CFS: Refiling air cargo’s flight plan: Growth opportunities and obstacles in global airfreight

This is a video recording of the second session at this year’s virtual Cargo Facts Symposium, featuring speakers from American Airlines, LATAM Cargo, Lufthansa Cargo, UPS, and Volga-Dnepr Group. For all the coverage on the Symposium, click here . A transcript is available below. This transcript has been generated by software and is being presented as is. Some transcription errors may remain. JJ Hornblass Hi everyone and welcome back. Thank you again to rich Corrado and Frederick coursed for the first session of the conference, a great fireside chat and now we're looking forward to our first panel of the conference. We're going to turn our attention to growth opportunities and obstacles and global airfreight and our panelists will break down a range of factors facing the global air carbon market as we head into 2021. I am pleased to introduce Charles Kauffman, who will be moderating this panel. Charles is the senior editor of cargo facts, or our monthly newsletter, and he directs as well royal media's overall editorial operations. Prior to joining cargo fax in 2016. He spent nearly four years in China managing exports for a biochemical firm. He holds a BA International Studies from the University of Washington and an MA in international and Public Affairs from Shanghai Zhao Chang Jiao Tong University. It is my pleasure to introduce Charles to the virtual stage. Charles, take it away. Charles Kauffman Thank you, JJ J. Hello, everyone. Good day and welcome to the 2020 edition of cargo facts symposium. As JJ mentioned, I'm Charles Kauffman, Senior Editor of cargo facts. And I'm very excited to be moderating our first roundtable of the event refiling air cargos flight plan. This session is graciously sponsored by Pratt and Whitney. And before we kick off the session, here's a short message from our sponsor. Thank you, again to Pratt and Whitney. Now, the biggest shock to our industry is not that many of us are working from home and attending this conference virtually. I think by now, we're starting to get used to that, but rather the fact that passengers aren't yet returning to the skies. As of last week, international passenger volumes remain down 78% compared to last year, with more pronounced dislocations on on some key trade lanes. In this session, we have five excellent executives representing a broad spectrum of airlines who will share their views on what we can expect in the months ahead and moving into 2021. in alphabetical order, our panelists are Tatiana our sonova, Executive operating officer of opa Knepper group. Andres Bianca, Chief Executive Officer of lategame cargo, Houston Mills, Vice President flight operations of UPS Airlines, Jessica Taylor, President cargo and vice president airport excellence of American Airlines, and authoritative on boksburg, Chief Commercial Officer of Lufthansa Cargo. Welcome to all of you. So in this session, we'll focus on two main threats emanating from the crisis with a discussion of air freight capacity and some of the varying strategies carriers are employing as they navigate the capacity crunch. We'll also look at some of the unique pandemic related demand drivers, including the highly anticipated COVID-19 vaccines. So with capacity as the more volatile variable in the equation, that's where I'd like to get things started this morning. Pen was where are we at today in terms of global air freight capacity on a market wide basis and for your airline in particular? And maybe as a secondary component to this question, you know, our conventional methods for measuring capacity still accurate and meaningful. With this first question, let's go alphabetically if, if that works for everyone, and then from there we can we can jump around. So Tatiana was speaking with you. Tatyana Arslanova Hi, I'm on our current situation. So be ready to provide full capacity be happy, within group to our customers. And I think the key challenges it's not related to the capacity now based on our customers request, but also about how to operate it smoothly based on our schedule network. Because we still see a lot of limitation in terms of protection. So how and where we can arrange cruris and really to to provide real schedules service without changing our network. And this is big, biggest challenge in the beginning of PCA. It's still a challenge now because we see more and more country closing now and for us to continue to operate all aircrafts we have a fan group. So this is the big Fred's in current situation. And this is also received as a phrase for future delivery. Charles Kauffman All right, thank you, Andres. Andres Bianchi I think overall, we're probably the tightest we've been coming through the crisis, probably tighter than on q2, and this is probably the tightest will be in terms of our capacity going forwards. Just because freighters are maxed out the passenger ramp up, it's coming coming in slower than expected. And you're seeing the passenger faders, which was supplementing capacity, being a bit more complicated to operate just higher fuel costs. The fact that some fleets have been phased out crews have been furloughed, and the like. So it's a bit more complicated to allocate passenger fader capacity. So from that perspective, I think we are probably we're going to be in q4, closer to the tightest we've been I mean, later in 2021 we'll see some faders Some conversions come in, etc. And that will, together with a passenger ramp up. increase capacity. Charles Kauffman Thank you, Houston. Houston Mills Yeah. So from a UPS perspective, we certainly have seen a since all the uncertainties surrounding COVID has certainly caused some significant disruptions, as she mentioned early on, no, we will, we've been able to do is really just kind of bookstore that demand is. And that's been one of our primary ways to kind of address some of those capacity needs, you know, really demand driven. The other thing that we've done, we've been very fortunate to be in the very midst of a buildup of aircraft. Over the past four years, we will have added 50 additional aircraft to our fleet, which has tremendously expanded our ability to meet these current demands. So we certainly see those, those changes. Fortunately, for us, we've been able to flex based on the customer demands, adjust our networks, you know, both in Asia and Europe, you know, the Americas, you name it, to really kind of meet those. So it's, we've been very fortunate to be in a position to adjust, but we certainly have seen the extra demand, because of all that passenger capacity that has been lost, and that that lower half of the bellies worldwide. Charles Kauffman Right, but it's certainly an interesting situation to be Jessica. Jessica Tyler Sure. And that's a Houston a great transition to American. Obviously, Andreas and I are probably most similar in this audience in terms of being passenger carriers. But what I what I'd add to the conversation, not really mere much, what has already been said in terms of flexibility, trying