Merger update
What effect has the merger had in terms of cargo handling and operations? How have you managed this process, and what have been the priorities and challenges?
It has now been two-and-a-half years since what was called ‘Cargo Day One’: when Continental Cargo and United Cargo merged all their customers, booking, tracking, products, policies and rates into one integrated network with one air waybill in December 2012.
Since I came into the merged United Cargo in July 2014 without ties to either carrier, it no longer matters whether a process or project was originally ‘CO’ or ‘UA’. All our judgments and decisions have been based on what is more likely to lead to immediate and/or long-term success for the business.
Q: What has been the strategy in terms of getting cargo operations/handling ‘under one roof’? Where are you with this process?
A: The transition of United Cargo’s service partners at many worldwide warehouses was a significant challenge in the last half of 2013 and throughout 2014. This process is essentially complete, though of course there are always adjustments made at individual stations to improve customer service. The priority now is boosting service partner engagement – to ensure our freight facility team members take personal interest and ownership in enhancing quality and customer satisfaction.
Q: What lessons have been learned so far, and how do you see the process going forward?
A: The most important lesson is one I learned from being in the middle of the Air France/KLM merger: changing standards, policies and processes is the easy part. What takes the most time, and is key to the outcome of any merger, is changing peoples’ minds. Management can provide direction and foster the right atmosphere, but the new shared business culture is forged by the employees of the two merged companies as they work together every day. The merger isn’t a success until employees stop thinking of ‘us’ and ‘them’, and start thinking of ‘we’.
Strategic priorities
Q: What are your strategic priorities for this year?
A: Given our role within the United enterprise, our essential strategic priority is the same every year: to maximize the value of United’s cargo capacity. We recognize the air cargo business will be impacted by global economic cycles and a number of other factors we cannot control. The best way to remain consistently viable is to earn customer preference by being easy to do business with and being a highly reliable contributor to our customers’ success.
Q: Are there any specific targets within that you can mention?
A: Once we gain that customer preference, the best way to reduce the impact of any future negative economic cycles is to grow our added-value products and business. Achieving a considerable increase in our value-added business – TempControl, EXP Express, QuickPak, UASecure for high value, etc. – is one of our specific targets for 2015.
A key value-added product is TempControl – our service for pharmaceuticals and other commodities needing temperature-sensitive transport. We’re enhancing our TempControl business in a number of ways: expanding our network, offering new product options, making new containers available, and enhancing our customer service.
We’ve also recently launched an innovative service that doesn’t have an official name yet. But we are already transporting shipments using this service – shipments we would not have carried using our normal or even our interline processes. This service expands the destinations we can serve and the types of freight we can carry. It allows us to serve customers we’ve had to turn away in the past, and it maximizes our cargo capacity and optimizes our network.
Q: What are you doing in order to achieve those aims?
A: Another strategic priority this year is the rollout of the new United Cargo brand. Our new brand identity corresponds with the United’s revitalized ‘Friendly Skies’ campaign. When we describe United Cargo as ‘Business Friendly’, we mean we care about the success of our customers’ businesses, and we focus on developing and sustaining partner relationships that create the most benefit for their company and ours.
Quality initiatives and e-freight
Q: Are you working on any quality improvement initiatives this year, for example within Cargo 2000? If so, which? And what are you hoping to achieve? What progress have you made towards improving these measures in the last 12 months?
A: We are addressing quality improvement in several different areas this year. We have established a target for improving our success in the C2K key NFD metric: notification to the customer that both freight and documents are on-hand at destination within the time committed to the customer.
United Cargo admittedly struggled in this area during the last half of 2013 and the first half of 2014. By focusing on both operational improvements and increased messaging compliance, we made a steady month-over-month improvement in NFD throughout the latter half of the 2014. Our goal is to maintain a leading position among US flag carriers in 2015.
Q: What is your status in terms of e-freight?
A: United Cargo is a strong supporter of IATA’s plan to establish the e-AWB as a necessary precursor to full e-freight. We achieved IATA’s stretch goal of 22% e-AWB penetration on valid trade lanes by the end of 2014. This was a significant accomplishment, because our progress was delayed as we rolled out completely new cargo technology in 2013. Once the technology to support e-AWB was in place, United’s penetration rose from less than 1% in January 2014 to over 22% by year’s end.
Q: What e-freight targets do you have for this year? Are you on track to achieve those?
A: Our target for 2015 is to exceed IATA’s goal of 45% e-AWB penetration on valid trade lanes by the end of the year. We are presently on track to exceed that percentage.
Q: What more can be done to encourage e-AWB penetration in the US market? Are you working on any initiatives to encourage uptake/participation in the wider market?
A: The first step for any carrier is to ensure their principal stations are ready to accept and process the e-AWB. We have accomplished that, and our largest e-AWB volumes are on those lanes where the greatest number of customers support the process. Since customers’ level of e-AWB interest and expertise varies, we’re engaging customers wherever they are and we’re ready to do whatever is necessary to support their adoption and/or expansion of the process.
Market and industry issues
Q: What are your expectations for this year, in terms of the market and your position within the market?
A: At United Cargo, our view of this year’s market is generally positive – although we do not expect all regions and lanes to experience gains from the upturn in the business cycle. Through March, United Cargo’s volumes are up a very healthy 13.2% year-over-year. We recognize that the West Coast port strike impacted these numbers, and that we’re comparing against a less-than-stellar 2014. But our improvements in customer relationships and delivery of quality and value have also played a major role in the increase.
Q: What do you expect will be the main challenges and issues affecting the market this year? And in the medium term?
A: The fundamental question is: will the continuing expansion in the global economy be strong enough to offset the long-term issues that have suppressed yields and growth in air cargo? Overcapacity and modal shift continue to be dominant adverse factors.
Q: What are you planning to do in order to meet those challenges and address those issues?
A: The port strike caused a welcome reversal in the air-to-ocean trend of recent years. The challenge for our industry, and for our team specifically, is retaining as much of this business as possible when the backlogs clear and ocean transport returns to normal.
With regard to market share, the formula is basic and never varies: you need to be better than your competition in the areas that mean the most to customers. This means offering the products and services they want, providing creative solutions to new opportunities, and keeping your commitments and delivering on your promises. To make this happen, it takes the focus of the entire team advancing toward a goal everyone believes in. That’s what we’re building at United Cargo.
