Air Transport: Summer’s new air cargo horizons?

   In the past few months, airlines have seen the friendly skies open up, awarding intrepid companies with new routes to previously limited locations.
   While these benefits will likely be of little consequence cargo-wise, it should be interesting to see how passenger carriers deal with the added freight capacity that comes from new passenger flights to Mexico and Cuba.
   First, Mexico. What started in December of last year has finally come to pass, as the new U.S.-Mexico air transport agreement has entered into force. According to the Department of Transportation, the deal “further elevates and strengthens the dynamic commercial and economic relationship between the United States and Mexico and advances our goal of shared prosperity…Cargo carriers will now have expanded opportunities to provide services that were not available under the more restrictive agreement.”
   What does the deal actually mean? U.S. carriers will now have an easier time offering flights into Mexico, and U.S. cargo airlines that are routing from Mexico to another foreign destination won’t be required to make a pit stop in the states.
   Southwest is adding routes to three Mexican cities from Los Angeles starting in December; Delta is planning to fly routes to Cancun from Los Angeles and New York’s JFK, reserving one flight each week for a trip between Kansas City and Cancun; and American Airlines will also launch routes to Puerto Vallarta and Cancun from Los Angeles in December. While these are mostly passenger hot spots, the additional flights will add cargo capacity into Mexico as well.
   The other big airline news is, of course, JetBlue’s maiden flight into Cuba, which marks what should be the start of regular service between the United States and the once embargoed Caribbean nation.
   FedEx is the only all-cargo carrier flying into Cuba, and will start running five flights a week to Havana in January. This is certainly good news for shippers wanting access to the Cuban market, but in general, analysts don’t really think Cuban flights will have that large of an impact on the airline industry.
   To measure the anticipated impact of Cuban flights, ratings firm Fitch looked at enplanements in Puerto Rico, betting that the 5.2 million flights the commonwealth saw in 2013 would be a pretty good guess for Cuban activity. For comparison, Florida’s Fort Lauderdale airport, from which the maiden Cuban flight took off, experienced more than double that activity in 2015, Fitch found.
   Fitch did allow that smaller airports in the United States would see a larger impact from Cuban business. For now, DOT has only opened Cuban routes to Atlanta, Charlotte, Fort Lauderdale, Los Angeles, Miami, New York and Orlando.
   “Over the near term, 20 daily flights to Havana and 90 daily flights to nine other Cuban cities will be awarded to carriers,” the ratings firm said. “In Fitch’s view, this number of flights could grow to include smaller U.S. airports. Cuba’s proximity to the U.S. mainland makes it a market that many other U.S. cities could also serve, so we would expect the impact on smaller airports to be more substantial.”
   New horizons for carriers? That sounds like somebody got a new job. Make that two somebodies. In the last month, American Airlines promoted Robert Isom to the role of president (reporting to CEO Doug Parker) after the departure of Scott Kirby, who left to become the head of United.
   In a note to investors, Cowen and Co. wrote about the shifting winds in the C-suite, stating that American with Isom as president is a neither a positive nor a negative. Cowen looks at the change at United as a step in the right direction, a result of the “complete revamp” of the airline’s executives spearheaded by CEO Oscar Munoz. “Expectations will now be elevated given the overhaul of management,” Cowen said.
   The activity at both airlines this summer has translated into more positive numbers for freight movement. The latest figures from the International Air Transport Association show that in July, North American carriers, who made up a shade more than 20 percent of the international market, experienced a 4.1 percent boost in activity, when compared to July 2015. This freight boost was accompanied by a 3.4 percent increase in capacity. IATA said that international freight carried by domestic airlines only rose 1.3 percent, as international activity is suffering “from the strength of the U.S. dollar, which has kept the U.S. export market under pressure.”
   Viewing the world as a whole, air cargo activity rose 5 percent year-over-year, while capacity increased 5.2 percent for the month. After a bit of celebration over the airfreight numbers, new IATA boss Alexandre de Juniac sounded a more cautious note.
   “We must recognize that we face some strong headwinds on fundamental aspects of the business. Global trade growth is sluggish and business confidence is weak,” he said in a statement. “And the political rhetoric on both sides of the Atlantic is not encouraging for further trade liberalization.”