to match demand to where it is in the world. For us as a passenger carrier, in the very beginning of this, you know, we were shutting down, flying left and right, right, because of the the dramatic decrease in passengers flying. And for us, really making sure that as an entire organization, the American Airlines team was willing to put those assets back in the air without passengers on board. So we don't have freighters, much like Andres, what we did is completely introduced for the first time in over 30 years, what we call cargo only flights, so the passenger aircraft, filling as much of that capacity down below as possible. And so we now have, you know, more than 1000 flights in the air several hundred a week, including passenger and cargo only flying wide bodies that are, you know, like, like Houston said, chasing demand wherever it is and trying to be as flexible and as gentle as we can be. Charles Kauffman right thank you and dorotea Dorothea von Boxberg Good day from Germany. So well, we are a combination carrier flying freighter and passenger aircraft in regular times. And of course, the belly capacity is still quite significantly down. So we have less in the market than we usually have. But I would agree that there's high demand, and we also flying with the highest load factors ever. I think that is compensating part of the missing capacity. Charles Kauffman All right, so across these different carrier models, I'm hearing quite a quite a few innovative responses to the capacity crunch. Jessica, you mentioned passenger freighter operations, Andres, I believe that time has operated to a few of those as well. Perhaps Tatiana, before returning to the topic of passionate writers, Tatiana, or Houston. What are some of the the methods that your your airlines have have used to respond to some of the increasingly violent and volatile capacity fluctuations? And how might this vary from from pre crisis operations? Tatyana Arslanova Oh, fossa if I may, it was a complete shock in the beginning of February because for us the shutdown for two or three weeks when COVID started in China, and it was a big challenge for the company because the later much depends on China to Europe routes and visitation. And of course, when we saw different demands first coming from Europe to China with protective equipment, and they needed to switch from scheduled to provide more charter capacity on the market based on these different destinations. When we had all these challenges with different country cause then it was somehow different approach to passenger flight and cargo flight. And for some flights, it's even for was forbidden for one or two weeks for any companies to go international. So When, of course, we decided to keep fosse the right balance between charter operations, when we can be more flexible in terms of destination, we can operate in terms of capacity we can provide to our customers, to have his dedicated BP charters and all other things, as well is to continue to operate and to re establish our schedule networks. But frankly, speaking for now, I think that period, only half of our schedule network was decorated last year, because most capacity now to dedicated to guaranteed customers who really try to have this challenge in disruptions of logistics chain and try to really to have guaranteed capacity for long term. This is one portion of business and another portion of, of course, their original scheduled flights. Charles Kauffman All right, thank you, Houston. Do you? Is there anything you would like to add on? I certainly, yes, has a significant freighter fleet, but it's a different operation? Houston Mills Yeah, you know, it's interesting question, Charles, I, you know, I kind of think the, you know, we have a scheduled network, and we literally operate in over 220 countries, on any given day around the world. So, over 2005 segments worldwide. And so we've got a scheduled network that is very intentional, just from an express perspective, but what this pandemic is introduced, and it really shown the need for is the need to be very agile. So we've had a significant amount of ad hoc activity that we've had to pivot to, as Jessica kind of pointed to you and go to where the demand was. But what's been key to that success is we've had a lot of crew members leaning forward into this pandemic, and really, as critical infrastructure employees, you know, not being afraid to operate and go in and do those tough things and really feel like they're part of a solution, you know, to help move people around the world and everything else. So that agile, you know, flexibility in this ad hoc environment has been significant. How long that'll last, you know, it's a question that, you know, I think everyone wants this pandemic to be over yesterday, I think recomend pandemic fatigue, if you will, but certainly the flexibilities that we've had to be able to pivot and adjust and make sure that that demand is there has been successful primarily, because we've got the capacity, we've got some four, seven, dash eights, or hundreds that we upgrade internationally, we got seven, six sevens that operate for trunks, we have MD elevens, that we can find domestically, internationally. So we got the variety of Fleet that can meet a wide variety of demand. But the most important thing that we've seen, but up against pandemic, is we've had our union, our crews leaning forward to work through all the other challenges that exists in meeting this demand. And so you know, very much a collaborative effort not only with being able to meet the demand, but also having crews and working with the different countries and regulators to make sure we can continue to keep commerce moving on an ongoing basis. Charles Kauffman That's That's certainly important. And I think I would like to take a step back, Jessica, you mentioned a high degree of collaboration as well, between cargo and Americans passenger operations. And, you know, I think if I look back to March, I probably wouldn't have guessed that cargo, only passenger operations would would have continued to the extent that we see them prevailing in today's market. You know, maybe I would have guessed their wager that flights hauling personal protective equipment and bulky commodities would have been the limit. But, you know, how have Americans passenger freighter operations evolved since since the onset of the pandemic? And how have have you continued to adjust to reflect the current capacity markets or requirements? Jessica Tyler Yeah, I think it's a really interesting case study in shifting mindsets, even internally. So if you imagine nearly hundred year old passenger focused airline, all of our decision making all of our data, everything we look at is driven off of that model of where passengers want to fly from the way you build your network. Everything right? And so when we first said, Hey, wait a second, we have a lot of customers and we think we can fill these flights. It was it was just a kind of a everyone sort of stopped and said, Okay, what does that look like? What do we have