Seeking standardised stable solutions

posted on 16th June 2022
Seeking standardised stable solutions

Two years of extreme volatility in air freight markets have left airlines with a greater appreciation of strong, stable and professional cargo handling partners that can deliver reliable services in a still challenging environment, says Dnata CEO Steve Allen – and preferably suppliers offering proactive, standardised solutions and modern facilities that make outsourcing handling easier and more consistent, with greater operational transparency, he tells Will Waters

Although the worst effects of the Covid-19 pandemic on aviation appear to have passed, there remains considerable instability and volatility that is likely to affect air cargo handlers and the wider air freight sector for much or all of this year and most likely well into 2023, Dnata CEO Steve Allen believes.
And that also means an ongoing heightened appreciation among airlines of strong, stable and professional cargo handling partners that can deliver reliable services in a still challenging environment – and preferably suppliers offering proactive, standardised solutions and modern facilities that make outsourcing handling easier and more consistent, with greater operational transparency.
In an update briefing and interview with CAAS, he notes that the inconsistent recovery from the pandemic, especially within the airline sector, means it’s “very difficult” for cargo handlers “to plan and optimise our business”. Alongside continuing Covid-related market disruptions, ongoing geopolitical turbulence such as the war in Ukraine means the air freight market will continue to rely for some time to a far greater extent than pre-Covid on chartered rather than scheduled capacity, with the greater volatility and unpredictability and additional expense that this entails, believes Allen.
But along with the enormous recent challenges for airlines and handlers, in which “most companies have built up quite considerable amount of debt”, there are potential opportunities for financially strong companies whose business model is based on an outsourcing function.

More outsourcing
“There are more companies and more airlines turning to companies like ourselves to either outsource capability, or to help them solve problems,” he notes. “One advantage we have is we have a very solid base. We have a shareholder who has no intention of discontinuing or changing the way that they invest in our business.”
Allen says airlines “are looking for handlers that they can trust right now”, with ground handling having become a problem for carriers in recent months. “There are times when carriers have to cancel flights, because the ground handlers can’t handle the flight; there aren’t the people on the ground to do it,” he notes. “And we want to take that problem out of their hands.
“Carriers are looking for proactive support. Our role is to make sure we’re ready and they can turn to us for support – when they’re concentrating on things like getting crews retrained and building back up their passenger profile.”
The labour challenge
Attracting and retaining good people is “probably the biggest challenge” companies in the aviation industry face currently and “need to tackle in the next six to 12 months, as we grow back”, Allen says.
This includes new expectations from staff. “Things have changed – the way that people work; there is wage inflation all over the world, which is going to impact on our bottom line. So, this challenging labour market is probably the biggest thing to we need to tackle in the next six to 12 months, as we grow back.”
Although handlers’ passenger operations were far more severely affected than their cargo activities in the pandemic, many also downsized their cargo teams and optimised their operations at various locations. For example, Dnata’s London Heathrow (LHR) cargo operations were consolidated from eight facilities into three of its newer buildings during the height of the pandemic. They are back up to six again now, “and hopefully the two that are dormant can be brought back this year”, Allen says.
The staffing challenge for cargo handlers in the last couple of years has at times meant having to turn down or be selective about accepting some new customers or lines of business – although that has been less of an issue this year, Allen says. But Covid surcharges applied by cargo handlers across the industry have remained in place for the time being, reflecting the additional volatility, challenges, and work required to service aircraft in the current environment – including cargo in cabins.

Competition for people
Allen says recruiting and retaining good people in the current competitive employment market in many countries “is not just about wages, it’s about what it’s like to work for a company. That means your working environment internally, but also how we work with the rest of the community.”
He is confident Dnata can compete for good people not just among its aviation industry competitors, but in the wider employment market, where individuals’ aspirations continue to grow and develop. This means offering more than just a competitive salary but an attractive broader package that includes the wider direction of the company and other key issues including investment in innovation, technology, sustainability, people and infrastructure.
“We’ve got health and wellbeing programmes running; we just finished running our culture survey, a global survey of all our employees worldwide,” Allen highlights. “People have been through a really tough time, and we wanted to know where people are, how they’re feeling, and where we should put our efforts.”

