Carriers, airports and other service providers debate the essential requirements for a successful freight airport, and how these vary according to local and individual needs
Creating or even defining the ideal cargo hub may be an impossible task because it varies from place to place and changes over time – and needs to be affordable to its users. But there are various ingredients that consistently work well and certain essential requirements have emerged – at least at the current time – selected specialists told this year’s Air Cargo Handling Conference in Budapest.
According to Jonas van Stekelenburg, cargo director at Amsterdam Airport Schiphol, establishing a successful cargo airport from scratch is a major challenge because of the need to generate a critical mass of air connections: “It is difficult to create an ideal hub out of nothing, of course, but we studied the subject with Seabury and came up with a list. On top was ‘connectivity’, so network; and then came ‘clearance’, so customs etc.; and then came ‘handling’ and some other things. It is difficult to start somewhere with a network, so you have to build that over time. But looking at an airport like we are working on, I think these three things are key.”
Brendan Sullivan, head of cargo operations at the International Air Transport Association (IATA), has been examining the key elements of airports’ cargo operations infrastructure as part of a project undertaken by IATA’s Cargo Handling Consultative Council (ICHC) to establish a ‘Facility Capabilities Matrix’ – to allow users to make meaningful comparisons between airports or their handling facilities.
“One of the things we have seen as we have started looking at this is that there are some ideal elements that need to be considered,” he observes. “Whether there is an actual ‘masterplan’ that works everywhere or not, I don’t know that we have seen that necessarily. But if you create a list of all the things you want to score against, and then map that to a list of what your current customers would be looking for – and ideally with a little more foresight perhaps than we have had in the last few years, starting to look at what the shift might be in terms of customer demand – you can create a really interesting matrix of key criteria for a cargo hub: connectivity, data-driven, technology, modularity so that it can be a little more flexible than it has in the past; I think that is really important,” he explains.
Murat Yalçin Kirca, vice president of cargo operations for Turkish Cargo, says: “There is not currently an ideal cargo hub. It depends on the geography and the customers and the needs of the region.” For example, the new cargo handling facility that Finnair has developed includes areas and specialist capabilities designed for the needs of Finnair’s perishables – and specifically seafood – customers, something that may not be relevant to other carriers or locations, he notes. “We are currently on the verge of building a new facility, and that will be an ideal hub – we hope. We will see next year!”
Common elements
Walid Khoury, managing director of air cargo handling systems specialist ALS Logistic Solutions, comments: “There are lots of elements in common: you have to look at good IT; some automation, but maybe not full automation – partial automation; but most importantly, what do you need it for? Do you need it for cold storage? Do you need it for pharma? Do you need it for general cargo? There are lots of elements to look at, but there are lots of things in common that you can concentrate on and take as a model, and start from there.”
René Droese, executive director of property at Budapest Airport, observes: “It is not only about having the hardware and the software, and sufficient information, and enough capacity. In my eyes, it is also about perception – the acceptance within the airport company that cargo is important; similarly important to passenger traffic. We know that in the past cargo was sometimes handled as second-class, but I think in recent years, airports have recognised that cargo is of similar importance and there is a need for freight in the strategy of airports.”
Martin Langaas, cargo director for Norway’s biggest airport operator Avinor and its largest hub, Oslo Airport, comments: “I think it depends a bit on how you define a hub; you can have global large hubs, whereas we are more of a regional hub. But I think the same things apply to all of us. What I have been really concerned about, and I think the reason for some of our success, is to really focus on the community. People can do a lot with the infrastructure and software, and everything, but you need to really make this industry a little bit sexy. You need people to be engaged with it and to want to work with you. You need to attract people who want to be in this industry. Having that is also an essential key.
Customer benefits
Asked what characteristics will have a big impact benefit to customers, he responds: “We are now working very closely with the exporters, not the forwarders, and that is also part of our success. And I think you need to ask the customers about what kind of facilities do you need? What routes do you need? What infrastructure? We have done that, and that is the reason why we have been able to attract nine new freighter airlines in the last 13 months – because we are talking to the customers. And the forwarders don’t like that; but to move forward, I think that’s a good way of doing things. And according to my KPIs, it is delivering results!”
Droese agrees: “Yes, communication is really important. And delivering something tailor-made. So, you need to understand what the customers want, not only in terms of facilities but also in terms of operations. And then you simply need to deliver.”