to do and right and many of you on this call, managed through the same effort, I see dorthea nodding, that you know, there's governmental regulations to be able to do cargo only flying that we had to hustle and figure out how to get certification to do that. We have had to look at our you know, from our network planning team and our operations, kind of command control center, how we are going to operate these we had to look at crews and whether or not crews had to have certain, you know, qualifications in terms of that kind of flying, as well as entering a lot of international locations that had health and safety restrictions for crews, in terms of testing or other issues in terms of where they could stay if they were doing an overnight. So there was just a ton of new problems to solve. You know, as an airline, many of us obviously, with safety being a ticket to play in this industry, we have played books for just about every crisis, in every situation, we didn't have a playbook for this. So it took a lot of discussions and decisions and collaboration across so many different functions. And I'm happy to say I don't think any of us thought it would last as long but I'm happy to say, months and months later, we've got great reporting, we have way different decision matrix that we use to decide whether or not we're calling down certain flying or adding flying in certain markets, adding frequencies, whatever it is, so it was just a big. Let's stop and look at all the things that we do how we do it and flip our mindset. I'm also really happy to say that cargo is now especially the American seating our passenger network, so we're flying to places and able to open up the passenger market because we were able to sustain a cargo flight into that market. And when the demand for passenger cars starts back up, it's just easy to add them up top right. That's that's the first in our history. Right as a passenger first airline, we are flipping that thinking so it's been a fascinating journey but incredibly rewarding for the entire American team to figure it out and successfully meet our customers needs. Charles Kauffman That is that is certainly a first for us base mainland carrier to pay it now. If If I recall with tons of cargoes, passenger freighter operations, you know, it was more more or shortly If so, could you speak a bit to to the cargos experience? And perhaps why, why these operations were wound down? Dorothea von Boxberg Yeah, I think passenger aircrafts differ a lot in their ability to carry cargo. And I think one aircraft that really really works very well as a triple seven 300. And any carrier operating triple sevens 300, I think is a lot more likely to fly passenger only aircraft for a longer time, the economics are just much better than other aircraft. And in our case, Lufthansa doesn't have any triple sevens 300 in the athletes. So we were flying with a 330. And it works at certain kind of yield level, but it's a lot less effective than some of the other aircraft. So for example, in the lower deck, the triple seven 300 can take almost three quarters more more freight or more volume, then a 330 could and and that just shows how the economics are not as good for some of the other aircraft. And that's why for us it worked well in the very high demand season when everybody was yelling for capacity to get PP and other protective material out of China especially. But it didn't really work out for us for a long time. We're flying some passenger aircraft, some cargo some passenger aircraft as cargo only, but it's kind of few. It's not a regular schedule as as, for example American has. Charles Kauffman And has we've also, you know, relied on on cargo on some routes to to seed Dorothea von Boxberg definitely restarted. So So I think the description on how suddenly cargo is not this teeny weeny little add on, but becomes somebody important in the group. I think that's also happened for Lufthansa, no doubt. I mean, network planning on the passenger side was never looking much at cargo. And now we can be decisive on some routes depending on what the revenues are that we bring. We also have had a lot of discussions on which aircraft types should be used for that particular route, which day of week is suiting as best to to make the best revenue. So there's a completely different way of collaborating with passenger airlines than it was in the past. No doubt. Charles Kauffman All right. Thank you, Andreas. If we look at the latam fleet, you know, certainly Historically, freighters operated alongside the passenger fleet. There was there was quite a dynamic interplay between the two fleet types. How has that changed during during the pandemic? And moving forward? You know, how might, the freighter your freighter network adapts to reflect passenger recovery? Andres Bianchi I mean, fortunately for us, I think we're operating on a much more complimentary model with a passenger business from from the get go. That's kind of our mindset. So we didn't have to adjust that much. I mean, discussions about fleet types, or are they temporary, were part of our DNA, so to speak. So from that perspective of just moving in under one roof, having the cargo operation center, just take control of the other passenger freighters and just increase the interaction, I think, I mean, everyone on cargo these days, and an airline would be in a much better position to influence decisions that a year ago. So we are kind of built on that and we took it to the next level. Now thinking about the future. I think the interplay between freighters and passengers will be slightly different the next two, three years while passenger capacity ramps up, I mean, things that we were doing in the past, like feeding our passenger network with traders will certainly take a backseat to just complementing our our scheduled passenger schedule and giving customers capacity that they lack today. I mean, we see the cuts on the passenger side impacting some industries quite significantly in terms of their capacity requirements. So we're putting our freighters alongside the passenger planes to try to maintain those volumes are going I mean, that's kind of the role. The faders are playing now. also taking advantage of tactical opportunities, but it's more of a complimentary role. And over time, I think we'll come back to a more traditional model in which we operate the freighters as a company as a full complement to the passenger fleet, running some feeder operations, and just expanding the network. In the middle, we'll use the passenger freighters as an extra lever to try to provide that capacity. And I think I agree with that if they are not all planes are included equal. And from that perspective, some airframes are much better to play that role than others. So we've been focusing on the ones that are really useful, and it's coming along nicely, but it's heavily yield dependent. Charles Kauffman Today, would you Is there anything you would like to add on on that front from from your experience to managing capacity year across the freighter fleet and passenger