The development of the Airbus A380F air freighter (F denoting freighter) has been put on the back burner, according to Tom Enders, the company’s CEO. BMI’s freight transportation team considers this to be a prudent move, for although the global air freight industry is picking up after its decline in 2009, a slow and steady recovery appears to be on the cards, with a number of air cargo operators exercising caution.

The A380 passenger version has not performed as well as predicted, with Air Cargo News reporting that Richard Aboulafia, the vice-president of analysis at aerospace research firm Teal Group, stated that the ‘A380 is best regarded as a US$25bn write-off and an act of industrial irresponsibility’.

My colleagues at the freight transportation team note that although bigger is not considered better in the current air freight environment, when the market improves the emphasis will once again be on economies of scale, which is the reason the A380 was touted in the first place. BMI therefore believes that a complete write-off of the A380F is unlikely, with Airbus previously stating that the freighter is ‘still technically part of its product portfolio and can be produced later’.

Regional Breakdown Air Freight Traffic Growth (y-o-y)

Although a recovery in the air freight sector has indeed begun, with IATA reporting that global air freight increased year-on-year (y-o-y) by 28% in March 2010, air cargo operators are still jittery about the strength of the recovery. The most recent example of this is Air France-KLM freezing its cargo capacity, despite the uptick in the market. The cargo unit accounted for about a third of the airline’s US$1.6bn loss in 2009, with the subsidiary in the red to the tune of US$545mn. If a major air freight operator is pulling down the shutters and refusing to increase capacity despite an upturn in the market, this could indicate stormy weather ahead for the air freight sector. The move suggests that the airline believes it already has enough capacity in circulation to meet demand, and so at best is expecting a plateau in air freight volumes or at worst another dip.

In these market conditions, BMI’s freight transportation team believes that Airbus’ decision to hold off the development of the A380F is prudent. The decision does, however, leave the company once again trailing its American rival Boeing. As yet, Airbus has nothing to compare to Boeing’s 747-8 freighter, which is undergoing test flights and is due for delivery to clients in Q4 2010. In fact, Airbus has fallen so far behind Boeing that the company’s A330-200 freighter, a rival to Boeing’s 777F, is only due for delivery in August 2010, while Boeing’s 777F has been in service for over a year longer, beginning operations in February 2009.

Editor’s note: Risk Watchdog will not be updated on Monday 31 May, due to a public holiday in the UK. I wish you all a very entertaining Eurovision Song Contest!