Stronger together

posted on 4th April 2018

Marcel de Nooijer wears several hats within the multi-airline organisation that is Air France-KLM-Martinair Cargo. His role as managing director of Martinair Holland gives him responsibility for all of the group’s Schiphol-based freighter operations, and as executive vice president of KLM Cargo he is also head of the cargo operations of KLM, including various legal and human resources functions.

Effectively, he is responsible for all of the Schiphol-based cargo operations of Air France-KLM-Martinair, with the group’s cargo commercial activities under the watch of Eelco van Asch and the Paris-based cargo operations controlled by Alain Malka.

De Nooijer outlines two main overall operational issues facing the air cargo business at the moment: cost pressures and digitalisation – although both are, essentially, about improving efficiency. “In a world that is fairly competitive, and where customers – for the right reasons – continue to push for higher quality levels, with revenue results under pressure, it is a continuous challenge to weigh and balance our capabilities to offer the ultimate quality product in an industry that is characterised by margins under pressure,” he continues. “That is a challenge for airlines and all of the air cargo industry – but a fair challenge, because it pushes you to continually find process improvements, which is important both commercially and operationally.”

The challenge of moving towards full digitisation is substantial because it requires so many stakeholders within the industry, including freight forwarders, shippers and authorities, to participate. But he sees the potential benefits as considerable and wide-ranging.

Air France-KLM-Martinair Cargo started last year with e-air waybill levels of 5-6%, and ended the year doubling that amount. “That is a trend we want to pursue because it brings lots of opportunities in terms of process efficiencies,” says de Nooijer. “Also, with the ongoing efforts of the authorities to push on security matters, digitalisation is the right answer. But it is crucial that we do it from an industry perspective in a way that mitigates mistakes being made, enabling us to offer a better quality product to customers.”

He is proud of his organisation’s own recent efforts, but says the true benefits of any efficiency improvements will only be seen when the air cargo chain goes totally paperless. “There we are seeing a positive trend, but it is still less than 1%.”

In the meantime, he says the company has seen noticeable operational benefits from its own internal initiative to “computerise” its documentation at Schiphol, “in such a way that, by means of our IT system ‘Chain+’, we have a real-time warehousing system functioning and ensuring that we know where the cargo is in the warehouse and on which pallet. This helps us to prevent mistakes, and we clearly see the benefits in terms of quality improvement in that respect.”

This system was fully implemented last April and allows tracking at piece level. “Not outside of the warehouse yet – we still have to work on that. But within the warehouse, we track and trace it.”

Quality improvement

The reduction in errors has also reflected in the company’s Cargo 2000 results, which improved further last year, “and also means that we’ll continue to push for a higher target in 2014”, he says. Another element of this development has been the rollout of an iPhone app that allows customers to check the status of their shipment, at the master air waybill level. “Customers want to know what is happening with their cargo, where it is, and its status. If we can make use of these innovations and digitalisation, as an industry but also as a cargo carrier, we can offer that kind of added value.”

The benefits can also be seen in the company’s latest customer survey. “We saw for the second year in a row that we improved our customer rating,” says de Nooijer. “There is always room for further improvements and as a carrier you should never be satisfied. But we have a very good track record there.”

And these kinds of innovations also generate tangible financial benefits. “Mistakes need to be repaired, which costs manpower, time, and capacity, and if you can prevent that, the knife cuts at two ends: you have a satisfied customer, but also you reduce the cost of ‘non-quality’,” de Nooijer says.

Preventing mistakes – and knowing where your cargo is at any moment – can also ensure that you are a front-runner when it comes to security and safety measures.

“And as an industry, with our customers, we can jointly build further opportunities in ensuring that we work with the correct booking data, and enhance booking reliability,” he says. As well as improving security, knowing where your cargo is at all times also helps the efficiency of running an airline operation, “ensuring that we work with optimised flights, which is good for business in this competitive world”.

Pharma focus

Like many leading carriers, AF-KLM-Martinair Cargo has placed a particular recent focus on the pharmaceuticals sector, opening its ‘Pharma 15-25 Cool Center’ last year for this segment of its business. “We are also extending our services to ensure that we report the conditions of the shipments on board,” says de Nooijer. “At the request of customers, we see more technology being available where will enhance our product with these recording services. That helps customer confidence and is good for business.”

Providing the necessary service quality to this demanding customer segment can also drive forward service levels and quality for other products and commodity segments. “Products such as flowers, which is a key element for us, can benefit from those recording measurements. Looking for opportunities to strengthen the specifics of certain customer requests with certain products from one industry to another, I think that is a game that airlines can clearly play and should play.”

Good distribution practice

He says the importance of the pharma and life-science segment has meant the carrier group is continuing to invest to make sure that its capabilities comply with the latest revision to the EU’s Good Distribution Practice (GDP) for pharmaceutical transport. Although GDP is currently a best-practice initiative, de Nooijer believes it will eventually evolve into a firm requirement, although he says it is in the best interests of the industry that the requirements are set up in consultation with carriers.

Another development in recent months has been the changes within AF-KLM-Martinair Cargo, as the challenge of operating freighters in the current soft air freight market has shifted the group’s emphasis towards bellyhold capacity. Operationally, the reducing number of freighters operated by the group is likely to result in an increased number of transhipments needed between the freighter and bellyhold networks.

“We operate the full freighters as Martinair, and we handle those at the Menzies terminal at Schiphol. The passenger belly-friendly planes and the combis we handle at KLM Cargo,” he explains. “But we have an excellent routine in terms of the right procedures for the transfer of cargo, when it comes to intercontinental transit freight.”