network? Dorothea von Boxberg Well, I think everybody who's got a freighter these days is really happy about it. And we see a lot of old tech freighters also in the air. So it's not only the brand new models, but use a really high high enough to, to see kind of any freighter then kit that can still fly up in the air. And on the passenger freighter side, while you kind of try to match those economics, and I think there have been lots of solutions of taking out in three seats, taking finding solutions for putting shipments into the bin, etc. But it's really a bit handicapped if you want Yeah, you don't have a proper cargo loading door, you need things that you can carry in, it's a lot higher handling effort, and so on. And I think depending on the customers you have on the specific cargo, you find a cargo only aircraft can make a lot of sense and also carry a lot of freight. But in some cases, you can basically just use them, the belly part of it. And then it depends how big is it? Do the economics work to really fly them? Charles Kauffman And, Jessica, we have a question from the audience for you. Is there any chance that American would consider full freighters as a next step in the future, as opposed to the cargo only triple sevens door and other passenger freighter flights? Jessica Tyler That's a great question. I would say up until a couple of years ago, the answer was just no, the economics didn't make sense. I think we flew them in the 80s and 90s. But I will say that we have a great strategy group internally here that takes a look at it is looking at it more frequently. So we used to dust that, you know, analysis off every couple years and the answer was usually still no. I think they're dusting it off now every couple of weeks. And taking a look at whether or not it makes sense. Obviously, we just announced as an airline, retirement of even additional fleet. So there are there are options available to us to continue to evaluate whether that makes sense for us or not. So I can't you know, I'm not going to answer yes or no right now I can tell you we're constantly looking at ways to increase capacity so that we can say yes to every customer. When I think about capacity though freight you know, whether it's freighter Prater, partnerships is another big area. So we're working very closely with several of our one world partners to make sure that we can have smooth handoffs, when we're working with our customers. So there's a lot of ways to make capacity work around the world, and freighters is just one answer. But there's a lot of versions of that there's also so many different variations of what that could mean for someone like American whether or not that's our own aircraft that we convert or some other options. So we look at it as a capacity, just a capacity question. And there are several different solutions that we constantly look at and explore and make sure that we have the right partnerships in the right place. Charles Kauffman But it is a conversation topic that has come up with and more frequently it's it sounds like even if no concrete decisions yet. So I'd like to shift gears a bit. We've spoken a bit about you know, how how each of your airlines have have managed capacity a bit. Let's but let's discuss now, you know, how how carriers are responding much of the contracting and the traditional carrier forwarder relationships have have been upended as well with with a decrease in scheduled capacity across all airline types. So you know, maybe touching on a you can get us started off here. How is the pandemic redefining the carrier shipper dynamic. Tatyana Arslanova High elicitation. Of course, the change in our key customers base, having 30 years experience in different types of aircraft, especially for ontonagon. To find solution. 76, we see that more and more people and customers over responsibility lead for emergency delivery to different airport, like an ambulance machine like hospital, equipment and all these things. And he saw on demand not only from our kids folders with him whom they are working on schedule, not books. But it was a lot of involvement from governments and from different structure in every scene because many companies wanted to order for example, pp themselves, especially here in Russia. And we saw in our customers sleaze box you saw in our customers list, metros, and everybody who wanted to protect the passenger who wanted to protect me in place. And this is exactly where our chapter expert is helped. And of course, we understand that we needed to react on this quickly. From another side, of course, the keeping the key flights for schedules, we kept this close relationship we prayed for this, but in the challenging environment. And before with disruptions of network, we had more and more people to discussion together before this and shippers in terms of what kind of routes and what kind of services we can provide, really to be able to prepare for npis we had the last month when this month and also to be prepared for lm month of november and all our big dates. But Black Friday is when we can guarantee some capacity and really to discuss how also our service level and of course this is very much important for Watson discussion when we have these three party talks with pharmaceuticals company but mostly about quality requirement and what we can do and how we protect these types of applause Charles Kauffman All right. Would anybody else like to to follow up on that? I mean, I've certainly seen many forwarders declare force mature they're they're certainly thinking about you know, different different types of partnerships and ways of working with their their carrier partners that I talk to you on I mentioned we've seen new new customers new commodity types, you know, how what are some of the other ways that you know, the pandemic is, is changing this this relationship and, you know, is this spot marquee spot market? finally making an inroad for air cargo Jessica, would you like to respond, Jessica Tyler I'll just put a little pitch in there for the technology that we have a need in this industry. Obviously, you know, if you've been paying attention to Americans journey, we we just finalized the implementation of a good end to end cargo management system back in August was our final deployment. And having something like that, that allows us to communicate with handlers, customers, other industry players dynamically, in the moment, allows for all kinds of interesting plays in terms of how we price how we sell in this industry. Some that we're comfortable with some that we're not comfortable with, is, as many of us know that that's been an interesting discussion over the years, and we have new players, you know, booking platforms, and that are coming into play that a lot of us participate in on this call. So I think there's just an incredible opportunity for us to really look at how dynamic we know the the dynamics of this industry, and how, how overnight, things can change. And so to be able to have the right technology in place to communicate instantly, and have