Creating connectivity

posted on 4th April 2018

A lot has happened at AirBridgeCargo in the five years Denis Ilin was away from the airline, and also since his return in August 2013 as executive president. But then things have moved quickly throughout the airline’s 10-year history, during which time it has established itself as Europe’s second-biggest all-cargo airline, and one of the winners from the turbulent economic times of the past few years.

Ilin says it is a common observation that an economic crisis can help some companies by weeding out weaker or less professional competitors, but he feels it has been true for ABC. “It opens up the field and opportunities for those who stay in the tough times; they absolutely have better chances to keep going and to grow further when the good times come.”

Ilin’s five years in the airport business broadened his experience, bringing useful insights from different parts of the aviation sector. Some of these have been applied since his return to AirBridgeCargo.

“When I looked inside AirBridge, my conclusion was pretty simple: the body is healthy; there is some fine tuning to be done inside the organisation to improve efficiency, both in systems and people; and there is definitely huge potential,” he says.

Quality and stability

He says one thing customers really appreciate is stability, and when they identify a reliable partner, they do lean more towards a better long-term partnership. Having established itself as a stable long-term player in the global air cargo market, and a significant provider of capacity, particularly on the Asia-Europe and Russia markets, ABC has been moving to the next stage of its development.

In the last 18 months, a new focus on quality has seen ABC’s “delivered as promised” (DAP) figures increase from just 50% to over 80%.

“Everybody says that belly capacity is our number one competitor, and is taking a lot of traffic away from us,” Ilin observes. “However, in terms of quality, the on-time performance of passenger services is much higher than cargo services. Cargo operators historically have considered that if you are late by four hours, who cares? Cargo will still be delivered the same day… But not any more.”

Ilin says freighter operators have had to learn to compete for cargo, and the greater availability of large wide-body aircraft with significant belly-hold capacity means that customers have become used to high quality standards and on-time performance when sending cargo by passenger services.

Ilin says there are certain routes and traffic flows where belly operators are now taking away cargo on the basis of their on-time performance, not price.

I looked at that and said that if we say we are competing with them, we should be matching them on service, and on-time performance,” says Ilin.

The second element of the performance improvement has been driven by the desire to develop ABC’s capacity into a genuine network, rather than a series of point-to-point flights.

“I want each station to be able to sell each station, and in this case you need connectivity, and for that you need to fly on time,” Ilin continues. “So, by flying with poor on-time performance, we have people in the station selling point to point: from Shanghai to Amsterdam, and from Shanghai to Frankfurt. By flying on time with a hub concept, you sell on the same aircraft Shanghai to all destinations, which gives you a better position in terms of market fluctuations – for example, Milan is not doing so well this week, but Paris is doing well. Or when we’re flying from Zhengzhou, we carry on the same aircraft Apple cargo to Moscow, Amsterdam, or to Chicago.

“It is possible that all markets may be down, but it is more likely that if one of them is down, we’ll be in a better position to balance traffic fluctuations. With that improved on-time performance, we can use it in terms of our marketing; that this is our quality, this is our performance. But for us it is also the ability to be more flexible and to balance different traffic flows.”

All about focus

Ilin says achieving these on-time improvements is not a big trick: it is about focus. “If you don’t care about this, you don’t fly on time,” he says. “So, you start talking to people and saying we should be focusing on on-time performance. So, everyone’s priority is now known, and we have screens in our offices that show this week’s on-time performance, delivered as promised, so everybody is aware; it is about awareness and knowing that this is our priority.”

Another key element is schedule construction. “The schedule had never been constructed to provide connectivity, and so we changed it,” Ilin says. “In the passenger business, this has been known for a long time, which is of course why passenger flying is far more focused on flying on time, simply because most of the carriers work through hubs and they are able to sell on-connectivity.”

The third element in the plan has been to put some additional ground time in Moscow with a back-up aircraft, in case of unavoidable disruptions like weather or aircraft on ground (AOG), “which happens with everybody. Is not a fully dedicated aircraft, but it is technically available in a flexible way.”