Diversity: IATA 25 by 25 initiative
Of key relevance is a company’s approach to diversity, and Dnata has signed up to the IATA ‘25 by 25’ initiative, which targets that 25% of senior management should be women by 2025. “And we’ve gone one step further to say 25% of our employee base should be women by 2025,” Allen adds.
Efforts to support this include training staff at all levels – for example, “to recognise that we all have unconscious bias”. While this may sound challenging to some, Allen reports a very positive attitude among staff. “People love to learn, and it’s an opportunity to learn something about yourself,” he notes. “People are very aware of diversity issues and I like to think they want to contribute to the progression.”
His experience is that once people have participated, “you kind of become an evangelist, and say, ‘I think my team should go through this’, and it will cascade through our business. And I think it’s a real opportunity to change our mindset.”

Innovation step change
Similarly, he sees investment in innovation as “a huge opportunity to make a step change in the way we standardise and optimise operations. We were already invested in what we call ‘One Cargo’, a single cargo management system for our worldwide cargo operations. We’ve already rolled it out to five countries and it will be rolled out to all.
“That helps with the tracking and monitoring of cargo, but also means we can share data and it’s easier for training people.”
Another innovation launched in the UAE is Dnata’s Cologi trading platform with freight forwarders. Forwarders that register can identify available space on flights coming in and out of Dubai, and book their cargo online and pre-register all the documents. “So, when it comes to the warehouse, there are no processes to be done; it’s already been cleared with customs. So, real digitalisation of the relationship between the freight forwarders and the airline cargo handlers.”

Autonomous drones
Another digital innovation is IATA’s DG AutoCheck, which enables airlines, ground handlers and freight forwarders to automatically check the compliance of the Shipper’s Declaration for Dangerous Goods (DGD) against all relevant provisions.
“And then a fun one, but actually a very practical application, is autonomous drones in the warehouses,” Allen notes. “A trial launched in Dallas proved very successful, whereby the drones can do all the stock checking; but also, they can advise how best to build pallets based on what is being moved around the warehouse. And that’s being rolled out to other warehouses around the world now, as a tried and tested and proven innovation.”
He continues: “Our objective is to triple our investment in technology in 2024. We really believe technology is the way forward, and we need to get in the forefront. We’ve got lots in train, but we need to up that investment, to make sure we’re making the most of that opportunity.”

Environment focus
With the environment increasingly important, Allen says Dnata is “really stepping up the sustainability strategy, which we’ve had for a long time, because we realise how important it is to people, but also how important it is to our customers. Many customers are asking now that the sustainability strategy is part of the contract that they sign with us.”
Initiatives include reducing the environmental footprint of handling infrastructure and investment in green airport ground support equipment (GSE), with an objective to reduce Dnata’s carbon footprint by 20% by 2024 and 50% by 2030.
Strategic international investments
In recent years, Dnata has also made strategic investments in new cargo facilities in Karachi and Lahore, and additional cargo capacity and infrastructure in Brussels, Sydney and Toronto. Furthermore, the company has recently announced that it would invest over €200 million in its operations in Amsterdam and operate one of the world’s largest and most advanced cargo facility, Dnata Cargo City Amsterdam, at Schiphol Airport.
Dnata’s cargo developments in the UK, a significant market for the company, are also a strong demonstration of how it has been progressively able to build and modernise its capabilities. Following a lack of investment for many years in Heathrow Airport’s independent cargo handling facilities, a series of off-airport or second-line developments by Dnata close to the UK hub’s main cargo handling areas has brought some fresh alternative solutions to the airport’s often congested and dated cargo infrastructure.
Allen says it is satisfying to bring a fresh approach to the main hub airport of his home country, the UK – where, among other things, he spent five years with British Airways and helped with the design of LHR’s Terminal 5.
“That really showed me that when you build a facility around the customer and the people that are going to work in it, there’s a great opportunity to make a step change,” he notes.
“That’s what we’re trying to do (at LHR). They’re just steel-framed buildings, and yet you can create something really nice to work in.”
Appropriate levels of technology
Along with enough space, and appropriate levels of technology to make the processes better and smoother…
“That’s the key for me. Where the cargo industry needs to go is in much more automation and passing of messaging between every step of the process, so that the cargo just continues to move – and the whole passing of air waybills happens digitally,” he highlights.
“But we’ve got to get the industry to work together on it as well.”
He says you can provide incentives for people to participate digitally, but industry change generally goes a lot faster if mandated – whether by a dominant carrier, airport authority, or a regulator like a customs authority.
“I think IATA can do a lot more on it as well,” he notes. “I’d like to see IATA take a much more active role.”
Longer term partnerships and relationships
Another key area of recent significant change is interest among customers in longer-term partnerships and relationships.
“I think there are three approaches,” explains Allen. “Carriers are looking to outsource more of their ground activities, because they’re concentrating on what they can deliver in the air and also maximising the use of their assets – the aircraft.
“We’re seeing more of them interested in outsourcing hub activities, which they were nervous about in the past.”
Some carriers are also looking to put together agreements around multiple geographies. “So, it could be a regional deal, or either end of route,” he notes.
“And we have more and more carriers come to us and say: ‘Will you set up in this location, because the quality there is terrible?’ And if we say ‘we’ll put the investment in as long as you can commit to a longer-term contract’, they’re saying: ‘If you’ll give us the quality we need, that isn’t there currently, then we’re willing to work with you on that’.”

