AirBridgeCargo’s Sergey Lazarev talks to Will Waters about on the airline’s evolution in its first 15 years, its growth expectations and ambitions, the potential of e-commerce, and its big plans at Liege Airport
Just 15 years after its relatively humble launch in 2004, AirBridgeCargo (ABC) Airlines’ fleet has grown to 18 Boeing 747 freighters, including 12 of the latest-generation Boeing 747-8Fs, together carrying total annual volumes exceeding 700,000 tonnes. And since the beginning of scheduled operations in 2004 with two Boeing 747-200Fs, it has evolved from being a low-cost provider of point-to-point services linking a handful of cargo gateways in Asia with Europe, via Russia, to a respected, leading network carrier – operating through modern handling facilities at the airline’s main global hub at Moscow’s Sheremetyevo airport (SVO).
As well as becoming a member of air freight quality initiative Cargo iQ, ABC now offers a range of specialist products and has been investing in various technology-driven initiatives to improve quality and ease of doing business – from ULD tracking through its partnership with Unilode, to a pioneering Internet of Things project with SITA subsidiary SITAONAIR.
Alongside the various digital initiatives, the carrier has ambitious plans to further expand its fleet, and recently announced a long-term commitment to build a substantial business around a new European hub at Liege Airport, already emerging as a European hub for Cainiao – with which ABC parent company Volga-Dnepr Group signed an MoU to co-operate – and other Chinese e-commerce logistics specialists.
Top 10 status
Asked whether ABC has now been accepted as a top-tier air cargo carrier, ABC’s general director Sergey Lazarev focuses on its global status in volume terms, noting: “According to our results for 2018, AirBridgeCargo is ranked among the Top 10 cargo carriers of the world, and we are proud to have stepped into our 15th anniversary year with such an achievement, which reflects support from our customers worldwide.”
Among the key milestones in achieving the company’s acceptance as a major player, Lazarev says there has been an enormous amount of work behind this achievement, starting from the first day of operations back in 2004, noting: “It embraces all the areas of our business: expansion of our network in alignment with fleet enlargement, strengthening of our positions in the regions by building of our own sales and customer service structure, rather than relying on GSAs’ support, and the development of dedicated services for special cargo with a primary focus on quality performance.”
He stresses that the quality and safety of its services are “the two pillars which form the basis of our business portfolio”. He acknowledges that along the way, the company has “of course had our ups and downs, facing many problems and challenges”, but it had overcome these, with the support and “endorsement” of its customers, thanking “our customers and partners for supporting us in good and hard times. They have bolstered our growth and development though the solid and reliable partnerships we have managed to build throughout these years.”
He highlights a number of milestones going all the way back to 2002 – when “the management of Volga-Dnepr Group took the decision to launch the project to establish a new scheduled cargo airline and started to attract the best minds within the group, as well as from the industry, to make it happen”.
Following the launch of scheduled operations in 2004 with two Boeing 747-200Fs, ABC obtained its own AOC (aircraft operator certificate) in 2006 – thus becoming the second independent airline within Volga-Dnepr Group. “This milestone has served as the right step for further growth, fleet enhancement, and ambitious future planning, with the purchase of new long-range Boeing 747-400F aircraft,” Lazarev adds.
The following three years saw “tremendous renovation of the ABC all-cargo fleet”, with the delivery of newer Boeing 747-400F aircraft to supplement and subsequently replace the ageing B747-200Fs, “which opened up new opportunities for further network expansion”, culminating in 2009 – ABS’s five-year anniversary – with its first industry acknowledgements, via several award wins including Fraport Cargo Services’ award for Best Cargo Performer 2010 after ABC increased its freight volume through Frankfurt Airport by nearly 50%.
ABC’s entry into the US market in 2011, “becoming the first Russian air carrier to operate scheduled flights between Russia and the USA”, was another key milestone. “Starting with Chicago, we have gradually been enlarging the number of our online stations and currently serve six US stations with around 40 weekly frequencies,” he points out.
And the following year, ABC deployed its first brand new Boeing 747-8F. A key milestone in its own right, Lazarev says the new aircraft type’s operational characteristics fostered ABC’s “plans for the development of dedicated services for the transport of special cargoes”.