things like dynamic pricing, where instead of, you know, long contracts with pricing for months out that we don't even know what the demand environments going to be looking like. Not that you don't want some of that, obviously. But I think there's just a huge opportunity coming our way a wave of technology capabilities that are readily available, that that will be interesting to see how it shapes the way that we all work together with customers and even handlers in terms of operating performance and things like that. Houston Mills it was interesting, because now being a worldwide network, you know, what we found, particularly what from the spot opportunity, or, you know, very dynamic flexing, from a sales perspective is to customer communication. And so you know, this dynamic pandemic environments really highlighted the need to stay really close to the customers. Because as you flex to different locations, you also create opportunities. So that ongoing communication in terms of what that looks like understanding what those needs are, has been very critical for us. It's something we do all the time with our business development or sales teams. But even more so during this this pandemic, because we've seen as the world is kind of shift towards more of an e commerce perspective, it used to be we're about 5050 or 50%, of business to business and 50%. No business to customer. And now with this pandemic, we've seen a shift to where most of our e commerce shipments are about 70% directly to the customer to the homes. And so this communication, you know, with the customers, where they went to businesses, or whether going to individuals is very important, particularly as this market just continues to shift. All driven, of course, by the pandemic. Jessica Tyler Hey Houston and ohana recent conversation that some of us are having we talked about forecasting is kind of a joke, right? So our historical data is not allowing us to see ahead. And we were asking, Well, what are you using to forecast and it's conversations with customers. Honestly, that is the absolutely echo what you just said that those daily, sometimes multiple times a day conversations are literally how we are keeping a pulse on what's coming. Dorothea von Boxberg I would very much agree with Jessica, turn on how it has helped going digital. So we've seen a huge surge in online bookings. And also, we were kind of just in time launching a ad hoc pricing tool end of last year. And it's really been rolled out super fast this year. Because there was such high demand for it when our customers also work from home office like our people did. It's turned out it's proven to be so efficient and so easy to do online bookings, online price finding and so on. And of course you want to talk with your customers and they with you. And there's still lots of things you need solutions for and so on. But for the kind of repetitive tasks, the volume tasks that you've been doing for years, and yes, yes. And we're actually we haven't seen great increases over the years. I mean, think about the airway bill, how long it's taking this industry to really come to reasonable, like levels of usage of every bill, but this year has definitely been a good year for digitalization. And, yeah, I think it's something that's going to stay and to continue. Andres Bianchi I would I would echo what you're saying about what two things one is. I think we've been shippers we've seen shippers become much more involved in discussions. I mean, calling us directly asking us what what's the outlook on on capacity on on what are we planning to do? So instead of having the typical discussion with just a forwarder, you're getting on on tripartite discussions, General discussions with a shipper and the agent, at the same time, and also on longer term discussions is that this is what I want to take my business, how can you help me with that? Second, I think ecommerce players have become more active in terms of trying to secure their own capacity. And those discussions, I mean, that the five, the five years in five weeks, really came in here and you can see that happening. And And last but not least, I think technology also coming into play, because I forecasting still a an art more than a science in this industry, it's really hard. But we I mean, we've been quite lucky that we got access to additional resources, both on the passenger side, and from external sources, trying to build for example, a, a AI prototype that's been surprisingly good at forecasting certain demand patterns, which we were a bit skeptical at the beginning. And now that the machine is learning, and it's really kind of getting a grip of the data, it's starting to show a lot of promise. So certain things that we thought were impossible a year ago, with more resources and just a commitment to try to forecast differently, because he's using different words, the results have been quite promising. Charles Kauffman Alright, so I think that's a that's a great segue into our next topic. The fifth the shift from b2b focus to b2c. You know, as we're all at home, or many of us are at home, I should say, and certainly online shopping is is accelerating. Rich, Kratos comment during the fireside chat about the the acceleration is, is quite, quite significant. I in Houston, you mentioned, you know, UPS certainly is affected by this. But I'm curious for some of the combination carriers and you're touching on as a representative of an all scheduled all cargo carrier, you know, how, how is e commerce really manifesting itself on some of your networks during this crisis? Or is it a purely Express game? Andre Andres, do you want to start off? Andres Bianchi I think I mean, a business it's, it comes in a lot of flavors. And I think it's just it's not just expressed game, I think action and reaction will will will play in here, because a brick and mortar players are going to react. I mean, we all have gotten used to getting delivery of our stuff at home. But the way it plays out in the future is going to be quite different. I think ecommerce players are going to have a role. Other people are just going to do have to hop on airport to airport traditional shipping with shorter lead times. And that means probably some shift from from C where and given the relative balances, that could be even a model shift from C to air, it's quite significant for us as an industry. But overall, I think a our people are getting used to delivery and express plays are becoming more active B capacity are from their warehouse to warehouse locations, it's becoming much more active as well. And then that means pallets, as well as more boxes. And third, I think cross border is gaining a lot of a lot of traction. I think cross border was kind of a sort of a question mark a year ago, when you see your use of tracking your shipments from your ecommerce providers these days, they're coming from all over. So it's it's becoming more of a reality. Now, what does it mean for us? I think in terms of when you look at the requirements on the stress on the network, you just managing