He continues: “It is similar to what passenger carriers are doing. Although the product is different and the market is different: we are B2B and the passenger airline is B2C. But operationally, we are not so far apart from each other, as an airline flying aircraft. So, we are trying to focus on this internally more and more, this focus on on-time performance and connectivity, connections.”

Cargo 2000 push

ABC’s involvement with Cargo 2000, as an associate member, has been another important element in the push for quality.

“Cargo 2000, which is one of the industry’s initiatives to improve the efficiency of air cargo transport, is one of the pillars we use to deliver quality to our customer, and therefore we pay particular attention to it. We managed to exceed our internal KPI of 75% for DAP and will do our best not only to keep it up but also to overreach it,” Ilin says.

“At the moment, we have nearly 90% of our shipments tracked. We have got a number of customers already online with us monitoring according to Cargo 2000 standards, and we are gradually adding more and more clients. But we are participating very actively.”

He says there are certain routes where ABC is getting on-time performance of 90% plus, such as Japan. “For the Japanese market, that is a given that you have to be on time, and so we really put a priority on Tokyo routes, and it is nearly 100% – it might be just a few issues beyond our control such as weather. And last August or September, one of the forwarders reported that for us, Frankfurt to Beijing was 100% delivered as promised. So, on some routes we can be really, really good. And that is a psychological thing – as a consumer yourself, once you use a phone with 100 features, if somebody comes back to you with the basic phone, it doesn’t matter whether you only need a phone call, you still want the features. It is the same for us – customers want more and more features for the same price, and that is what technology is doing at the moment. And for some reason, in air cargo this is not recognised. Customers want to have better quality, better performance, more features included for the same price. That is when we talk about temperature control, time definite, it is not that we quoted as a product and say “now you have to pay 10% more”, because the customer will say “Why? I want to pay the same price but for more diverse needs.”

Positive reaction

Ilin says customers have noticed and appreciated the airline’s improvement in performance. “Europe to Asia has always been a market that is ad hoc and that is very price driven, with low commitments from clients. We see people asking for block space agreements now, even in the current market situation from Europe to Asia. So, this is the return we are getting in return for quality: when the customer feels there is stability and reliability, people come to you.”

But Ilin says ABC is simply doing what it is supposed to do. “I want to go back to the basics: our job is to deliver cargo from A to B, on time, safely and securely, and people are getting too excited about all the fancy features on top of that.

“If you come back to the passenger experience, you only start caring about the interior when the aircraft flies on time. Even if you fly in a nice, comfortable environment but with a 10-hour delay, you hate this airline! If you have booked your ticket or you booked your cargo to arrive at this time, it should be there –exactly the same.”

Russian hurdle

Ilin confesses that that biggest hurdle in terms of achieving ABC’s desired quality improvements lies in the airline’s home country.

“We don’t say this very often or very publicly, but Russia is our biggest advantage and also our biggest challenge,” Ilin says. “Customers are so used to global service, both by airlines and on the ground, the way it is done in Chicago and the way it is done in Frankfurt and the way it is done in Japan. But Russian infrastructure still leaves something to be desired; it is at a level that is very underdeveloped compared with global standards, especially in cargo.”

He says Russian airports currently focus strongly on passenger services and really neglect cargo services.

“As a result, sometimes I need to do everything with my own hands in Russia, from really physically monitoring cargo from offloading time to the warehouse and to the client, sometimes going along with the documentation process, helping customers, the consignee or the shipper, with the documentation process – which is not included in the price; we don’t charge extra for it. But we have to do it, because we know the customer is used to it.

“So, unfortunately what you can do elsewhere through partners, in Russia you have to rely on yourself only. So that is the biggest challenge in terms of infrastructure.”

Ilin says there are signs of improvement in cargo handling in Russia, although he has anther option in case this does not happen quickly enough.

“This is not our core business, and we don’t want to be involved in that side of the business as much as we are. However, if it is going to stay like this, we might get involved even deeper – for example doing things with our own hands, ground handling in Russia.

“Unless it changes drastically towards an improvement, I wouldn’t exclude that we will be doing it ourselves. With two aircraft we would never think about this, but with a bigger fleet and larger operations, it is probably a moment when we need to think about our side services.”