Etihad activated a ‘passenger-freighter’ fleet network within 48 hours of the suspension of passenger flights. But only the reintroduction of passenger traffic can ultimately ease the inevitable financial challenges for airlines, says Abdulla Mohamed Shadid, managing director for cargo and logistics at Etihad Aviation Group
What have been the biggest challenges to your air cargo business and cargo handling operations from the coronavirus pandemic and the measures taken to reduce its spread?
On 24 March 24, all passenger flights into and out of the UAE were suspended upon a directive by the UAE GCAA. This meant that Etihad Cargo immediately lost all belly-hold operations – which accounts for the majority of our capacity and connectivity to more than 80 destinations globally. The biggest challenge this presented us with was how to adequately address our continuing customer demand, as well as the increasing global demand for air freight following the grounding of passenger flights all over the world.
Additionally, many countries implemented stringent border control measures in response to the COVID-19 outbreak, which naturally introduced added complexity to the crew planning process as well as layover measures in the higher risk destinations. With our employee safety and wellbeing coming first, we moved rapidly to adapt our rosters and shift patterns to protect our pilots, crew, riding engineers, loadmasters and ground staff, whilst maintaining our own strict occupational health and safety measures in line with the World Health Organisation, the UAE Ministry of Health, UAE GCAA and the Abu Dhabi Department of Health guidelines, to safeguard our employees’ wellbeing as they continue to operate on the frontline.
How have you responded to these challenges?
To address the challenge of reduced capacity, we immediately deployed passenger-freighters and increased the utilisation of our Being 777 freighter fleet. The passenger-freighter fleet network was activated within 48 hours of the suspension of passenger flights and has provided us an opportunity to continue supporting our customers globally, introducing a network that addresses key global trade lanes. It started with five Boeing 787-1000 aircraft deployed to serve 11 destinations including Beijing, Incheon, and Manila, among others. This quickly grew to a fleet of 23 aircraft by the end of April serving 32 destinations, in addition to 10 additional passenger aircraft used for charter activities. We are continually monitoring loads and demand across our network to ensure we are providing support where it is needed most and during the first week of May added three new cities to the network with the start of flights to Oslo, Barcelona and Kuala Lumpur.
Other transformation initiatives, such as our digitalisation strategy, have supported our own operations and our clients during this time, especially while our customers are now working from home. We have been able to provide them with seamless booking processes using etihadcargo.com as well as portals such as cargo.one and Webcargo by Freightos, and minimised the need for paper air waybills and physical transactions thanks to the big investment undertaken to push our e-AWB penetration from 16% last year to almost 75% right before the COVID-19 outbreak.
Has there been any significant cooperation between stakeholders?
As the national carrier of the UAE, Etihad is more intrinsically linked with Abu Dhabi Inc. and the government of the UAE during the COVID-19 global pandemic. We have been working alongside the various local entities, including the National Emergency Crisis and Disaster Management Authority (NCEMA), to cooperate and ensure that the continuity of food and medical supplies into the country remains uninterrupted by the global situation.
Each entity, such as the UAE Food Security Council, Abu Dhabi Development Holding Company (ADQ), Abu Dhabi Department of Health (DOH), Abu Dhabi Ports Company, Abu Dhabi Airports Company, the UAE General Civil Aviation Authority, the Ministry of Economy, the Ministry of Foreign Affairs and International Cooperation and the Abu Dhabi Health Services Company (SEHA), among others have each played a vital role in the UAE’s response and handling of the current crisis, and we are proud to have a seat at the table in the form of the various committees that meet regularly to address evolving needs and priorities.
The Abu Dhabi Airports Company has been a key stakeholder and supporter in our own operations. Their leadership has supported us in managing swift flight operations in and out of the capital’s airport.
Thanks to the collaboration of all stakeholders and the guidance and support of our country’s leadership, Abu Dhabi and the wider UAE are adequately positioned to manage the current situation through effective decisions.
What challenges and opportunities have been presented by the introduction of cargo-only passenger aircraft services, and/or increased numbers of freighter services? What proportion of your ‘normal’ cargo capacity are you currently operating?
It is fair to say that the whole industry is facing the same issue when operating passenger freighters: managing the increased cost of operation due to using passenger aircraft without passengers. With breakeven costs pushing higher and higher up, airlines had to react to offset these incremental financial burdens whilst at the same time prioritising the shipment of essential medical supplies and food items. The lower fuel price has provided us and our customers a welcome cushion.
In addition to passenger-freighters, we also drove further optimisation of our Boeing 777 freighter fleet, initially as part of our plans for the IATA summer season, and subsequently tweaked following the suspension of our passenger operations. This allowed us to backfill some of the global capacity shortage as we increased scheduled freighter frequencies into markets such as Amsterdam, Frankfurt, Hanoi, Hong Kong and Shanghai, as well as introduced new services to markets where we lost bellyhold capacity, such as Chicago, Milan and Paris.
