharges in the face of high jet fuel prices, and with a tone of recovery in the second half, the charter business grew along with regular routes.

"The recovery over the fiscal year was gradual and revenues declined from the previous fiscal year, but as a result of extensive cost reductions, including aircraft operating and maintenance expenses, the company reduced its loss," said the report.

NCA operates eight Boeing 747-400Fs. NCA employs its own fleet operation and maintenance systems and is working toward becoming an air cargo specialist with a leading position in global markets, said the annual report.

"With its current fleet, NCA is targeting to reach break-even at the recurring level in fiscal 2011, and moving forward the company plans to introduce the next-generation Boeing 747-8F cargo freighter," said the report.

Although NCA responded to rising fuel prices with fuel surcharges and increased scheduled flights and charter flights, revenues were down year on year due to recovery in demand being moderate, the report said.

"In response, we implemented cost reductions, including aircraft operation and maintenance expenses, and consequently the recurring loss improved in comparison with the previous fiscal year," said the annual report.

Said NYK corporate officer Hitoshi Oshika, responsible for NCA, said: "We focused on maintaining on-time flights, and achieved an on-time ratio of more than 90 per cent, placing us in the top ranks of the industry worldwide. Flight delays increase costs; therefore, a strict observance of schedules and standardisation of operations are an important means of controlling expenses.

"We expect growth in air cargo demand from Asian countries, cantered on China, to Europe and North America. NCA will leverage its strengths as a dedicated air cargo company - its flexibility and cost competitiveness-to steadily meet expanding demand," Mr Oshika said.
(Source:www.schednet.com)