Training, simplification and standardisation
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Posted Date: 24/09/2008
Issue: Airline Handling International November 2008
Publication: Airline Handling International
If air freight is to cling onto its market share in the world logistics market, there is plenty the handling industry can bring to the table to ensure the air cargo industry sparkles as the provider of worldwide movement of assets.
But, and it is a big but, the airlines require very specific performance criteria from the handlers in order to ensure air freight is a winner in the logistics chain. Strong speeches by airlines very much set the scene at the Air Cargo Handling conference. Des Vertannes, Executive Vice President – Cargo at Etihad Crystal Cargo, said, in his view, airlines and handlers together should be aiming towards integrated services, they should share the same business objectives, they need to link their systems and they have to target the same customers. There is nothing hit and miss in this business.
The first imperative on Vertannes’ list was that cargo handling companies must put in place trained, motivated and proactive staff. This is a given. But those all important processes have to be defined and refined, appropriate handling mechanisms have to be put in place and tracking is also vital to the equation.
He said a cargo airline also looks for value-added services, such as a truck network controlled by an IT environment, packing services and perhaps a network operation – which maybe gives the multinational handlers the edge over niche providers.
Vertannes said an airline should expect – not just desire – competitive pricing. This is not to leave handlers reeling, but to accommodate the reality that a staggering 12% of a freighter’s costs relate to handling. Obviously consistency, transparency and protection of the carrier’s position in the market are vital to the relationship between cargo handler and airline.
Also speaking from the perspective of a cargo airline was P Balasubramanian (Bala), Manager Cargo Global Operations Services, Emirates SkyCargo. His theme was the airline as expert handler and he had much to say about whether to buy in services or deliver them using the airline’s own resources. He talked of critical mass thinking, using IT systems to their full potential (the Skychain system has recently been implemented at Emirates SkyCargo which includes a handling module) and truly understanding the economics of diminishing returns.
Moving from economics to philosophy, he was disparaging about allocating blame and pointed out that a kilo of freight in the warehouse is revenue for the handler and a liability for the carrier – hence the urgency to move freight quickly for the airline to the dismay of the handler.
The conference asked whether an airline like Emirates SkyCargo could or even should export its culture? Such a question left delegates pondering the gap between airline expectations and handler delivery. But one thing that was clear for Bala: standardising service level agreements (SLAs) for cargo handling should be at the front of everyone’s minds. After all, quality is so much more important than SLAs and yet it is the determination of the agreement and its annexes that attracts so much more attention than the actual delivery of quality itself.
He empathised with the handler on the technical side of handling – that is in terms of systems and procedures – and could see the handler dilemma: how many systems do I train my team in? Back we come to standardisation.
Bala pointed out that the passenger side of handling has already become paperless and the cargo fraternity has to get into this faster. Today, Emirates SkyCargo has e-kiosks in place for freight at its cargo terminal. But it is not just technology that will pave the way for future excellence; training is the key to the future. Bala was quite clear that he and his airline colleagues are in the business of moving three things: the package, the document (which will become redundant tomorrow) and the information associated with the freight. And training is the way in which this business has to be managed going forward.
“We need to dare,” he said, quoting Seneca, the Roman philosopher: “It is not because things are difficult that we do not dare; it is because we do not dare that they are difficult.”
Batting for the handler
Batting for the handler, amongst others, was Winfried Hartmann, Managing Director, Fraport Cargo Services. He tackled the worldwide phenomenon that airlines – cargo, passenger and combined operators – have invested billions of dollars in the last five years or so in new aircraft and yet, when it comes to investment in cargo handling expertise there remains a question mark.
Hartmann queried whether all airlines really understand the background to handling processes and bemoaned that dearth of focus on interfaces in the air cargo chain. With so much of the negotiation about charges, there is not enough time spent on truly understanding quality issues – very much in keeping with Bala’s comments.
He stated: “Short term handling arrangements avoid necessary long term investments in our common business – which only proves that we like to continue to work in a very segmented process – for the benefit of integrators.”
“Togetherness” was emphasised time and again by Hartmann as he argued for a better business environment.
Beyond the improved interfaces, handlers also cried out for simplification, standardisation and training; very much in keeping with airline comments. Chris Notter – who has a long pedigree as a handler – urged: “We must simplify our industry.” He said we need a standard SLA, differentiated costs for extra or complex processes, real “in partnership with” contracts, quality related development and ground handling agreement grades. He pointed out that airlines, forwarders and handlers are all in the same team so there really was no benefit in working with differences in expectations.
Notter said that all too often handlers accept SLAs in order to keep a contract without truly understanding what is required. This is not a good state of affairs.
Notter believes training should be thoroughly documented and air cargo handlers should carry a passport type document that proves training has taken place at every step of a handler’s career. But induction training, he said, is the responsibility of every ground handling company; not the industry at large.
Focus on forwarding
Time and again the conference came back to the relationship between the handler, the airline and the forwarder. Neil Hougham, Director of consultancy Air Transport Management, has worn all three hats and reiterated that the three players in this section of the logistics chain share the same goals.
He talked of the augmenting power in the hands of the forwarder compared with previous years when the forwarder was a mere agent. He drew parallels between the handler and the forwarder, pointing out that they both rely on the accuracy of information. They also both regularly deal with each other at critical points in the process of moving freight and yet there are no formal or contractual links. He said, freight damage, theft and delays can all be alleviated by effective communication.
Christian Oelschläger, Executive Vice President European Airfreight of Schenker, representing the forwarding community, commented that there has been a change in mindset between cargo handlers and forwarders. He said handlers now see forwarders as customers, especially on the importer side of the equation. Schenker itself has concluded contracts with handlers at airports in Frankfurt and this is becoming more typical.
Francois Wolmarans, Managing Director of Express Air Services and Director of Bidair Services in South Africa, pointed out that cargo handlers are ideally positioned to provide value added services to forwarders resulting in additional revenue streams for cargo handlers; and greater efficiencies and cost reductions across the whole supply chain. This is great news for handlers but we are yet to see the full potential of this thinking in practice.
Where is this headed?
With an eye to the future of the cargo handling industry, Ludwig Bertsch, Chairman of Aviation Services Holding and Equilog Management AG, outlined industry change – handling liberalisation in Europe, privatisation of international airports, outsourcing and airline market developments – and ventured that industry growth potential looks healthy in the long term, but short term threats are looming. Given the negativity much of the market will face in the coming months, he asked: does scale matter? Where are the efficiencies?
He concluded that the handlers that will benefit from the downturn will be those that have the critical mass and enjoy scale economies. “Handlers with the right strategy have a window of opportunity now – be it for horizontal or vertical integration or both,” said Bertsch. “But more of the same is not enough.”
Of course several handlers are owned by private equity funds, he pointed out. They might well be in the market for a divestment or an acquisition; whichever it might be, consolidation is not over. Finally, said Bertsch: “It does not so much matter whether one aims to be a dominant local hero or a global network player.” But, he warned: “Don’t get stuck in the middle.”
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