The benefits of simplicity

posted on 11th September 2018

Virgin Atlantic Cargo’s priorities are to become easier to do business with, embrace new technologies and digitisation, and leverage its partnerships with Delta Cargo and Virgin Australia, managing director Dominic Kennedy tells Will Waters

 

The departure last year of Virgin Atlantic’s longstanding and popular head of cargo, John Lloyd, after 30 years at the carrier marked something of an end of an era for the UK air freight sector. During his two decades as head of cargo, Virgin punched above its weight on the international air freight stage, winning a string of awards that reflected the carrier’s popularity among customers, a reputation for quality, and a bold and creative approach to marketing and customer relationships.
That Virgin opted to replace him with an internal candidate says something about the culture of the organisation and implies a focus on continuity and evolution rather than revolution. Indeed, the airline actually appointed two internal candidates for the role, initially offering it to the then managing director of Virgin Holidays, David Geer. Geer was subsequently offered the role of senior VP for revenue management and digital distribution at Virgin Atlantic when that became vacant, opening the opportunity for an internal promotion within the cargo department for Dominic Kennedy.
Kennedy had joined Virgin Atlantic in 2005 and began his career in the Fleet and Network Planning team before moving to Cargo in 2008. He held a number of leadership positions in the Virgin Atlantic Cargo team over the next nine years, latterly as director for Commercial Planning, prior to taking on the MD role.
He talked to CAAS about his first twelve months in the new role, and about the airline’s cargo priorities and plans.

How difficult or easy has it been succeeding someone that had been in the role for such a long time?
It’s been a smooth transition as we have a well-run cargo business and a fantastic team of people. My predecessor, John, was with Virgin Atlantic Cargo for 30 years but I’d been part of the cargo leadership team since 2008 so, for me, the transition was fairly seamless. Obviously, I’ve come into the job with my own ideas and objectives and I’m very happy with what we’ve achieved as a business in the last 12 months.

What have been your priorities since taking on your current role? How far have you got in implementing any changes that relate to that?
Our priority is always to ensure we deliver the best possible financial contribution to the airline. Cargo is a very important part of Virgin Atlantic’s business and our performance in 2017 was certainly recognised as we achieved 6% and 9% growth in our volumes and revenues respectively year-on-year. We benefited from the level of demand in the market, but I don’t want to take anything away from our team because there is so much competition out there. You not only have to win the business, you also have to deliver in all the other key areas, such as operations and customer service performance, to make sure customers keep coming back. At the end of last year, our volumes had reached a five-year high.
At the same time, we’re looking at our mid- and long-term objectives and what kind of business we want to be in the future. This has resulted in three key areas of focus:
• Greater simplicity to make Virgin Atlantic easier to do business with;
• Digitisation and embracing new technologies;
• Leveraging our partnerships with Delta Cargo and Virgin Australia;

We’re making tangible progress on all three fronts. We see some clear linkages between simplicity and digitisation, using new and emerging technologies to drive benefit for our customers when they do business with us. Simplicity is also about us looking at every aspect of our business to ensure that for all touch points we are delivering our product as efficiently as possible. One clear objective we have is to develop a self-service platform that will enable customers to interact with us in a different way. This will be driven by Suzie Wardle, our new Head of Digital & Distribution. It’s a challenge and an opportunity; but technology, and how we can better embrace innovation, is very exciting in terms of the ability to remove paper, modernise and automate warehouses, and deliver self-service for our customers.
As consumers, we can all see how the world is changing because we live in an online society where everything moves faster and we have visibility of our purchases from the moment we place an order until the point of delivery. I want our customers to have the option of being able to do everything they do today through telephone and email via a digital platform; requesting pricing, creating waybills, ordering AWB stock, accounting, tracking, raising queries.
We’ve got lots of great ideas and now our focus is working with our partners, handling agents and technology provider to ensure we can deliver a seamless experience for our customers.
This will also support the business in terms of leveraging our partnerships. As we more closely align with our joint-venture (JV) partner, Delta Cargo, we are excited by the shared journey we are embarking upon. I’ve had customers tell me they love working with Virgin but they wish we were the size of Delta. Customers are increasingly demanding scale and reach, and partnering with Delta gives us and our customers much more choice than before. The main thing is that we want to build a JV that offers clear and meaningful benefits for our customers but which still enables them to express their airline of choice to work with.