Khoury cautions against unnecessary complexity. “Customers want a very easy process; they don’t want something very complicated,” he says. “They want something where they don’t need to ‘reinvent’ new people in order to operate the cargo terminal. They want smooth processes, and cost-effective solutions – so basically a good ROI. We go to lots of airports, and a lot of people want something cost-effective, and something that their staff can actually operate.”
He continues: “It is not good to give a 10-year-old a Ferrari and tell him to go and race. You have to use the same tools and the same people, mostly. You can train them, and give them the tools, but they still have to use the same elements. Turkish Airlines is building a huge new terminal, but they can’t reinvent the world and bring in new people that will operate this new terminal; they have to use their own resources.”
Turkish Cargo’s Kirca responds: “We want a terminal that is ready for our growth rates, and ready on time, and gives us visibility.”
Common mistakes
So, what are the common mistakes in planning an air cargo hub?
Van Stekelenburg highlights a current very live challenge facing Schiphol’s cargo community at the moment: a significant cut from this winter in the number of freighter slots available that has undermined the airport’s excellent work for years in creating an attractive environment for cargo operators. “We have a deal with the communities around Schiphol that we would not go over 500,000 ATMs a year by 2020, and we did not expect to reach that level until 2020, but we did,” he observes. “Did anyone make a mistake?” he asks. The answer to that is a complicated on, he explains. But he adds: “We are going to use this crisis to get better performance from ourselves and from the handlers and the airlines.”
He highlights a “need to professionalise” among the air cargo community. “We started out two years ago with a new strategy at Schiphol” that focuses on “quality first – with data and people and systems, it is all about quality. Quality is about talking about things and getting to the bottom of things, and being open,” he explains.
Sullivan says: “One thing that I see quite regularly that is an error, or that leads to a problem, is that they either over-reach or under-reach towards their desired end state. I could sit down with brilliant people and design the perfect hub, but if the processes are not going to be there quickly at start-up or if your customers are not going to give you the information that you require to make that functional, it is not going to work; you are going to have to do completely manual processes inside and automated facility.
“On the other side, they completely overstretch their desired end state and build without shifting the processes, and what that yields is a lack of quality and the lack of ability to deliver to the customer the quality and the visibility and the ease of access that the customer is asking for. You end up with either a beautiful hub that doesn’t function or a not-so-beautiful hub that you are wishing is looking better and working better.”
Predicting the future
Kirca responds: “I think that before the creation of an ideal hub, we have to make a prediction about what the future is going to be, and then we have to create or shape that cargo hub. The important thing is to create an optimum level of automation that gives an optimum level of service.”
Khoury adds: “I think the availability of information and data and KPIs are the biggest worry that we see with customers. They rely also on a lot of internal resources – they don’t go out and hire a specialist to look into their books – and when you look from the inside, you don’t see the actual picture like an outsider. I think hiring someone from outside and looking at the data; at what was before; and at what aircraft you are you buying, et cetera; and then designing the real needs of automation, is very important. Some people don’t even need automation… What does your data say? What do your KPIs say? What do your customers say? That should be what drives your design.”
Droese comments: “It is about paying attention to the cargo business, communicating, and understanding the business, and getting an exchange of information with your business partners. It is important to have a long-term vision, sufficient space must be available; capacity must be available, otherwise you are getting constrained.”
But Langaas highlights a broader concern. “I think the problem with hubs is that there are too many of them,” he says. “If we just look at the Nordics, people are too keen to be a hub and they forget all the steps needed to get there.”
Defining good
One air cargo handling executive questioned how we are even to define a good hub. Do we mean how well it is managed from an operational perspective, or whether it can generate more revenue, offering more services, or are we looking at operational efficiency?
Sullivan agrees these issues of operational efficiency are things that IATA and operators should be thinking about. “And if we are not thinking about it, then you are doing your facilities or hub a disservice,” he adds. “We all talk about how big these facilities get, and how that works towards peak – we build to this capacity to handle peak – but if we had better data, we could de-peak more efficiently than we do today. And what would you do with that excess capacity that you have built? Those are new business models. And if they are not new business models, then it’s wasted space in prime locations. There is a reason that an air cargo hub is at an airport – it’s because that is really efficient. But if you are wasting space at the airport, it is sitting unused, and you are not opening yourself up to new business models – for example, regional distribution centres for e-commerce, postal distribution centres, added-value service for long-term storage – all of this needs to be explored and articulated and to be part of a long-term vision.”