Has the increased number of healthcare-related shipments, for example testing kits or personal protective equipment, presented any particular operational challenges?
Etihad Cargo has made significant investments in enhancing and expanding our Cold Chain product portfolio, having become the Middle East’s only IATA Centre of Excellence for pharmaceuticals and perishable logistics in 2019. This included expanded cold storage rooms, active-container partnerships with reputable service providers, mapping and tracker devices, thermal blankets and priority ramp transfer at our Abu Dhabi hub. The positive market response and increased customer confidence in our investments became visible during the first quarter of 2020, as we increased our year-on-year cool chain volumes by 25-30%. This number has further increased during the month of April as we expanded our activities of bringing food and medical supplies to the UAE and transporting PPE equipment across the globe, the latter representing more than one third of our global tonnage alone during April.
We continue to work hand-in-hand with our ground handling partners to mitigate any risk arising as a result of warehouse congestions and resource availabilities, which has ensured we never compromise our high delivery standards.
What new opportunities have arisen, if any, amid the undoubted challenges of the last few weeks?
The global response to the COVID-19 outbreak meant that more and more people around the world became confined to working from home. This presented a real challenge mostly for conventional carriers that relied heavily on administrative tasks such as scanning and printing of paper air waybills, declarations and various other forms and physically carrying them to the warehouses and placing them in pouches. For Etihad Cargo, this presented the opportunity for us to put our digital capabilities to the test in order to best support our customers, with enhanced online booking features on etihadcargo.com and our partner portals, as well as seamless access to track & trace and messaging functionality using our mobile application. Additionally, we now surpassed the 75% level for Electronic Air Waybill penetration, up from 16% during the same period last year.
Furthermore, the rising demand trends witnessed during the past weeks combined with global bellyhold capacity shortages presented unique opportunities to open new routes using our passenger aircraft. An example of this has been the introduction of Oslo to our flight network for the very first time to support the seamless transport of fresh salmon to the UAE and beyond. This traffic was and continues to be served through our extensive European road feeder service but is now further enhanced with a direct service to the Nordic region.
Other opportunities have also arisen that allowed us to operate ad-hoc charters to unique destinations, delivering PPE equipment and medical supplies to places such as Bucharest, Copenhagen and Zagreb, as well as supporting the UAE Government Aid programme delivering medical supplies to nations including Guinea, Mauritania, Armenia, Georgia, Chad and Kazakhstan.
To what extent has increased pricing on certain lanes in response to cuts in capacity made up for losses of capacity and demand?
As mentioned before, operating passenger aircraft without passengers inevitably increases the financial burden on the bellyhold capacity due to the lack of passenger revenue, driving freight breakeven costs higher and requiring airlines to adjust their prices to cover the resulting incremental costs, all of this whilst trying to remain globally competitive. Only the reintroduction of passenger traffic can ease these financial bottlenecks over time.
Have you had to let go of or furlough significant numbers of cargo staff? How long can your operations and businesses be sustained in the current environment?
The Etihad Cargo family continues to work round the clock to support our nation’s food and medical supplies strategy as well as our forwarder customers around the world during these turbulent times, and we are proud to have retained our small workforce during the past months to continue delivering on our service quality mandate. That being said, we maintain a cautious outlook to what the future may bring and are adequately prepared to weather the commercial and operational impact of this crisis as required. Our transformation programme during the past 24 months has given the business agility to better manage our operations through these unprecedented times, and we confident of our ability to navigate what lies ahead.
Has the changed environment meant you have had to change your charging structure – for example via cargo handling surcharges?
It is natural for airlines during these unprecedented times to review their strategies to manage increased costs such as the use of passenger aircraft without passengers and the added operational complexities. Maintaining full transparency with our customers and driving deeper trust is key during these times.
To what extent have contractual arrangements prior to Covid-19 had to be suspended – for example, long-term pricing contracts and blocked-space agreements?
The cyclical nature of the cargo industry does mean that the needs of customers continue to evolve. During these uncertain times, new opportunities for long term pricing and blocked-space bookings have arisen, and our teams work closely with our partner customers to support and manage changing requirements.
Handling and quality challenges
Some freight forwarders have reported longer handling times in recent weeks, for example due to the challenges of handling cargo-only passenger flights – including the use of the upper decks of passenger aircraft – and/or high levels of staff absences. Would you agree that this has been a challenge?