Winning the ‘All-Cargo Airline of the Year Award’ in 2015 marked the beginning of the current era, which Lazarev says is characterized by ABC “bringing quality to the forefront of its operations, being in constant dialogue with its customers worldwide and strengthening its speciality services”, which now include products such as abc pharma, abc XL, and abc DG.
“Our special products resonated with market demand and our customers’ expectations,” he says. “This commitment was also demonstrated through our Cargo iQ certification, IATA CEIV, Envirotainer QEP certification, alignment of internal procedures, and reinforcement of the ABC team – which significantly enhanced our abc pharma performance and made it possible for us to become one of the leading carriers of pharmaceutical and medical products.”
But he says there is much more still to achieve. “The sky is the limit,” he says, while stressing that “everything we do on our development path we do with our customers’ needs in mind”. He adds: “We will follow their requirements always and be ready to support these with high-quality services, supported by the development of our digital environment as there are many things to be done in this area.
“But what is more, we will keep on reinforcing our team of worldwide experts because they are our main asset; and with the level of knowledge within our company always going up, we feel that having highly qualified, experienced, and well-educated personnel is the way to achieve a successful future.”
Highlighting progress in the last 12-24 months to improve service quality and operational efficiency, Lazarev notes: “We have just re-confirmed our Cargo iQ certification, which stands as our commitment to high-quality services. This included a lot of preliminary work and cooperation with our ground handling partners.”
He stresses that Cargo iQ embraces not only services for general cargo, but for special commodities as well, noting: “We have been working under the development on reinforcement of our specialty services, strengthening our internal processes, strengthening our dedicated teams of experts, and most importantly, collaborating with our customers and partners on the educational side of the process, organizing joint workshops, participating in regular meetings to share updates, and monitoring industry news, and upcoming trends.”
On the product side, confidence in the company’s internal procedures and our processes in April led it to introduce a new product, ‘abc premium’, for customers seeking guaranteed capacity and prioritisation on specific flights across ABC’s international network. Expected to attract demand from customers with urgent, time-sensitive shipments, the product can also be combined with existing services and products.
SVO cargo hub
And Lazarev confirms that the new cargo complex at SVO has also contributed significantly to improvements in ABC’s quality performance. “SVO is our cargo hub and most of our flight connections are being done through this major airport,” he explains.
“We have been able to achieve our growth and network development partially thanks to their support. With more than 85 weekly flights to/from SVO, we are able to guarantee flight connections with cargo transfer to various destinations within our international network.
“We have gradually become a top-tier network carrier and are able to provide our customers with air freight solutions for various types of cargo. In fact, SVO actively participated in the process of our IATA CEIV certification and contributed to its overall successful outcome.”
Asked if there are any aspects or capabilities offered by other cargo carriers that ABC admires or aspires to, Lazarev responds: “To some extent we admire the speed of digitalization penetration some cargo carrier peers are adopting at the moment, introducing it to all the levels of their organizations. This is what we are aiming to do too, although we should understand that digitalization depends on a number of factors, including each country’s regulations, customs authorities’ regulations, readiness of other supply chain stakeholders, and other matters.”
Looking ahead at ABC’s strategic milestones or targets for the next few years, Lazarev notes: “Our short-term perspective is to concentrate on the provision of high-quality services, with special focus on leveraging volumes of dedicated cargoes,” highlighting, in particular, pharmaceutical products, oversize and heavy cargo, dangerous goods, and e-commerce traffic, for example. And on plans for other areas of ABC’s business, he notes: “Following our customers’ needs, we will expand our network and enlarge the fleet, as well as work on improving the digital environment our customers expect to experience while working with top-tier cargo carriers.”
E-commerce and digitalisation
Meanwhile, whether or not in partnership with affiliated – or non-affiliated – carriers close to ABC and VDG, ABC is among the many air cargo carriers that expect that e-commerce traffic will increasingly be a significant driver of growth in the short and medium term.
