Growing in transparency

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The year has been another strong one for Etihad Cargo, with growth of around 10% in terms of volumes, thanks to new routes within the ambitious airline’s passenger network together with new destinations for its growing freighter fleet, which now stands at 10 aircraft.

Vice president David Kerr describes the growth this year as “somewhat polarised, with some strong spots and some not so strong spots”, although he is happy with the start to the year and optimistic about the outlook.

Nevertheless, this expansion is being achieved within a growth-restricted environment at Abu Dhabi airport, where a new cargo terminal is still two years away from completion.

Abu Dhabi airport upgrade

As the Emirate of Abu Dhabi continues to grow, following its 2030 plan to develop the city further, the airport’s new passenger terminal is being developed for launch in 2017, and the cargo terminal – being developed in the east midfield of the airport, adjoining the passenger facilities – is on a similar timeline, Kerr says.

But while that new cargo terminal is being developed, Etihad is also continuing to upgrade its existing cargo facilities to cope with the carrier’s prolific growth. “So we continue to add capacity in the various different areas, whether it is transit cargo storage or cool rooms,” Kerr says. “We have just upgraded our TempCheck product, which we launched in March; we have upgraded to rooms at 2° to 8° and 12° to 25°.” That is being done in line with GDP requirements, which Etihad is using to guide its responses to customers’ pharma needs.

“So these are investments that we can make at this point,” Kerr says. “We manage the cargo terminal for Etihad and other Abu Dhabi customers’ needs, so we are investing in capabilities there for the short, medium, and long-term.”

Exceeding capacity

Kerr says the current cargo terminal is already well over its theoretical capacity. “But as we have added some of the new capabilities, it continues to offer us capacity,” he says. “We have taken out, for example, mail and narrow-body sortation to another location, and invested in that. We have just implemented Hermes technology, as in a new hub system, which will transition and be mobile and be scalable to the new terminal. That is having an endlessly positive impact on our transparency, visibility, and overall service performance. So, we are seeing immediate dividends from that.

“So we are running things more efficiently, the team grows, the capabilities grow, our product sophistication grows; but we have obviously got to keep investing in various different points here to keep that in a positive cycle.” And when the new terminal is available, he expects “a smooth, seamless transition”.

Plans currently remain flexible for the current cargo terminal, on the south side of the airport, after 2017. Kerr believes there will still be a requirement for the facilities, for example for some specialist cargo capability, from other parts of

Etihad, or from its equity partners and other stakeholders on the airfield.

“So, there are some moving parts there, and there are other areas adjoining the airport that are also in play for further developments, and we are obviously there representing the interests of the logistics community,” Kerr says.

Etihad currently still has a monopoly in terms of cargo handling at the airport, something that is likely change in the long term, but not in the immediate future. Etihad Airport Services – Cargo manages the cargo terminal, whereas Etihad Airport Services – Ground does the ramp handling. “We manage that as an integrated part of the operation, so Robert Fordree is the GM of both the airport handling business, the cargo handling business, and obviously our operation at the hub,” says Kerr. “It is very integrated.

Step change in efficiency

Kerr expects moving into the new facility be a step change in terms of “the ability to offer customers specialist products and capabilities, and provide more integrated solutions for our customers. But we are obviously going to need scale, because we are building this for scale as well as for sophistication.”

He adds: “It is important for us to maintain that growth from a capacity standpoint in a seamless way, and that is why we are investing in the operational platform, Hermes – which was a key thing to do now, so we are ready for that in the new facility. We want to do things better – to employ newer technologies and be able to respond to an ever-more demanding market.

“So we have innovation managers talking to customers, to various different developers, about how we can provide a more sophisticated solution – say in the pharmaceutical area or secure cargo, the technology that we are using, the regulatory requirements; we have to continue to be responsive. So, the sophistication is as much a driver of our development as the scale.”

Kerr says the improvements from the introduction of the Hermes system are mainly about visibility and transparency. “There is a full scanning and bar-coding capability there, and location tracking,” he says. “It is more dynamic in terms of the flight-planning process. So we can run the whole platform in a more constrained environment, and be more efficient.”

It improves visibility for inbound and outbound freight, but also cargo moving through the hub. “We are an 85% transit facility, so connecting freighters to bellies, wide bodies to narrow bodies, different products within our portfolio now – whether it is fast-track priority products or cool-chain TempCheck products,” Kerr points out. “All of that has sophisticated requirements, and the visibility that we get out of the Hermes platform is a step change for us; we are excited about the impact of that.”

Cargo 2000

Kerr is also positive about the benefits of Cargo 2000. “We are board members, and there is obviously a major review of the capabilities of that and how the direction of that needs to go long term,” he observes. “We always want to be part of that and look to drive that through. When we look at technology and flows of data, I think it is really the operating platform – Cargo 2000, side-by-side with the e-freight platform – that is going to be required in the future; the investment has got to be in there in the technology, in the flow of data. So we want to move forward with both of those, and so we are looking at investment in new capability in our technology to be able to respond to that.”

Kerr says Etihad took an interest in C2K “pretty early on”, and has now been on the board for a number of years. “So, we want to play an active role. We spent time talking to not only our global multinational customers, but we also want to bring in the independent networks into that.

“We have worked closely with the WCA network and put together an interesting platform with them, working with their WIN platform. But we see that platform also having applicability with industry platforms like Cargo 2000. They (WCA) are now active (C2K) board members and participants in the developments. So I think there is an exciting opening of the programme now to another segment, which should absolutely be integrated into the industry. There is complexity there that needs solving.”

Sources at WCA say that Etihad Cargo has led the field in terms of carriers developing a proactive relationship with WCA and its members. So, is this because the yields that carriers get from multinational forwarders these days have become so low that there is now a clearer benefit from working with smaller forwarding players, in terms of yield?