much more volume. I mean, much more. I mean, smaller packages, which has a handling a handling site and a technology site. So similar to what Jessica just finished doing an American we're doing a similar effort ourselves. And one of the things we were really deliberate about was building a scalability into the system. Because you want to be able to handle I mean, it's not double double a transaction system 20 times more transactions per plane the way you were you were doing before. So so there's a handling side, there's a network site, and there's the technology side that's really relevant if you want to serve this customers the right way. Charles Kauffman Jessica, would you like to follow up I'm curious if you're if you're interested. from the airport side and close contact with with handlers is kind of shaping Americans future strategy when it comes to e commerce shipments? Jessica Tyler Yeah, that's a great a great question. So, I would say so I'll start with the fact that leveraging our narrow body capacity is stronger than it's ever been, obviously, because of the number of dots we have on a map, as a passenger, you know, network, we can provide a lot of extension for the e commerce movements, right. So we are able to fly into small markets now on narrowbodies. Obviously, it's it's it is small boxes, and Andres talked about the handling side of it. So we, in my new role, with airport responsibilities have great close relationships with our Ramp leadership in all of our major air, and partners, and all of our major airports around the world and all of our small airports to make sure that we are handling those small, smaller packages as quickly and as safely as possible. Well, so I would say that, you know, in terms of future strategy, it's just strengthening the relationships, making sure everyone is aware that you know, what's in those boxes, we all have these expectations that, you know, you order something early this morning, and you can get it that same day or the next morning. And that's only going to continue, as we've seen over the last year. So those timeframes keep shrinking. And so having multiple frequencies to destinations matters to e commerce. And so we're positioned really well to continue to play a really important part in that in the growth of e commerce across the world. And we have great partners like ups who, you know, we provide a lot of our network where they can't, and that's a great partnership. So it's it's interesting, we were competitors and partners. So that's always a fascinating part of this industry. But it's, it helps things like e commerce happen for all of us. Charles Kauffman Alright, so I know we do have quite a few questions coming in from the audience. I do want to encourage our audience to continue submitting those, but we have 144 doors here. The question is, do you anticipate accelerating triple seven? f? triple seven Raider additions, and replacing the MDR weapons that continue to operate in your fleet? Or do capacity restraints delayed that transmission? Dorothea von Boxberg No. So next year, we will face our Md 11 fleet and we are getting a new triple seven faders into our fleet. So that transition is in full swing. Right now we're still flying six empty 11 souls are really in that transition. Yeah. And I think for us, it's really beneficial to get into a single fleet, having two rather small fleets is not so useful and really going into a new tech fleet, which the MD 11 is not really anymore as far as a very good solution. Charles Kauffman But the MD 11 continues to work well in some ways. I know a few of those are are attitude ups if I'm if I'm not mistaken. Tatiana, there is another question for you, how is the current environment impacting the voting of groups, longer term strategies when it comes to to fleet planning? You know, and do you foresee additional expansion of the 747 dash eight platform or narrowbody freighters? Tatyana Arslanova First what we see as we continue to develop our network and of course the crisis started we try to reconsider our long term strategy in terms of flip developments. And now there are three key elements there firstly Of course, modernization of the current fleet and the past starting with company from operational ontonagon to four dilution 76. And we see a huge demand now for these types of aircraft. The question of modernization and first priority on 747 triple seven side so we step in in triple seven operation already got Sacra and we consider how to continue to develop widebody fleet with partnership approach. And of course, we are wanting to double our business today. 737 this year exactly related to your complaint form, and the what we can appear it for domestic Bureau and international and then is to passion flight. So they decided to choose combinated blonde development. Obviously, of course, we are focusing on quality of our services and really to provide a larger network and more flexibility in terms of synergy between three airlines, we have vision group, as well as our strategic partners. And step by step, I think we will continue to expand our network and to grow why but if it Charles Kauffman Alright, and Houston or Andres, Have either of your airlines began to reevaluate long term fleet planning decisions directly as a as a response to to the pandemic. Andres maybe you can, or two sooner, if you want to start us off. Andres Bianchi You want to take it first. Houston Mills Yes, yeah, sure. Yeah, the pandemic for us, as I mentioned, we did, it's really driven by ecommerce growth and demand around the world. So for us know, as a integrator, small package delivery company, our planning is truly been based on global demand. And so a pandemic like this really just kind of feeds right into what we do each and every day. Because we have existing relationships with large pharma companies, and healthcare vertical in particular, you know, we're very well positioned to be prepared, you know, for whatever happens, you know, with the vaccines, etc, etc, the PP, all those things naturally fit in your particular small package perspective and our network. As I mentioned, we just happen to be, you know, towards the end of a four year 50 additional aircraft process, which includes, you know, some for brand new some for seven DASH 876 sevens. And thank you, for the view, the MD 11 says, you mentioned, Charles, that we've been able to add on as well. So all that extra capacity has been part of our regular planning for a network, but certainly not driven by a pandemic. I think, if anything, what we've seen as a result of the pandemic is a an increased demand on e commerce perspective. So it certainly has provided more opportunities. As Jessica said, collaboration is a big part of what we do as an integrator with multiple passenger airlines to to help supplement you know, areas where we deliver on the ground, but not necessarily by the year. So that that partnership is certainly part of this, this this plan. But I wouldn't say that the pandemic is driven in decision making force, if anything is really kind of No, I