The transformation underway is already fostering an entirely new cycle of innovation, not only within the air logistics sector per se but also in the industries attendant to the sector. And of course there is innovation underway in the operating processes of the firms at the production end of the supply chain, just as there is innovation in the way consumers obtain and use goods at the other end. It would not be an understatement to say that over time this revolution could well fuel a new regime of how the global economy functions; indeed, perhaps usher in a wholly new phase of globalisation. This will surely propagate a debate about the benefits and costs of a just-in-time economic system. The model for change, is an air logistics strategic plan that’s agreed with the CEO and board, business plan agreement with board and senior management, action and accountability planning with senior and middle management, shop floor processes and procedures dictated by the agreed product portfolio operational needs, with an overall strategy towards transparency, speed – and above all, quality. Martin Drew, Senior Vice President- Sales and Cargo, Etihad Aviation Group speaks to Upamanyu Borah on the imperatives, andthat with a full knowledge of customer needs for products, the focus to understand the depth and staying power of the current crisis in global supply chains and logistics are giving rise to great formulas for success at the UAE’s national airline.
NO REVISED BUSINESS PLANS, BUT COMPLETELY NEW BUSINESS MODELS
Reflecting on the COVID-19 crisis which created unprecedented challenges for the air cargo industry, our first response was that we had to be agile whilst remaining dedicated to our customers and partnerships.
Throughout the pandemic and post-COVID, we have been committed to driving innovation and digitalisation through logistics by the introduction of initiatives which not only improved our own efficiencies, but also provided cost-saving transparency and convenience to our customers.
Our workforce was and still is empowered to evaluate our operations to assess how they could be re-engineered to respond to rapidly changing market conditions whilst remaining customer-centric.
OPERATING DILEMMA FOR THE LOGISTICS INDUSTRY WRIT LARGE
The biggest macro-economic drivers for the industry are always the supply of capacity and the demand for capacity. It used to be a simple equation, with a good amount of supply and a constantly increasing demand. Balance was relatively easy to find, with the usual quarter-end and year-end rushes tightening the equation. What has really changed is the supply component, heavily affected and will take years to come back to stability.
In the very long-term, freighter sourcing should become easier, with Airbus also fielding a competent aircraft against Boeing who used to have the undisputed supremacy in large wide-body freighters.
On top of that, there are now attractive full freighter conversions, mostly around passenger 777 aircraft. But these will take years to come in large numbers.
In the meantime, sea freight capacity has become disciplined and passenger demand is not fully back to where it was. So the next 5 years will be supply-driven rather than demand-driven.
There are opportunities to be found almost everywhere. In Asia, e-commerce is growing in parallel with large industrial projects, while in the Middle East there are more and more distribution and consolidation centres being planned. The key element for these to succeed will be access to capacity.
FOSTERING AND ACCELERATING SECULAR CHANGES
There is demand from the East in general, including India. We have seen an increase of trade lanes having endured a continued shortage in connectivity, such as Intra-Asia movements and particularly China into India supply chain replenishments. We saw a trend in Q2 with North India increasing more than the global average and South India decreasing, which correlated with the difference in commodities each region produced and the phase of its fight against the pandemic. The supply chain did its best to push back to the latest productions and replenishments, and what we see now is the result of additional delays not being acceptable anymore.
E-commerce was growing at an incredible rate pre-COVID, but what COVID has done with most of the world going into lockdown is force people to shop online, so now there is an e-commerce boom.
Overall, the air cargo industry is well-positioned to capitalise on e-commerce. Approximately 80 per cent of B2C cross-border e-commerce is transported by air, which has become the preferred way of shipment for electronics due to relatively small volume or tonnage in comparison to high value.
When we look at the outlook, there is going to be the continued growth of pharmaceuticals, and also movement of the COVID-19 vaccine. In addition, there are ongoing constraints on the ocean which is fuelling air freight demand and capacity shortage as a result of many of the world’s passenger aircraft being grounded. I think that even now as we start to see passenger demand return, it’s still going to take a long time for that balance to be corrected.
I think because of these verticals growing and continuing to grow at the pace they are, there’s going to be an imbalance of demand versus supply capacity for some time.
ENERGISING THE MOVE TOWARDS GREATER COMPETITION AND THE DESIRE FOR GREATER SPEED
Traditionally the industry has been slow to embrace change and digitalisation, but the pandemic challenged that.
Etihad Cargo has itself introduced several transformation programmes across its fleet and network, commercial and operational processes. One of the core projects was our front-end systems migration to IBS iCargo, which has fuelled our ability to centralise processes through a state-of-the-art Cargo Control Centre which tracks, monitors, and reports on all our customer shipments in real-time.
At the Dubai Airshow in November, we announced that we have entered into a Proof-of-Concept agreement with SPEEDCARGO to utilise its AI products to optimise cargo space planning and utilisation on flights. The agreement makes Etihad Cargo the second aviation company worldwide to leverage the CARGO EYE dimensioning system, and among only a few global carriers to trial SPEEDCARGO’s AI-powered CARGO MIND software solution.
Importantly, the technology has the added advantage of significant cost control through manpower savings which could reach 3,720 hours a month. By maximising cargo across flights and ULD container configurations according to internal loading rules, we can boost capacity by more than 3,000 tonnes a year, equating to a significant increase in revenue yield that will greatly impact temperature control logistics.
DELIVERING ON THE INCREASED SCRUTINY FROM PHARMA SHIPPERS
Some classical supply chain challenges continue to be an issue for some industry players, especially with capacity shortages and capabilities concerning, but not limited to, pharmaceutical logistics. Through our expertise and dedicated IATA CEIV certified PharmaLife product, we provide tailored solutions to handle all temperature-control requirements from -80°C through to +25°C. This has been a vital lifeline throughout the past 18 months and supported our customers, the UAE Government aid programmes, our collaboration with UNICEF, and efforts through the HOPE Consortium – of which we are a founding member and other pharmaceutical initiatives.
CLIENT EXPECTATIONS AND DEMANDS EVOLVING ALONGSIDE LEVELS OF DYNAMISM
Looking to the next five years, air cargo transport will further develop as it becomes increasingly digitalised and made more efficient.
The cargo industry is perceived as having been slow to embrace technological change, but now that change is happening – fast. The pandemic presented an opportunity to entirely reposition the sector from member of the supply chain into a highly responsible and innovative industry. As consumers choose to work with transparency, organisations such as ours must prove their credentials. This means increased accountability with a greater focus on professionalism across the sector, which will require investment in product and education.
CHANGING MINDSET AND OPERATIONAL CAPABILITY TO SEE SUBSTANTIAL ECONOMIC REWARDS
The industry has already adapted to new methods of working and solutions to address changing demands and restrictions. The quick introduction of cargo in cabin is something I never believed I would see, but we ourselves refurbished five 777-300ER to remove seats, and I can tell you those aircraft fly as much as they can and the cabin space is constantly utilised.
In the longer-term, more efficient capacity options will become available due to the current situation. Previously, carriers were restricted to Boeing production freighters, however now, we have access to a healthy offer of conversions and Airbus is also entering the freighter market.
Our commercial sales distribution has undergone transformational change across select global cargo gateways through a combination of GSA agreements and recruitment of our own key leadership appointments across North America, Europe, Middle East, Africa and Asia. This strategic move has enabled us to deliver significant scope across multiple territories, enabling us to deliver cost-effective sales operations through bundling multiple jurisdictions and maximising economies of scale. We are always looking at ways to enhance our operations; our relationship with our customers is paramount for our teams in terms of expanding our network portfolio and overcoming challenges.