The utilisation of the upper decks of a passenger aircraft indeed presents operational challenges and added complexities whilst the cargo is being loaded and unloaded, including the need for additional resources and longer ground times. Whilst we have decided to not go down that route to date, we remain open to deploying this solution based on customer demand and would only see it as a last resort. Through our world-class Etihad Engineering capabilities, we are able to activate this within as little as 10 days if needed, including use of cabin seats and overhead bins as is, installation of seat bags, or removal of seats and installation of cabin pallets. Etihad Engineering has in fact already started carrying out such modifications to other airlines since April.
To what extent has it been possible to maintain normal levels of service or handling times in recent weeks? What have you done to help maintain service levels?
Our promise to our customers is second to none and it is key that we strive to maintain our high service levels they have grown accustomed to, especially during these challenging times when the timely delivery of PPE equipment and medical supplies is paramount. Last year we invested in our Cargo Control Centre to effectively manage this and support our customers’ needs every step of the journey, and it continues to be the nerve centre of our operations.
Additional resources and volunteers were positioned at our hub facility to handle peak movements and ensure smooth ramp transfers, and to navigate the additional complexities presented due to additional health and safety measures we applied across our network. Whilst service levels during COVID19 are not at their absolute peak, taking into account challenges like border closures and road curfews at some destinations, short-notice flight permits and other operational matters, we continue to deliver strong results in line with our customer promise and continue to monitor our Cargo iQ (figures) even more closely during these turbulent times, as the type of commodities we carry these days depends more on it.
What have you done to help protect staff from exposure to the virus itself?
In line with the wider Etihad Aviation Group and local government guidelines, Etihad Cargo implemented a work from home policy for all support functions of the business. As a result of an extensive digitalisation strategy over the past 24 months the transition to a mobile team has been seamless and allowed for our teams to work effectively while staying safe at home. Additionally, we have implemented additional health and safety measures across our offices and facilities to further protect and safeguard our staff, including installation of thermal scanners and deploying additional sanitization stations, all of which are in line with strict guidelines from the UAE GCAA, World Health Organisation, the UAE Ministry of Health and the Abu Dhabi Department of Health.
Whilst those that can work from home are safely set up to do so, the wellbeing of our frontline heroes working on the ground, ramp and warehouse, as well as our crew and loadmasters is our utmost priority. We carefully review every part of the operation to ensure their safety and security and take the necessary measures with respect to outstation layovers, rosters and medical testing in compliance with the UAE GCAA directives.
To what extent did your contingency planning prepare you for the various scenarios that it has thrown up?
The all-encompassing transformation strategy which we have implemented over the past 24 months saw us completely overhauling our fleet, network, digital capabilities, physical infrastructure, commercial distribution model, as well as our product verticals. This has enabled us to move swiftly to address the challenges that we have faced as a result of COVID-19, an example being the speed at which we were able to introduce our passenger-freighter network.
The speed at which we were able to adapt and implement this rollout is testament to the agility of Etihad Cargo and the airline at large, in addition to the support our shareholder and the board have entrusted on us.
What lessons have been learned for future contingency planning?
No one could have predicted a pandemic of this magnitude. The aviation industry is currently navigating the largest ever crisis it has had to ordeal, the impact of SARS and the eruption of the Icelandic volcano Eyjafjallajökull did not have the same devastation as we are navigating today which has resulted in a number of airlines ceasing operations.
Etihad Cargo’s own contingency planning and preparedness has shown that even during the toughest of circumstances, which didn’t come without their challenges, we were able to effectively navigate this and become a lifeline for the airline. As part of our future contingency the Etihad Aviation Group is currently reviewing its future passenger network ‘restart’ scenario and the strategy in a post-COVID-19 world.
How well do you feel the air cargo handling sector has responded to the various challenges?
The air cargo handling sector has demonstrated they are true champions throughout this pandemic. When countries introduced movement restrictions that have confined people to their homes, ground handlers continued to work on the frontline to maintain essential cargo flows to support us all. It is important that we recognise the role they play and their timely response to keeping goods moving.
Cargo handlers have seen their own challenges as some of the larger providers sought to consolidate their warehouse operations in line with reduced flights versus pre-COVID, and others have had to adapt to the complexity connected to customers choosing to load cargo in the cabins. The way they are responding to and handling these challenges is commendable and as their partner we continue to work hand-in-hand with them to overcome any challenges as they arise.
How do you see the situation evolving over the coming weeks and months?
Based on the various COVID-19 containment measures introduced by the various countries around the world, we remain hopeful that the infection curves plateau and start to fall soon, and until then we will continue to provide support where it is needed most. As the national carrier of the United Arab Emirates we will continue to work hand-in-hand with the UAE government to transport aid across the world, support the UAE food and medical security programs as well as serve our global customer base across key global trade lanes.
What preparations do you have in place for volumes returning to more normal levels as restrictions are eased?
The Etihad Aviation Group is reviewing all possible options for a passenger network restart and Cargo will continue to play a core part in those future plans as we prepare to ramp operations up over the coming period.