What insights or different perspectives have you brought from previous roles or experiences that you are attempting to, or would like to, apply to your current cargo role?
Prior to taking this role, my background with the airline was in our commercial function, with responsibility for revenue management, capacity control, pricing, commercial insight, revenue integrity and joint venture activities, to ensure we optimized the business potential of our network.
Virgin is such a strong brand that people often assume we’re bigger than we are. My focus since taking the role was to learn every aspect of the business, to listen and learn from our outstanding cargo team, to talk to our customers and hear first-hand what they need from us, plus to leverage the benefits our partners – Delta Cargo and Virgin Australia – can offer our customers.
We’re committed to putting our customers at the heart of everything we do in order to maintain their great support.

Recent developments
What have been the most important features of the last 9 to 12 months for Virgin Atlantic Cargo?
Our focus on pharma is really paying off for us. With the support of our handling partner, dnata, we opened our Pharma Zone at Heathrow last October, which we share with Delta Cargo, and in April, we confirmed our GDP (Good Distribution Practice) compliance for both the Pharma Zone and our global headquarters. This has contributed to a 50% year-on-year increase in pharma bookings in the first five months of 2018. We had regular pharma shipments before this but it was always clear our customers were prepared to give us more once we stepped up a level to meet their requirements, and this has proven to be the case.
We’ve also made significant progress with our JV partnership with Delta Cargo on the continued alignment of our services. Looking further ahead, Virgin Atlantic, Air France-KLM and Delta Air Lines are also paving the way forward for our expanded transatlantic joint venture. We’re still working through the agreement, but we’re excited at the prospect of what the extended JV can offer our cargo customers.
In addition, the last 12 months has seen a focus on having the right team and structure in place across the network, a continued drive on performance and, working with our suppliers to ensure together, we offer a seamless service for our customers.

Wider airline cargo sector
What do you see as the main operational issues and challenges currently affecting the airline cargo sector or your organisation? How do you see this developing, going forward? What changes would you like to see?
I think the challenge – but also the opportunity – is to make doing business easier for our customers, which primarily comes down to having the best technology platform and embracing digitisation, using new and emerging technologies to give customers more benefits and greater efficiency. I want our customers to have the option of doing everything they do with us today through email and telephone via a digital platform.
In the last few years, there has obviously been a drive to remove paper from the air cargo process and this has made some welcome progress, but you only need to walk through a warehouse to see how much we still have to do. I think we have an exciting opportunity to take a much bigger step by embracing innovation and the technologies which already exist to remove paper and to modernise and automate warehouses.
I have no doubt that new technology will help us further enhance our operational capability.

Cargo joint venture with Delta
How is the cargo joint venture with Delta developing?
We are into the implementation stage of our ‘Winning Together’ strategy with Shawn Cole and the team at Delta Cargo.
This is about bringing together two unique, successful brands with complementary cultures and shared values in such a way that we deliver clear and meaningful benefits or our customers and an even bigger choice than before. We are still learning from each other but there is great work going on between our two teams. Our cargo handling is now co-located in New York JFK, Boston, Atlanta and Heathrow – and we share the Pharma Zone in London. In recent weeks, we have also established a Virgin Atlantic Cargo Contact Centre at Delta’s headquarters in Atlanta, and Delta Cargo now has a Customer Service team at our HQ in the UK.
Our goal for the future is that our customers benefit from a dynamic Virgin and Delta partnership that is based on neutral metal, co-located facilities, aligned products and processes, seamless bookings, and collaborative service recovery. We still have a lot to do, but we’re focused on offering our customers more choice and an overall service proposition that brings together the ‘best of both’ of what Virgin and Delta have to offer. There are always hurdles to overcome, but the fact that our JV partner is also a shareholder means they are just as passionate about Virgin Atlantic’s success as we are.

