Southern Air founder to launch new cargo operator

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Cargo start-up Western Global Airlines plans to begin Boeing MD-11 freighter service in September pending US Federal Aviation Administration (FAA) Part 121 certification, a US Department of Transportation (DOT) regulatory filing reveals.

James Neff, founder and former chief executive of Southern Air, is chief executive officer and chief operating officer of the Sarasota-based airline.

Western Global Airlines will offer cargo capacity on widebody aircraft through aircraft, crew maintenance and insurance (ACMI) leasing agreements with operators and freight forwarders. It has filed two applications with the DOT for authority to operate within the US and in other countries.

The new carrier plans to increase its fleet of one MD-11 to four aircraft within a year of starting operations. The aircraft will be owned and leased by its founder's leasing firm, Neff Air.

An in-house team will perform line maintenance, and heavy maintenance will be contracted to firms in Singapore and countries in the Far East.

Western Global Airlines says it will be able to offer competitive rates because of its management team's experience and through sharing costs with Helsinki-based cargo airline Nordic Global Airlines, also owned by the Neff family.

The two carriers will share expenses for a dispatch centre, engine overhaul and maintenance centre and company to supply crews.

Nordic Global Airlines operates a fleet of five MD-11 freighters, one of which is in storage, Flightglobal's Ascend Online database shows. The regulatory filing says Nordic Global Airlines leases its aircraft from Neff Air.

Western Global Airlines was formed on 6 March and is wholly-owned by trusts held by the Neff family, which is "almost identical to the ownership structure of Southern Air" at the time it started up in 1999, the filing says. In 2007, Neff sold the carrier to Oak Hill Capital Partners, which merged it with Cargo 360, another cargo operator in its portfolio.

Neff departed from Southern Air in early 2010 and was succeeded by its current chief executive, Daniel McHugh.

The start-up is emerging at a challenging time for the cargo industry, which has seen demand dampened by economic uncertainty and companies choosing slower shipment methods and fewer premium services.

Southern Air is one operator that has felt the effects. When the carrier filed for bankruptcy protection in September 2012, its chief executive McHugh said the weak international freight market and cutbacks in US defence spending contributed to the decision. The airline then emerged from the restructuring process on 15 April with a new headquarters at the Cincinnati/Northern Kentucky International airport.

The economy has had effects on several other players in the industry as well, including larger companies like FedEx and UPS.

FedEx Express decreased capacity to and from Asia in April as customers chose lower-yielding services on international routes.

Similarly, UPS' executives told investors in April that overcapacity in the international air freight segment was causing weak yields, especially in Asia. The company noted the additional capacity added to the global fleet via new Boeing 777 aircraft.

ACMI service provider Air Transport Services Group has seen customers hold off on placing aircraft into service until the economy strengthens. The company said in its latest earnings statement that doing so has remained difficult due to excess capacity in the industry and economic factors.

New aircraft deliveries are expected to expand the widebody fleet by 6% in 2013, a recent cargo report from the IATA shows. While the air freight market is weak with growth just over 2%, profits are expected to see improvement over the next year.

Despite these market conditions, financial projections from Western Global Airlines show that the airline is expected to turn a profit by the fourth quarter of 2013 after seeing a net loss of about $141,000 in the third quarter of 2013. In the 13 months between the fourth quarter of 2013 and third quarter of 2014, Western Global is expected to garner a net profit of $780,000, revenues of $38.75 million and expenses of $37.97 million.