Greater appreciation of quality handling
The challenges recently faced by airlines and their cargo handlers – for example, in finding staff and managing volatility – means there seems to be a greater appreciation now of the difference between quality handlers that can manage some of these difficulties versus those that can’t.
“I think carriers have started to see the benefit of working with modern professional organisations,” confirms Allen. “And the industry is consolidating, and there are fewer but larger organisations that can afford to invest in their people, in their processes, in their technology; when it used to be so fragmented, you wouldn’t get that.”
Standardised processes
He continues: “So, they’re definitely seeing value in that (consolidation) coming. And one of the things we’re doing to make the world a simpler place is having standardised processes everywhere in the world for handling.
“That makes all the processes more efficient, you can adopt technology more easily, the training is easier – because everybody’s being trained in the same way, no matter where they are. And you can move people around between stations.
“So, we have standard manuals that are aligned with IATA’s IGOM ground operations standards. And we apply that consistently worldwide. Then a carrier knows that when you contract with Dnata, this is the quality you get, no matter where it is in the world.”

Technology interfaces
This extends to standardisation of the technology used as well. “Because then you’re not trying to build it on multiple versions of how you handle cargo,” Allen notes. “There’s only one way of doing it; you put those rules into your piece of technology, and you can use it anywhere in the world.”
The ability to then interface that technology with airline customers’ technology is also important.
“These days it’s much easier to interface technology,” Allen notes. “But if you know what you’re interfacing to, you can have that global standard. Then you can say anywhere in the world where you’re working with Dnata, we’ll just plug our technology together, and it’s easy.”
Existing customers will know the integration can be successful in new locations if they’ve seen those systems successfully working together at other stations in their network.
“That’s the big advantage. Global standards, I think, has to be the way forward,” Allen adds.
“How difficult can it be? All you’re doing is handling cargo and turning aircraft; it should just be the same every time, but somehow over the years, we’ve developed (as an industry) different ways of doing it in every station in the world. Standardising makes the whole world much more efficient,” Allen notes.
“And also the training. We’re developing eLearning solutions, and we’re using virtual reality for training now, on our standardised processes. So, if you’ve got a high turnover in your workforce, you can get people trained and up and running much, much faster. And you can share them across different locations, if you wish.”

Promising outlook
All of this suggests that although it has been an extremely volatile, difficult period, for airport ground services providers, on the cargo side at least things look quite promising for globalised, professional, technologically developed cargo handlers.
“Yes, I think so,” confirms Allen. “Cargo has been the one thing that’s upheld all the way through. So, that’s something most of the big players have been willing to continue investing in. And we’ve learned a lot about cargo. And also, the world has woken up to cargo, getting much more support from the authorities and the airlines and the freight forwarders. And suddenly this is now the thing everybody wants to get right – whereas before it was always the second-class citizen.”
And there is now more momentum and motivation to get the technology part right.
“Exactly – we are feeling that momentum beginning to really build.”