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Business coming back in China, says Delta Air Lines' cargo unit

Over the last two weeks, the airline has regained 10 percent of its overall business.

February 25, 2020 / 06:33 PM IST
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In what could be some good news for the global aviation sector, the cargo vertical of Delta Air Lines, the American airline which claims to be the most profitable in the world, is beginning to see some of its business coming back in the corona virus-hit China.

Over the last two weeks, the airline has seen its cargo business get back as much as 10 percent of its 'normal' volumes.

"We are beginning to see some movement happening. Roughly 80 percent of the capacity in Shanghai and many of the northern cities is back on line.  So is 60 percent of the manufacturing capacity in the south. This is for across sectors," Eric J Wilson, Managing Director of Delta's Global Cargo Sales, told Moneycontrol

He expects business to keep normalising further on, thanks to the manufacturing units resuming operations.

China's e-commerce and manufacturing companies are the biggest customers for Delta's cargo service.


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"These are general manufacturing parts that are used as sub-components in other manufacturing goods in the US and Mexico. E-commerce is the number one customer," added Wilson.

The development will give some relief to the global aviation sector, which like other industries, has been severely impacted by the virus outbreak in China that has till now claimed one 2,600 lives in the country alone.

The International Air Transport Association estimates that carriers in the Asia-Pacific region, and outside, will collectively lose $29.3 billion in revenues. The loss could be nearly $13 billion in China's domestic market alone. And this doesn't include losses in cargo business.

Delta Air Lines, which operates 42 weekly flights between the US and China, had suspended its operations in the virus-hit country on February 2. The suspension is till April 30. India's IndiGo and Air India have also suspended flights.

Delta's model

Then how is it that Delta, which doesn't have any freighter aircraft and carries cargo in a plane's 'belly', moves cargo without any flight service?

That is thanks to the airline's unique model, said Wilson.

Delta Air Lines has created a wider network across the world through equity partnerships with several airlines, including Korean Air, Aeromexico, Air France-KLM and China Eastern Airlines.

Though China Eastern Airlines has suspended operations, Korean Air still has some flights operating in China. Delta Air Lines taps into the space in flights run by its partner airlines to move cargo.

Last year, Delta Air Lines bought 4.3 percent equity in Korean Air's parent company.

While the improvement in the business environment in China will bring back some cheer, there are also concerns about the virus spreading to South Korea, Iran and Italy. "We are closely monitoring the situation. The cargo business hasn't been impacted yet," said Wilson.
Prince Mathews Thomas heads the corporate bureau of Moneycontrol. He has been covering the business world for 16 years, having worked in The Hindu Business Line, Forbes India, Dow Jones Newswires, The Economic Times, Business Standard and The Week. A Chevening scholar, Prince has also authored The Consolidators, a book on second generation entrepreneurs.
first published: Feb 25, 2020 06:33 pm
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