Building a genuine cargo joint venture requires time and commitment, says Virgin Atlantic Cargo’s senior vice president, John Lloyd
Q. What have been the most important features of the last 12 months?
A. We’ve introduced our eleventh US gateway with the start of daily services to and from Detroit and extended our trucking network across Europe to over 50 cities. The transatlantic market has been our biggest market for over 30 years. In addition to the launch of Detroit, we have increased frequencies on routes such as Atlanta, Las Vegas, Los Angeles, Miami, New York and San Francisco – and that also helps grow other parts of our network. We carry a lot of cargo from India to the US and our 33% growth ex Dubai in the first half of 2015 was partly due to the extra choice we introduced to the US over London, where we have a reputation for extremely fast and efficient flight connections.
Similarly, our longstanding contract to sell Virgin Australia’s long-haul international capacity connecting Sydney and Brisbane with Los Angeles continues to provide important benefits for both airlines in terms of revenue and flight connections over the US west coast.
In terms of the market overall, 2015 has proved to be another challenging year. Yields are certainly under a lot of pressure, particularly across the transatlantic.
Q. How are your plans developing for the cargo joint venture with Delta?
A. Our customers now have access to our combined capacity between the US and the UK and vice versa. It means our customers have the choice of more destinations, more frequencies, and more connectivity. This winter, it means across the Atlantic customers can book their cargo on 62 flights per day across the network.
Outside of the JV, Virgin Atlantic Cargo continues to offer capacity to and from China, Hong Kong, South Africa, India, Dubai, Nigeria, Mexico and the Caribbean, and we can offer Australia over Los Angeles through our Virgin Australia relationship.
Q. Which elements of the joint venture are already operating?
A. We market our joint transatlantic cargo capacity to customers and we’re trying to make this as simple as efficient as possible for customers. We want to get to a point where customers book cargo onto a flight because it is the best choice for them and they don’t need to think about whether it’s a Virgin or a Delta flight, because they feel confident in the service they are buying.
What we intend to do is deliver a seamless service that is resilient for our customers. The approach we are taking, in terms of putting all the necessary infrastructure in place first, means we will deliver tangible benefits for customers. It’s not an easy process, but it is achievable as both ourselves and Delta are fully committed to forming an alliance that truly benefits our customers and is not just a marketing campaign.
The big benefit for our customers, as I said earlier, is choice in terms of our combined network, frequencies and connections. Obviously there are also other efficiencies for both airlines in areas such as cargo handling.
Q. What will be the next stages in the process?
A. We are continuing to work together on the co-location of our handling operations because having both airlines under the same roof is so important in terms of ensuring fast and seamless connections, giving customers single drop-off and collection points, and ensuring the highest level of customer service. We have now co-located our cargo handling in Atlanta, Boston, Miami, New York (JFK), Orlando and Washington Dulles.
What do you anticipate will be the greatest challenges in terms of setting up and operating this joint venture?
I think some previous alliances in the industry haven’t realized their potential from a cargo perspective because they haven’t maybe had the right level of commitment from both parties to put the necessary building blocks in place to make their joint venture really work. That means they haven’t added sufficient value for customers or brought anything new to the table. What we are doing with Delta demonstrates that both airlines are determined to make this work.
Q. What capabilities or differing expertise do the two airlines bring to the joint venture?
A. Delta has strengths in terms of network, frequency and capacity these open up new opportunities for Virgin Atlantic and our customers. Another big advantage is that Delta has experience of being part of another successful cargo joint venture, so they’ve already been through the big learning curve of what works and what doesn’t.
Virgin Atlantic brings a strong customer perspective in terms of the flexibility of our approach and the strong focus we have always placed on outstanding customer service, which has enabled us to continue to compete at the highest level against much bigger airlines.
Q. What challenges do you face in terms of operational, quality, and product alignment?
A. I think the challenge in terms of ensuring service quality is the same as it was before our JV started with Delta. Customers have a tremendous choice of airlines offering capacity across the Atlantic, so you have to earn a reputation for being a quality partner – and by that I don’t just mean in terms of getting everything right first time, I also mean the fast, accountable, and proactive way you respond when something doesn’t go to plan.
Delta and Virgin are working hard to ensure we have the standards and processes in place to deliver the highest levels of quality for our customers. We are both passionate about customer service and highly committed to service quality. Our product offering will be consistent and our service level will ensure customers get the same high quality of service they have experienced for many years when they fly their cargo with Virgin Atlantic or Delta.
Q. What do you see as the main operational challenges currently affecting the airline cargo sector and your organisation?
A. Obviously security is a constant operational challenge in the industry. Quality really comes down to understanding what’s important to your customers and making sure you meet their expectations on a consistent basis. We continue to move forward with our rollout of e-AWB and have been conducting trials with customers. Overall, we are in favour of any developments that make the movement of air cargo more efficient.
We work hard to stay close to our customers and to be available to them when they need us. I hope that with the majority of our customers we have a mutual trust and confidence in each other that enables us to respond in the best way to challenges when they present themselves, as well as to new opportunities. We always want to be an airline that customers feel they can talk to and do business with.
Q. What are your expectations for 2016?
A. I am cautious in terms of the prospects for 2016 because the industry and economic forecasts do not predict much growth. In conditions like this, it’s more important than ever to stay close to customers and to be flexible and agile to market changes and opportunities. These are things I believe we’re very good at.