Airlines Cargo Contribution

For most airlines, cargo contribution represents the difference between profit and loss. As Murray Smyth, Sabre Airline Solutions' vice president for Europe, the Middle East, and Africa puts it, "Cargo is an increasingly important element of Gulf Air's business�Carriers have found that if cargo capacity is not managed successfully, critical revenue opportunities could be lost" (Hayden).

There are airlines that fly strictly cargo, those that fly strictly passengers, and many that fly both passengers and cargo. The difference in profitability between airlines that fly passengers and those that fly cargo is significant. In 2005, all of the air cargo companies surveyed by Airline Business Report had profits in the first quarter and all but one showed profits above those of 2004 that one lagger still showed a gross revenue increase of 20%; U.S. passenger airlines, by contrast, showed a loss for the first quarter that was worse than that of the same quarter in 2004 (Forsyth et al.). It is obviously to the advantage of a passenger airline to include cargo in its flights. Cargo contribution on passenger flights can make up some of the profits lost due to underbooked flights, inclement weather, and the high cost of fuel. There are also hidden costs that have undermined passenger airline profits in recent years. Since September 11, 2001 (9/11), many people are either afraid to fly, cannot bear the long delays, or refuse to submit to the more extens

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r one thing, they take up a great deal of space in the cargo hold (Rodrigue et al). For another, they can require more manhours for stacking; containers have to be stacked in a particular order so that those that need to be removed from the cargo hold first are not on the bottom (Rodrigue et al). Handling is another significant issue: The management logistics of containers is very complex. This requires high levels of information technology for the recording, positioning and ordering of containers handled (Rodrigue et al). Furthermore, repositioning empty containers also cuts into profits. After product has been shipped in a container, it often needs to be shipped back empty to its point of origination; the empty container takes up just as much room in the cargo hold as one full of product (Rodrigue et al). Finally, since containers can easily house illicit substances or weaponry, expensive scanning equipment needs to be in place to scan them for drugs and possible devices associated with terrorism (Rodrigue et al). Air cargo profits need to be balanced with air cargo losses, as well. The primary causes of air cargo losses are inadequate packing and improper marking of cargo, so these are areas where the shipper's effort

Category: Economics - A