Operational priorities
What areas has Virgin Atlantic Cargo been particularly working on or focusing on in terms of cargo handling or service quality? How do you monitor, manage and attempt to improve quality with your cargo handling providers?
Obviously, our first priority is always to ensure safety, security and compliance. Our cargo handling is outsourced, so it’s important that we have strong relationships with our handling partners because we are always looking at ways to improve reliability and efficiency, particularly in key areas such as truck waiting times.
A big focus for us is automation, and this includes investing in technology that fits the needs of our business and our digitization goals. It’s not always easy to influence the technology our GHAs use, but we can create the ability for our systems to interface with each other, which will enable us to provide live updates to our customer portal and support plans to give our customers a self-service platform. Our new business reporting and analysis tool, Tableau, also gives us the ability to put more operational information together in a live environment so we have much faster data on import milestones, flown-as-booked etc., and this, ultimately, enables us to have much more constructive performance conversations with our GHAs because of improved trend monitoring.
We enjoy very good relationships with our handling partners and they are always willing to look at ways to do things differently if it delivers improvements. Many of the points we discuss are based on the feedback we receive from our regular customer service surveys.
Some of the other initiatives we’re working on include a new GPS vehicle tracking trial for trucks arriving from the continent to speed up truck processing times by giving them allocated delivery slots, and we’re looking at portable warehouse technology to conduct dimension checks and to get pallets in trim for flights.

Short-term outlook
What are your expectations generally for the rest of this year and for 2019?
We started 2018 in the same way we ended last year, with healthy growth in our volumes and revenues. We have seen a softening in some UK segments in recent months, which reflects the stronger value of sterling versus the US dollar in the last year, but, overall, our business from the UK is still strong. Across our network, there is a good level of demand in major markets such as China, India, South Africa, Nigeria and Australia, and a positive upswing in the volumes we are carrying eastbound from the US to the UK.
We set a fairly ambitious target for 2018 and, six months in, I expect us to achieve it. We are particularly well-placed to benefit from two of the fastest-growing air cargo products; pharma and e-commerce. The transatlantic is not only the world’s biggest pharma market, it is also generating high volumes of inbound and outbound e-commerce shipments. Along with Delta Cargo, we now offer around a quarter of all transatlantic air cargo capacity. We’re also seeing growth in pharma shipments on our China and India services as well as high e-commerce volumes on prime routes such as China and Australia, the latter through our long-term partnership with Virgin Australia.
In 2019, we expect to be in an even stronger position, with modest growth expected in most markets.

What new challenges, concerns – or opportunities – do you anticipate, or are you facing, as a result of Brexit?
We need to ensure that goods continue to flow seamlessly across borders as they do today. The frictionless movement of goods between Britain and the EU is essential as a significant percentage of air cargo arrives from the EU by road, rail or sea before boarding our aircraft. We want to see progress as quickly as possible and are actively involved in industry groups to understand the implications, risks and opportunities of Brexit as well as through regular meetings with the Department for Transport as the UK government sets out its plans. Once there is a final deal, we will obviously explore all the opportunities it presents.

Long-term view
What new opportunities do you anticipate, for example through the planned expansion of Heathrow?
We firmly believe that Heathrow is the right choice for expansion and applaud the recent landmark parliamentary vote. As the country’s only hub airport, Heathrow is uniquely placed to support continued growth in UK trade and tourism – sending a strong signal to the world that we’re open for business. An expanded Heathrow must provide desperately needed, and long overdue airline competition to deliver more international destinations, lower fares and better connectivity to UK regions.
As we look to the future, there are still a lot of important milestones and decisions ahead. It’s important that Heathrow, the UK government, and airlines maintain the momentum to deliver an expansion which offers value for money for customers, effective competition, and is mindful of the community.