These procedures have been improved further by the introduction of one single air waybill last May, with all Martinair and KLM shipments now using the KLM 074 air waybill. This required considerable preparation, “ensuring that the whole infrastructure, including the IT, was capable of handling that”, says de Nooijer.

The merger of the Martinair and KLM cargo networks is to progress further with the development of a new joint reservations system – ‘Cargobus’ – which will replace the old booking system not only for KLM and Martinair, but also Air France Cargo. “And then we can come to one global inventory, and that will help us improve our services and to optimise our flights to an even more accurate level – and to ensure from a commercial perspective that we are a single force in terms of one face of the customer,” says de Nooijer.

And there will be other operational benefits. “It will also provide better utilisation of trucks, and also create better capabilities for clearly managing one ULD inventory, as well as improving pallet optimisation, both in Charles de Gaulle as well as Schiphol.” The plan is to implement this in two phases, in May 2014 and May 2015.

For the time being, there are no plans to combine the KLM and Air France air waybills. “In the short term, I don’t foresee that, but I believe it is the way forward, to come to a ‘grey’ air waybill and deal with it on a global inventory level. But that will not be in 2014.”

Priorities for 2014

With AF-KLM-Martinair Cargo having devoted a huge amount of time and energy in recent years to finding synergies between the group’s three airlines, de Nooijer’s operational priorities for 2014 include working on generating efficiency and quality improvements through partnership with other stakeholders.

“What we want to achieve is work on more of an intense relationship with our suppliers, with our global handling agencies, and making sure that it is not only about cost and price levels. These are very important, but also the fact that you each have the right quality levels and the right incentive levels to optimise the total chain process. We have put a lot of effort into that, and that helps us to also face the compliance challenges and regulatory challenges, and it is something we have to do jointly with your suppliers.”

Local versus global partners

While some progress is possible with local suppliers, he expects the greatest results to come from working more closely and on long-term agreements with the multinational providers. “What helps often with the big guys is that you can find those joint innovations and joint strengths to optimise the products or processes, based on clear KPIs, and trying to reduce on one hand the spend, and on the other hand creating a joint benefit when quality goes jointly up,” he says. “It is possible with local heroes, but the true gain comes if you do it with global suppliers, because then you can leverage the global network on both sides.”

This underlines a tendency to move towards using the global handlers, although handler choice is examined on a case-by-case basis. “There is not one rule that we will only work with the global providers, but where there is mutual benefit of doing things together at a high level, then why not pursue that road? That does not mean that at every station it cannot be a local hero; that certainly will also still occur. But if you can find, at many destinations, a joint benefit with a global supplier, in terms of cost and quality, that is an important element, because it helps to also smooth the process on the compliance side, and you can take things a step further.”

He also wants to work more closely with road feeder service providers, in the hope of creating a better “joint inventory” system that can deliver “better operational resource models, where we shorten the waiting times of trucks at the hub – which also has benefits for the trucking companies – and making it more of a push-pull model. And that is connected to the flight arrivals, with cargo loaded on the trucks arriving at the right time, so that you get a kind of just-in-time flow through the hub. That is in its infancy but it was one of the drivers this year, and we want to see if we can further optimise that.”

Another area offering potential is to intensify the partnership with Delta Airlines, something that is more strongly developed within the passenger side of the group. “We have still some joint ground to gain together with Delta on the cargo operational side by looking for opportunities when it comes to joint handling opportunities,” he says. “That is also one of the items for 2014, where we would like to get into the next phase.”

Company focus: Air France-KLM-Martinair Cargo

Revenue tonne-km (millions): 10,088 in 2013; 10,577 in 2012 (-4.6%).

Available tonne-km (millions): 15,971 in 2013; 16,411 in 2012 (-2.7%).

Average cargo load factor:
63.2% in 2013; 64.5% in 2012 (down 1.3 percentage points).

Cargo tonnage carried:
1.3 million tonnes (estimated) in 2013; 1.304 million tonnes in 2012.

Cargo revenues: €2.9 billion (estimated) in 2013; €3.06 billion in 2012.

Main hub handling capacity:
AF Cargo-CDG: 1.4 million tonnes. KLM-MP Cargo-SPL: approx. 1 million tonnes.

Main hub – infrastructure and capacity changes in 2013 and 2014: Improvements in the handling equipment and storage facilities for various specialised products (including Live Animals, Pharmaceuticals, Art, etc.) both in CDG and SPL.

Plans to outsource cargo handling: 2014 will see cargo handling outsourced in various AF provincial stations, such as MRS, TLS and BOD, although LYS will continue to be handled by AF Cargo. Cargo handling at Paris-Orly airport will also be outsourced in mid-2014, as part of the group’s ‘Transform 2015 Plan’, in response to the current economic environment and a significant downturn in cargo activity at these stations in recent years.

Changes to products and services in 2013 and 2014: Upgrades of processes and equipment, as part of a permanent improvement process.

Planned aircraft fleet changes for 2014: AF-KLM will receive more B777-300ERs and one more A380 (the 10th one for AF), and at the same time – and progressively – the seven remaining B747-400 passenger and the two B747-400ERF freighters will be phased out of the AF fleet by summer 2015. One MD-11F and one B747-400ERF will also be phased out from the KL-MP Cargo fleet by summer 2015.

By summer 2015, the AF-KL-MP Cargo fleet will be:
10 full freighters (two at CDG and eight at SPL).

New destinations for 2014:
In the Summer Schedule 2014, AF will inaugurate passenger flights to Brasilia, Tokyo Haneda, and Jakarta. Panama was inaugurated at the end of 2013.