I want to run a pure cargo airline (boxes are less troublesome traveling companions), and wondering if anyone could share some hints and tips about how to make this work. I started an airline 2 weeks ago (Forward Cargo on croyden). It’s been interesting enough to make me upgrade and buy enough credits for the rest of the year to see if I can turn a profit. I’m struggling with some basic strategy questions.
Does the hub-and-spoke model work the same way for cargo as it does for pax? Is there a different method that is more suited for cargo? How many “spokes” do you need per hub to make it work?
I thought I’d pick 2nd tier airports in major hub cities (eg. ONT instead of LAX, STN instead of LHR). There are more slots and fees are lower. But even though my price is lower, I still see other flights completely booked from LAX when I can’t fill up going to the same destination from ONT. How does the ground network factor in? If someone wants to ship a package from Los Angeles, my flight should be the cheaper option. So even though LAX is a 10 bar airport while ONT is 7 bars, shouldn’t I be getting a lot of spill-over demand from LAX that can use the ground network? Should I scrap this approach and instead try to stick to the 10 bar airports?
How do you approach scheduling routes for a new plane? I started by thinking “I have to keep this plane in the air at all times”, so I had my first one running the same route 4x a day, 7 days a week. Then I opened some more offices, and threw routes around more or less at random, simply to maximize flying time but without regard to overall “strategy” of the routing system. I suppose a more thoughtful approach would be to start with a map of the routes and time you want to fly, then allocate them to individual planes as best as possible.
Yes, it works similar, but it is probably for some markets less important, as in general cargo is less sensitive in regard to the transfer time. (Especially, if you have got no direct cargo competitor.)
I haven’t tried that strategy. I have some doubt, that you can attract cargo from larger airports through ground network. But give it a try and tell us your result. But keep in mind, that a competitor could easily (if slots available) push you out of the market by starting in LAX.
Asset utilization is all if it comes to cargo. So your first approach is quiet right. You might optimize it, by using flight pairs in opposite directions or do circles or whatever generates cargo that might be kept for ongoing flights. Second, you might think of plans that suit different airports waves. All optimization is getting harder while you are growing. But cargo, from my point of view, profits even more from a large network compared to pax. So optimization is getting less important as you grow.
Further …
a) I would start with only one very efficient hub and adding hubs rather conservatively. You might test and identify new hubs by running some disconnect high traffic routes. At least if you are not yet confident to know where they are.
b ) Don’t go for large aircraft to early. If they aren’t cheaply available, stay away from 73Cs. Don’t go for 74F or 777 at all (maybe when you carrying more than 4 Mio. CU/wk).
c) Cargo is not an easy business. You might grow slower than other airlines. So you’ll need some patience.
d) Have a good image, but be focused on managing your costs tightly. Cargo is a low-margin business, therefore you have to squeeze out every AS$ you can.
I have made a few fundamental mistakes - notably the lease of an MD-11F which was purely for nostalgic rather than economic purposes. Unfortunately that nostalgia is costing me $100k per day!
My investors are unhappy with the way I have been spending their AS$10M and I may end up having to reorganize and try again. About half my routes are profitable but the other half are really costing me in the red. I'm trying to review my network now to see if I can cut the bad routes and keep the good ones.
I have made a few fundamental mistakes - notably the lease of an MD-11F which was purely for nostalgic rather than economic purposes. Unfortunately that nostalgia is costing me $100k per day!
My investors are unhappy with the way I have been spending their AS$10M and I may end up having to reorganize and try again. About half my routes are profitable but the other half are really costing me in the red. I'm trying to review my network now to see if I can cut the bad routes and keep the good ones.
Indeed this game is about try and error. Seems you already found some good route.
I just started a Cargo operation in KJA (2-bar cargo) because of its geographic location. Granted, I had unlimited* funds...I needed 6 76Fs (Leipzig, PEK, HKG), 15 AT7Fs (Siberia), and 15 73Cs (China, larger cargo airports in CIS/China)...
They are averaging 70% capacity, but it took 3 weeks to get there of cancelling airports. I did this with all Russian airports (except MOW and LED) being 1, 2, or 3 bar cargo airports.
If you can get good geographic distribution, you can get a cargo operation. Maybe you should try something with more positioning near MEM? Otherwise, you're depending on demand to/from ONT and from SoCal to NorCal/Oregon/Idaho/Washington/Alaska.
P.S. Don't forget small airports. I've got a couple2 bar airport that gives me 200 units/day into my network and a 3-bar airpiort (Taganrog) that gives me 700 units/day.
Thanks for the advice, it is much appreciated.
I have made a few fundamental mistakes - notably the lease of an MD-11F which was purely for nostalgic rather than economic purposes. Unfortunately that nostalgia is costing me $100k per day!
My investors are unhappy with the way I have been spending their AS$10M and I may end up having to reorganize and try again. About half my routes are profitable but the other half are really costing me in the red. I'm trying to review my network now to see if I can cut the bad routes and keep the good ones.