think the big question is, where will customer demand go for? What will their behavior be in the future? And how will this pandemic change the behavior of customers on board? If it can change a plus and accelerate down the years of e commerce requisition for that bit goes back to the traditional b2b perspective, we're positioned for that. So we were very fortunate to be flexible enough to kind of play in both of those lanes. So for my to answer your question, from a pandemic perspective, it really hasn't had an impact on our long term planning, we've been very fortunate to be in position to support the world, and really be a key entity along with all the other folks here to keep things moving forward. Andres Bianchi From our perspective, has definitely impacted our planning, I mean, Bailey capacity into our region where we operate it, it accounts for a significant part of the total capacity that serves our markets. So we've been working with a passenger team trying to forecast what the outlook for the passenger capacities will be used to take as your capacity as granted. And it's probably the more volatile part of the equation these days. So looking at what's going to happen with passenger capacity trying to forecast on how that sort of the pandemic and the economic fallout is going to impact the man. It's determining what we want to do in terms of our fleet. I mean, we our core scenario is that cargo demand is going to fall less than passenger demand. So there's going to be some gaps in terms of unserved demand and we're looking at the right way the right way to serve it, either are deploying our past Europe differently looking at alliances or working different with our fleet of aircraft. So we cannot make any announcements yet but we are definitely deep into the planning part and hopefully moving persecution soon. Charles Kauffman All right, I, Houston you did, you mentioned the healthcare vertical and certainly we'd be remiss not to discuss COVID-19 faxing, considering it may be just weekend. away. Hopefully. We'll see. I want to go back at a recent t aka airfreight readiness survey struck me found that, you know, only 28% of industry respondents feel prepared to transport the COVID-19 vaccine. And I guess I want to ask each of you, you know, are these results meaningful? And what do you see as some of the opportunities to improve industry preparedness ahead of the existence of ready to ship vaccines? Tatyana maybe we can start with you. Tatyana Arslanova I think so far it's important, there are three key things. First, we talk about special condition for vaccine and we need to meet it, be it container be dry ice or some special requirement. And of course, for us, we don't have right to mistakes and to tell, but this isn't a portal to handling fault. so in this situation, of course, declare cooperation, the keys, key suppliers. So now rules is an important part. And we need to understand that we can provide quality. The second we understand that it will be very volatile demand. For example, what we see is the request and we don't know when we don't know what routes that we want to have standby aircraft around some dates in November, some dates in December in some different airports. So for us, this is another challenge how we can change our approach and network, once again, to be able to provide these standby services for key customers and filled the most important things. It's not only about boxing, it's also also about those supplementally things like needles and everything we need. And we see a lot of demand now for production line of oxen. so in this situation receive it might be Watson will be produced locally, and it will be not so much the demand for vaccine itself. But we still demand for all supplementary things we need to deliver and it should be delivered at the same time. Because what's in it for needle and other things, it's useless. Houston Mills Because I would I would add just from sushi survey for us, long before COVID-19 healthcare just happened to be one of those key verticals, that we've been working with large pharma for a number of years. So in primary because the margin centers for lateness reliance on on e commerce. So our express service, but from the perspective of innovation, delivering no cold chain supplies, with the vaccines from an industry perspective, it certainly is going to be something that's needed from the overall industry, that we personally from a UPS project, we have been investing in cold chain logistics for quite some time. So it puts us in position to really support this particular you know, distribution, whatever that happens to look like you know, we've we've been working in here with FEMA with Operation airbridge. And so we've had a lot of relationships and building things. But we've also have a cold storage supply facility setup here at our world pork diet course and believe Do we have one on your European network in Cologne, Germany, and we've got one in the Netherlands, we're looking to set up a few others around the world just to be prepared. So the whole coaching logistics piece I think for for all of us, it's going to be very important to how that fits in and Tatiana mentions to dry ice as well, because obviously, you know, when you're transporting these vaccines, there's no large amount of dry ice associated with that. So making sure that the industry is prepared, you know, to move those things and keep crusade while moving as much of this practice possible, is surely going to be an industry effort. Andres Bianchi If I may add something I think I mean, what Houston Dana have said, it's, it's I think we can all agree on, I think one important element that we as an industry still lack visibility on what the requirements really are. And and I think that's that's the crux of the problem, as long as we don't know if it's gonna be two to eight, or minus 70, where we're a bit of a bind, because we cannot plan. And I think it's really important because I mean, to DOJ is something that the industry knows how to do, and it's just beefing up and getting, getting everything set up so that we can move much higher volumes of pharma than usual, especially on certain peak production periods. But it's critical, then the industry as a whole gets very visibility and I think that's where entities such as Yata, or what were seminar associations, Have to come into play and ask the former shippers to be more sort of give us more visibility on the requirements. I think there's a lot of information that's being kept confidential. And And quite frankly, I think it's putting the logistic chain at risk, because we don't have enough time to prepare. And, and I think that's critical that as an industry, are we approaches sort of together, because that's, that's where the, for my perspective, from a farmer, our perspective, it's the most risk lies, it's not being able to be prepared, because we don't know what we need to do. Jessica Tyler I'll just say, if I can time into absolutely, everything everybody has said is is definitely how American sees it, you know, in