As 2011 draws to a close, a handful of air cargo leaders have taken the time to reflect on a tumultuous year. From supply chains ravaged by the Japanese tsunami to economic instability permeating the U.S. and the eurozone, the airfreight industry has taken numerous hits throughout 2011. But can the lessons gleaned from these difficult times be used to avoid similar fates in the future?
In the second installment of a three-part series (click here for part one), Liege Airport Business Development Manager, Asia Pacific, Steven Verhasselt; Panalpina COO Karl Weyeneth; Radiant Logistics CEO Bohn Crain; and Air France-KLM Cargo Senior Vice President of Marketing, Revenue Management and Network Pierre-Olivier Bandet discuss the past year and their prospects for 2012.
What was the most significant storyline of 2011?
Steven Verhasselt: One of this year’s biggest storylines has been the downturn of freight traffic between Asia and Europe. This is further proof that airfreight demand is highly unpredictable and that flexibility is the most important asset in our business.
Bohn Crain: From our standpoint, we feel the most significant 2011 storyline was the persistent cloud of uncertainty hanging over the global economy and its impact on the supply chain. In most cases, we have all been challenged to do more with less. Even so, we believe the economy actually worked as a catalyst for both our organic growth and acquisition initiatives.
Pierre-Olivier Bandet: After the very difficult period the airlines went through from the last quarter of 2008 until the end of the first quarter of 2010, the general consensus among carriers was that the crisis seemed behind them for good. This attitude of optimism actually lasted throughout almost all of 2010 until the beginning of 2011.
Unfortunately, early 2011 showed rapidly declining figures in air transportation — more on the cargo side than on passenger operations — and this was confirmed by the same kind of down-slope of international seafreight. Worldwide trade, because of an international crisis due to the various states’ debt situations, was severely affected again by a sort of ‘wait-and-see’ policy, which penalized international commerce. We were actually facing a rollercoaster year yet again, with somewhat unpredictable results month after month. This situation was even more apparent when carriers’ re-engaged dozens of the full freighters they had parked in the desert during the previous months during the short recovery period.
Inevitably, a new situation of overcapacity is occurring almost everywhere. And it’s carrying the traditional consequences: a significant decrease of yields at levels making the cargo business almost impossible to be run in a cost-effective manner. Again, we all faced evidence that the same actions almost always lead to the same consequences.
What lessons have you learned in 2011 that will help you have a successful 2012?
Verhasselt: [We were reminded that] as a cargo airport, we are only a small part of a logistics chain. The airfreight industry is selling time-saving service, and the shipper pays for that.
It’s the job of the airport, as well as all other service suppliers involved, to ensure that cargo is delivered quickly. All the services, from aviation, airports, Customs and handling to trucking have to be streamlined to come to this final product: a minimum door-to-door transportation cost as quickly and efficiently as possible. Legislators should support this, as logistics are the lifeline of all industries.
Karl Weyeneth: [Amid the challenges of 2011], we looked ahead of our medium- and long-term strategy and signed a multi-year ACMI agreement and upgraded two of our Atlas Air B747-400 freighters to the new-generation B747-8 freighters. They are scheduled for delivery in the second half of 2012. In the beginning of 2011, we also launched new, own-controlled flights from Hong Kong to Huntsville and Sao Paulo-Viracopos.
So 2011 was not so much about lessons learned. But the year showed us more than ever how careful planning and the speedy reaction of our airfreight organization to market changes are key to staying competitive in all aspects.
Crain: Over the course of the year, we found ourselves servicing more and larger shippers who have been more receptive to opening new relationships in an effort to extract more value from their supply chains. In addition, this market environment has also served to remind us that there is strength in numbers. And over the course of 2011, we had the opportunity to welcome six new strategic operating partners, which allowed us to expand our footprint to open new operations in Denver; Orlando; Tucson; Houston; Nogales, Ariz.; and Maui.
We can only assume that these market dynamics will be with us for a while. Our attitude and approach is best captured in the words of Benjamin Franklin: “We must all hang together, or assuredly we shall all hang separately.” For us, this means further expansion in 2012 and beyond as like-minded entrepreneurs continue to join our ranks.
Bandet: First, the current economic crisis reminds us how important it is to stay close to our customers and market expectations. As an airline operator, we have adapted to the declining market and adjusted our service levels to avoid overcapacity. After all, overcapacity is one of the worst economic handicaps for a carrier.
Present circumstances have also taught us the necessity of remaining flexible and agile in the redeployment of our cargo fleet. We must properly adjust our pricing policy while also investing in future technologies, such as e-freight, and envisaging new types of routings for our freighter fleet.
Crisis situations provide us with the opportunity to become more creative. But thanks to Air France-KLM Cargo’s and Martinair Cargo’s assets — a wide network, a young fleet and hubs at Paris-Charles de Gaulle Airport and Amsterdam Airport Schiphol — we have the tools to tackle these difficulties and work for better days.