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When Your $450,000 Aston Martin Has to Arrive Overnight: Freight

May 16, 2013

Aston Martin Like 007’s in Jet Belly Pads Delta Profit

Delta Air Lines Inc. flies about 100 cars a year, putting it in the vanguard of a new front in U.S. airlines’ quest to widen profit margins with premium services for wealthy fliers. Source: Delta Air Lines Inc. via Bloomberg

A 1963 Aston Martin like the one James Bond drove in “Goldfinger” began its journey from Frankfurt to New York by being maneuvered into the hold of a Delta Air Lines Inc. (DAL:US) jet.

The tires of the $450,000 coupe were lashed to a standard freight pallet. Its gleaming chrome bumpers extended over the sides, so workers adjusted by putting slimmer cargo nearby. The bill for the trans-Atlantic trip: More than $10,000.

Delta flies about 100 cars a year, putting it in the vanguard of a new front in U.S. airlines’ quest to widen profit margins with premium services for wealthy fliers. That strategy drives the lie-flat seats and multi-course meals lavished on full-fare travelers. The payoff from freight, a $4 billion-a-year industry for North American carriers, is even bigger because passenger operations largely cover flight costs.

“The higher the value of the goods you’re shipping, the higher the margin, and a lot of these cars are almost irreplaceable,” said Helane Becker, an analyst at Cowen Securities LLC in New York who recommends buying Delta. “Most of that is going to flow to the bottom line.”

Profit margins on Delta’s $1 billion-a-year cargo business can top 50 percent, the airline has said, compared with a forecast operating margin of 10 percent companywide this quarter. It’s a reliable profit contributor because costs for aircraft payments, crew and fuel are largely covered by fares from passenger ticket sales, the airline’s main business.

Delta Growth

“By definition, if it’s something people are shipping by belly, they need it fast and they’re willing to pay for it,” said Savanthi Syth, an analyst at Raymond James Financial Inc. in St. Petersburg, Florida, who rates Delta market perform. “Not just anybody off the street can do this. It requires special training and handling.”

Delta’s current automotive cargo compares with a few dozen vehicles a year in the past, said Ray Curtis, vice president of worldwide sales for Delta Cargo.

The airline recently handled a $250,000 Lamborghini and a $150,000 Porsche 911 GT3 in addition to the vintage Aston Martin favored by Bond, the fictional British spy also known as 007.

The carrier’s shipments still lag behind European carriers such as Deutsche Lufthansa AG (LHA), which leads passenger airlines in automobile deliveries, and British Airways parent International Consolidated Airlines Group SA. (IAG)

Stock Returns

Delta fell 1.7 percent to $18.64 at the close in New York as most U.S. carriers declined. That pared the shares’ year-to-date (DAL:US) gain to 57 percent, the second-biggest return among 10 carriers in the Bloomberg U.S. Airlines Index. That outpaced advances of 48 percent for United and 16 percent for the Standard & Poor’s 500 Index.

Lufthansa has climbed 10 percent to 15.74 euros this year, while IAG increased 50 percent to 276.7 pence in London.

American Airlines, which, like Delta, handles about 100 cars a year, recently flew a restored red 1948 Ferrari from London to Chicago for a customer who had purchased it in Monaco, said Tristan Koch, managing director of cargo sales in Europe for the Fort Worth, Texas-based carrier.

The car sold for 1.1 million euros ($1.4 million), according to RM Auctions, which handled the sale.

‘Newest Bentley’

“Some people want to be the first person in Los Angeles with the newest Bentley, so $10,000 on a $250,000 product isn’t important,” Koch said of the typical cost, which can top $13,000. “If you stick it on a boat, it’s out of your sight in a 40-foot container for weeks. Or if you have a race in Argentina this week and need it in Switzerland tomorrow, you need to put it on an airplane.”

One constraint is that American mostly uses Boeing Co. 777 jets on trans-Atlantic routes and loads cargo pallets horizontally, which means it can’t handle cars that are longer than 4 meters (13.1 feet), such as modern Rolls-Royces, he said.

“We can’t physically load them,” Koch said.

Lufthansa, based in Cologne, Germany, transports about 1,400 vehicles per year and also has a fleet of dedicated freighter jets.

“For our employees, the transport of exclusive and rare sports or luxury cars is always a special highlight,” Brigitta Ebeling, product manager at Lufthansa Cargo, said in an e-mail.

British Airways parent IAG said it handles “hundreds” of cars per year, declining to be more specific. Recently the London-based carrier flew a dark-colored Pagani Huayra, which starts at 850,000 euros.

Achieving Perfection

Even with volume growth at the passenger airlines, airfreight specialists such as Cargolux Airlines International SA and Deutsche Post AG (DPW)’s DHL retain an edge.

In addition to flying Formula 1 cars, DHL also flies Bugatti sports cars, which have an average sale price of $2.5 million, around the world for customer delivery, said John Hill, director of sales for the Americas for the Molsheim, France-based automaker.

“It’s the best way to ship a car because it is safer,” Hill said in a telephone interview. “Everything is geared toward perfection. There’s nothing we do that’s trying to cut costs, and that continues through the delivery phase.”

Some Bugatti owners fly their cars in the bellies of passenger jets to high-end collector car shows at Pebble Beach, California, and Amelia Island, Florida, or to races and driving events, he said.

“Some people like golf,” Hill said. “This is a hobby that these individuals like to do when they get away.”

To contact the reporter on this story: Mary Jane Credeur in Atlanta at mcredeur@bloomberg.net

To contact the editor responsible for this story: Ed Dufner at edufner@bloomberg.net


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Companies Mentioned

  • DAL
    (Delta Air Lines Inc)
    • $36.04 USD
    • 1.65
    • 4.58%
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