“E-commerce is one of the most dynamically developing sectors in the air cargo market,” Lazarev notes. “It has been growing at 20% annually on average during the last 10 years, and is expected to continue its upward trend with at least 15% growth rates, both for domestic and cross-border e-commerce shipments. With more than half of all cross-border e-commerce being inter-continental, air cargo is the most preferable mode for delivery, especially when it comes to meeting the term of 72-hour delivery frames.”
He continues: “Active development of regional fulfilment centres, increasing popularity to accelerate online purchases and deliveries, simplification of online shopping procedures and the emerging level of consumers’ confidence in this type of purchasing facilitates the increase of air traffic of e-commerce purchases to various countries of the world. We feel that e-commerce will drive the growth of cargo volumes and expect that more commodities will be embraced by e-commerce, such as pharmaceutical products (non-temperature-sensitive), household appliances (both small and big), furniture items, etc. From our side, we are ready to support customers with our dedicated ‘abc e-com’ product, which could be combined with other products and services offered by ABC.”
He doubts the suggestion that e-commerce growth could be punctured by changes in international postal pricing agreements, triggered by the planned withdrawal from the UPU by the US Postal Service.“This is hardly possible because the market is so consumer driven; the tendency is quite contrary, as more buyers around the world expect faster and friendlier delivery terms. Indeed, there might be some hurdles on certain trade lanes influenced by economic and political situations, but when one door closes, another opens – this will facilitate the development of another regions, as consumers will still target the fastest and most seamless online purchase experience.”
In terms of how he sees air cargo carriers’ and freighter operators’ role evolving over the next few years to meet the needs of e-commerce customers and a new generation of digitally connected customers and logistics chains, he responds: “The only possible option to meet the demands of e-commerce customers is to guarantee high-quality services with enough cargo capacity and flight frequencies from regions of production to the points of consumption, which now will cover the whole world.
“There is a wide spectrum of things that lie behind successful operations for e-commerce shipments. It starts with modern and efficient freighters, capable of transporting various types of cargoes as well as having an extensive network and collaboration with trustworthy and reliable partners on the ground, because even if the carrier guarantees speed of delivery, ground handling hurdles could be the cause of delays. And, most importantly, introduction of a holistic digital environment which will guarantee 100% transparency and visibility of cargo status information.
“We are in an era when all supply chain stakeholders are expected to work in tandem as never before, stepping away from peep-to-peer data messaging to data sharing and working together to achieve greater supply chain efficiency. Digitalization for e-commerce shipments involves creating dedicated API (Application Programming Interfaces) to guarantee instant information flow between all the members of the supply chain, with data available for all the participants.
“We, at ABC, have already initiated this process for our dedicated ‘abc e-com’ product and received positive feedback from our customers with e-commerce cargo as they have access to real-time data and cargo updates. From our perspective, this is the future of digitalization – to maximize efficiency and accuracy of cargo movement data and deliver it to customers in an easy-to-use-and-read format. That is why, more than ever, the air cargo industry needs highly qualified IT specialists who understand the process of cargo flow and can adjust all digital processes accumulating data so it is all available in one place. Not only are we reinforcing our IT team, we are also closely cooperating with our partners’ IT departments.”
Meanwhile, on the market demand side, he comments: “The beginning of the year is shaping up slightly weaker than expected by the majority of industry experts. A lot of operators have introduced additional capacity at the end of the last year and plan more increases to their freighter capacity during 2019, which will, of course, influence demand-supply ratio and at the same time intensify competition.
“The last two years have been very good for the industry, and we know only too well that after an upward surge comes the downward trend – this is in the nature of air freight business, which is cyclical. Our expectation is that we will still see growth based on GDP figures and market drivers, such as e-commerce development and demand for dedicated services of special cargoes. Carriers are expected to orchestrate their fleet and network to meet their customers’ expectations in terms of high-quality performance, operational efficiency and digital environment.”
He concludes: “From our side, we will be focusing on guaranteeing high-quality services, including specialty services which have been in high demand, introduce more digital solutions to enhance customer experience, the development of logistics solutions based on our customers’ needs, embracing all the areas which might be essential for this. Basically, we will continue our path of development and will adapt to the current environment in the most effective manner.”