terms of Houston saying, you know, we've been doing cold chain for decades, have facilities or capabilities and more than 50, you know, airports. Were ready, right before this type of thing. But like Andreas, and Tatiana said, there's just so many unknowns that I think matching capabilities to the need, and ensuring the handoffs across the supply chain go really well is the primary or a few of the primary challenges of this particular effort will take. So obviously, we're really good at handoffs, in our in our industry, even with limited transparency around some of those. So again, I'll make a plug for technologies. But I think it here in the United States, you know, the government does have a an overall task force that's leading the the distribution effort, and the need for visibility into who has what capabilities and where and how do those handoffs happen across that is going to be the hardest part of making sure that we all play a part in successfully getting vaccines to people and all of the related things that that, you know, making sure that we vaccinate people take so the the ancillary things that Tatiana talked about. So to me, it's the coordination and transparency in this particular challenges is bigger than we've ever seen. And it's going to require a lot of conversations that, frankly, the industry, you know, we're having a lot of those are normal as we evolve as an industry. But this is even on the level, you know, I think, from what you know, we can tell it's going to be on a level that we just haven't experienced before. So it's going to take massive coordination to do it. Right. And I think that, you know, I've said multiple times that our purpose has never been clear. And what we do as a cargo industry, the rest of the world is just getting to see it front and center. Now. We've all known it. And so the fact that we can play a really important role in serving humankind right now is critical. And getting that coordination right is going to be critical to us playing that role successfully. Dorothea von Boxberg I would say we are a very flexible industry. And if you say we were not prepared yet well, but we I think we undergoing a steep learning curve, I think it will ramp up really quickly to make it happen in the end. And of course, it helps if you've got a long track record and farmer. And I think there are a lot of initiatives also driven by data, like for example, the Civ farmer certification that really makes sure that you have the right processes, that people have had the right trainings and you've got the right facilities and that it really works. That's been a big focus for us to have this network weds really, from export through trend to import every of those three stations would really handle pharma with care and then make sure that we don't run into wastage. And yeah, so So, I think we are getting prepared. I think there are some initiatives again on the digital side that are helping, for example, pharma is not pharma, is having this initiative called one source to show all the pharma facilities in all of the airports to make sure that shippers and forwarders have an easier way to figure out who could do it for them which kind of facilities are available. And so, so, I think kind of the orchestration is starting or the whole discussion on how much dry eyes can you have in which compartment of which aircraft type? And are those limits correct or could you increase them to be able to fly more deep frozen farmer? So even though there is maybe not much lead time, I think I think we'll get there. And we'll put the input on that one. Jessica Tyler Hey, Charles, Can I just add one quick thing? I think at that data point of 20%. Feeling prepared is a great example of how if you ask me today or ask the industry today, it would be far different than that number. So just in a short matter of weeks, like Dorothea said, we're learning the learning curve is steep. And I bet you that number, if you pulled today would be at least double if not triple it. In terms of our preparedness, the last part, the last chunk of whether that's 25 30% of preparedness is going to come last minute, and it's going to rely on that coordination that we're all talking about. So it's I think it's a great example of how data is changing so rapidly right now. Houston Mills And I and I would add the the industry groups, you mentioned the ACA, I add a e4, a carver Association, I think, to collaboration across industry groups, so that everyone's prepared is absolutely taking place. And so in this in when it comes to this vaccine distribution, no, that's not really a competitive thing. That's a world saving thing. And so I think we will see unprecedented collaboration that's going to need to take place, and we shortened the pool to being part of that. Charles Kauffman Yes. All right. Hey, very good discussion. So maybe, you know, if, if many stakeholders were not feeling prepared a few weeks ago, the point is that the air cargo industry can adapt very quickly to rapidly changing situation. So I think that is a that is a great point to end the session on. Unfortunately, we're already running out of out of time. So I, I do want to once again, thank each of our panelists for a great discussion and thank Pratt and Whitney for sponsoring this session. At this time, we will take a break, during which I encourage each of our panelists and everyone into everyone watching to take to our virtual foyer, where you can participate in one on one meetings, visit with our sponsors and join our commercial market trends meetup. So there is no excuse for for eating lunch or dinner alone today. I also want to remind everyone that our first on demand session powering the next generation engines engine supply chain and maintenance is now available. And additional content from our sponsors is also available in the stream tab. And one more housekeeping item, I'm pleased to announce that keeping in line with cargo facts symposium tradition, or a bunch of presentation will conclude with an aircraft model giveaway. So before Be sure to reconvene here at 2pm. Eastern for our next series of live sessions starting with a live presentation from DFW. So thank you again panelists.

CFS: Refiling air cargo’s flight plan: Growth opportunities and obstacles in global airfreight

Fleet closest to last mile thrives

DHL begins transferring 767 ops to Amerijet

DHL begins transferring 767 ops to Amerijet

CARGO FACTS CONSULTING

Watch: CFC presents its 20-year freighter forecast

CFC: Revision to key assumption lifts large widebody freighter demand forecast

Follow Us

CFS: Refiling air cargo’s flight plan: Growth opportunities and obstacles in global airfreight

Already subscribed? Log in below

Fleet closest to last mile thrives

DHL begins transferring 767 ops to Amerijet

DHL begins transferring 767 ops to Amerijet

By subscribing you agree to our Terms of Use and Privacy Policy

CARGO FACTS CONSULTING

Watch: CFC presents its 20-year freighter forecast

CFC: Revision to key assumption lifts large widebody freighter demand forecast

Follow Us