“I think it is really all about value for money,” says Kerr. “Being easy to do business with is probably the prime driver for that, to be able to connect with a wide network through the technology or through a platform, to be able to make us easy to work with and have access to air waybills, and be responsive; those are the major drivers initially.

Indeed, Etihad Cargo recently signed a further enhanced agreement with WCA – “an exciting next step in terms of increasing the ability to connect quickly into business together”, Kerr says.

Data elements

So, did the introduction of the Hermes create a visible improvement in performance that was measurable in terms of Cargo 2000?

“I think we have seen a step change,” says Kerr. “Performance is as much about the data elements as about the physical aspect, and as far as I’m concerned the shipment is not complete unless it is physically moved and you have communicated that you have done that through data.

“And I think it is much cleaner; we still have got some work to do to enhance that in C2K terms, because the industry platforms don’t talk to each other as well as they should. But if we can make those steps forward, invest in the technology, as we engage with those different platforms in the industry, I think we will be in better shape.

“We have spent a lot of time on e-freight, on the e-air waybill. On C2K, parts of the performance is markedly improved. We are now looking at arrival performances and we are hearing from the industry that this is the next thing that matters, and that is the bit that the industry needs to improve – the visibility of the shipment arriving; when it is ready for collection, and that its complete documents and data are there as well.”

Arrival improvements

The need for this improvement is being communicated by forwarders.

“Cargo has the export part – getting it out and moving, and it needs to depart on time. But equally we have to complete the process and finish it off in our remote stations or flying it through the hub,” Kerr says. “That is an important area that we need to continue to focus on as part of the overall service level. And C2K has that as part of its total journey: completing the job at the end of the journey is as much a part of the success.”

But Kerr says there is still room for improvement in terms of carriers linking their information systems with C2K.

“I think there are lots of platforms – ‘middleware’ as they call it, coming out of one system and going into another – and I’m not convinced that this is as clean or as robust as it needs to be,” he says. “I suppose in an ideal scenario, there would be an all-singing, all-dancing platform in the industry that everyone could talk to and within, but that would be a huge investment for the industry and it is not big enough really to do that in technology terms.

“So you’ve got to have open systems; you’ve got to have reliability connecting between platforms, and we want to make sure that those providers in the industry who are allowed to participate are up to standard. And we have obviously got to play a part in investing in those and working on those to do that.”

All-in rates

Other key developments this year has been the decision by several carriers – including fellow Gulf airlines Emirates and Qatar – to switch to all-in rates. Kerr is in no rush to follow their lead, but is “keeping a very vigilant eye on the market and how that is evolving”.

He observes: “There is an inherent desire for simplicity, but we are not necessarily in a totally simplistic business, and so sophisticated models can endure,” he observes. “We want to be easy to do business with, to deliver value for money, and so we have got to listen to our customers and make our decisions on that basis.”

Partnership opportunities

Meanwhile, Kerr says part of the opportunity for Etihad is that it is not only growing organically, but also growing with various partner airlines, in some cases where it has partial ownership of the other carrier. “We are working with the likes of Jet Airways, an equity partner on the one hand, and on the other hand working with Avianca Cargo on our South America twice-weekly rotation, which highlights to us the opportunities that this creates and what that brings to our customers in terms of increased choice and a more sophisticated network,” he says. “We are going to continue to develop those platforms, and we think they are innovative, and we think our customers are responding to them. Those are the opportunities that we see ahead of us.”

For cargo, those go beyond simple interline agreements. “We have got capacity exchange, transparency, and commitments there on service quality right the way through the process,” Kerr points out. “And we have got different models with the different partners and carriers. So, we are open to those, and I think that is the nature of two operators working together, to the extent that you are able to have those different models that can solve different challenges. And that is bringing greater choice and better solutions to existing and new customers.”

Milan’s potential

Another partnership seen as having great potential is the arrangement with Alitalia.

“We see great potential there in the Italy market and we have made some steps in northern Italy with the Milan-Bogota freighter, for example, with Avianca, to grow capacity there,” says Kerr. “We have obviously had a strong passenger and cargo network already flowing between the two hubs, between Milan and Abu Dhabi. So we only see growth opportunities there, to be able to work together to provide stronger platforms to serve the local inbound and outbound market. So we are excited about that opportunity, and the two teams will work together to offer those kinds of solutions to the local market, both in and out.”

Some have speculated about whether Etihad Cargo may use Milan as a secondary freighter hub. Kerr responds: “I think obviously Alitalia will have its own plans for potentially opening freighter platforms, and we will optimise that together while working with our own platform, or they will do so on their own planes. We will work together to do that, and that is where the opportunity lies.

“In terms of the overall programme with Alitalia, from the very beginning cargo was an integral part of the thought processes in terms of the opportunities, and we would expect that northern Italy platform to grow.”

But might that be an opportunity for Etihad to have its own secondary freighter hub in Europe?

“I think you look to optimize,” he says. “When you look at our service today, the four freighter flights a week, and now twice-daily passenger operations between Milan and Abu Dhabi run by Etihad and Alitalia, and then you look at the twice-weekly freighter into South America, there is already a strong platform there and I think as you look at the opportunities that can only grow.

“We will look to optimise the strength that we have individually and that complement each other to help solve challenges and take advantage of opportunities that are there, due to the size of the Italian market, and the growth and connectivity that it requires.”

That might potentially be under an Alitalia flag or an Etihad flag, it seems.

“Etihad has some traffic rights that can be used today and worked on today, and Alitalia has its own,” says Kerr. “So I think there is a complimentary opportunity there, potentially, to flow business between the two networks to the extent that we are able to fly it via either ourselves or Alitalia. I think we have got a lot to offer each other, both as brands and operating platforms.”