Van Stekelenburg highlighted an initiative by Schiphol and home carrier AF-KLM aimed at providing an additional service, mainly for e-commerce customers, that made further use of existing air freight capacity. “We thought out a same-day delivery service within Europe for parcels, so we looked at all the European distribution centres in the Netherlands – and there are a lot of them – and at what are their needs? For example, for the need to deliver expensive shoes the same day from Spain to the UK, we thought out a process of how these packages could be in the plane the same day via the airline baggage system at Schiphol.”
He continued: “Another example is we are looking with Cargonaut, our community system, at where there are options for e-commerce parties, for example, to go faster through the customs clearance process, via track and trace, fulfilment of data, etc. These are the ways we are looking at expanding the hub.”
Van Stekelenburg acknowledges that these two examples are “still framed within the hub thinking”, rather than completely out-of-the-box ideas. But while there are these opportunities to find simple, additional solutions, it makes sense to explore them. “Operational efficiencies sounds dull, but the data can be used for operational improvements, and I think there is still so much room for improvement, so that is where we concentrate on these things,” he explains.
Droese observes: “Less capital expenditure is needed if we are more efficient. Therefore your target of becoming more efficient is equal to getting more revenue.”
Extra services
Khoury says most cargo airports have shown little evidence of innovating and differenting themselves, although this is set to change. “Looking at the majority of the cargo hubs, they are almost the same,” he notes. “Extra services, what are they doing as extra services to earn more money or generate more money?
“I think Amazon will teach us a big lesson soon. They will become a big competitor and they will have to stand up and start looking at how they can generate extra services – for example, to receive cargo and give it to the landside, or vice versa.
Third-party services are what is going to drive this very soon. People are not going shopping on their own; they are buying (online) and everything is shipped by air freight, and Amazon is deciding to do their own. They are not going to touch these hubs. Amazon is using these hubs now, but they will create their own.”
Looking at where we can find inspiration from current best practice – either within the air freight industry or elsewhere – speakers were asked to share their examples of top hubs around the world.
Van Stekelenburg responded: “I would give an award to every integrator hub out there. What they do is maybe not always efficient in terms of full planes and costs, but the way they have automated is very efficient. So, my examples would be Leipzig and the US ones. If we look at a true hub, we have to look for a place that does not have a big city or industry behind it – for example, the Netherlands or Hong Kong. Serving all of China through Hong Kong, that is something impressive, where they have created something out of nothing.”
Sullivan commented: “I would choose those that are starting to think about things a bit differently. Hong Kong would be on my list because I have some visibility on their thinking on developing capabilities and delivering that for their customers – airlines and in turn the customers of the airline. And the integrators: the way they engineer their decision-making processes – moving the decision as close as you can possibly get it without adding risk into the process – so that you are significantly more flexible about adding things at the last minute… If you can think that through your process inside the hub, it is going to be a much more efficient hub. And there are a number of them out there, for example Memphis, Louisville, Leipzig, and so on.
Kirca also highlighted Hong Kong as an impressive example of a hub, and Khoury highlighted Hong Kong, SATS/Singapore, and DHL’s hub in Leipzig.
Langaas commented: “For me, innovation is the key, because this industry is going to go so fast forward in the years to come; innovation and being able to think differently and do things differently and more efficiently will be key. Taking again a regional perspective, because we are a regional hub, for us, Helsinki is by far the airport in our region – and in our size of airport category, the most important hub.”
No single blueprint
So, it seems that there is no such thing as the ideal cargo hub, or no single blueprint that can guarantee success, because the needs of its customers vary from place to place and continue to evolve. But there are some common themes – such as network connectivity, easy customs clearances, high-quality handling, regular communication with customers, the right level of automation, simple processes, data-driven processes, modularity, efficiency and affordability, and a focus on the cargo community. And at a time of change or disruption – particularly, to respond to the needs of, and perhaps imminent competition from, the e-commerce sector – innovation that has perhaps been lacking in the past may be increasingly important in the future. That might mean airports talking more directly to end customers – which may not be popular initially, but may help to identify where investments and resources are best directed. nnn
