JAL To Request 30% Rise In International Cargo Charges

TOKYO (Nikkei)–Japan Airlines Corp. will seek a 30% jump in international freight rates from the middle of this month as part of drastic measures to bolster such operations.

The struggling airline last implemented a full-scale cargo hike roughly a year ago. This latest increase comes on the back of rebounding demand for shipments of LCD-panel-related parts to Shanghai and Taiwan and deliveries of autoparts to Guangzhou, China.

On its North American routes, JAL currently requests 230-510 yen per kilogram, while European shipments are charged 420-540 yen per kilogram. Compared with last fall, charges are down 30-50% because of the economic malaise. Despite shipments of air cargo from Japan plunging 54% on the year in the January-March quarter, the decline has somewhat steadied to 40% since April.

Bracing for defections among customers rejecting the hikes, JAL is prepared to negotiate. But there is likely to be a strong backlash from forwarders.

“Cargo owners are still demanding lower prices,” says a leading forwarder.

Amid drawn-out economic woes, companies are stepping up efforts to slash freight expenses. So, if the recovery in shipments does not continue, the price hikes will face obstacles. And for agricultural machinery, semiconductor-manufacturing devices and other products for which there is little demand for urgent shipments, customers are shifting to marine transport as they focus on lower costs.

JAL is also considering further cuts to freight flights. Its North American service consists of five return trips a week between Narita and Chicago and four between Narita and Los Angeles. It will keep one Narita-Chicago service and switch the remainder to four flights a week on a Narita-Chicago-Los Angeles-Narita route, reducing freight capacity 10%.

In Europe, JAL suspended the Narita-Amsterdam-Frankfurt-Narita service in March. It also stopped code-share freight flights with Air France, halving its freight capacity. And for Asia, it is switching from large to midsize aircraft for Narita-Singapore-Bangkok-Narita flights.

Of JAL’s 1.95 trillion yen in group sales for fiscal 2008, international freight operations generated just 152.1 billion yen, or less than 10%. But around 40% of its operating loss of 50.8 billion yen is attributed to the cargo services.

(The Nikkei July 3 morning edition)

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