Etihad’s Abdulla Mohamed Shadid on the carrier’s transformation
Abdulla Mohamed Shadid, managing director cargo and logistics at Etihad Aviation Group, provides an analysis of 2018 events and a foretaste of 2019 at the the Middle East carrier.
The last 12 months have witnessed record yields not seen in our industry in over a decade, combined with volume growth on the back of strong global economic recovery. It is therefore safe to say that 2018 has been a very successful one for the air cargo industry as a whole, both for the carriers and forwarders, and a rewardingly transformational one for Etihad Cargo in particular.
Having taken up my post in March this year, I can certainly say that the last nine months have been a steep learning curve regarding the opportunities and challenges in this unique and special industry.
Seen not only as an important division of the Etihad Aviation Group, but a major catalyst in the development of Abu Dhabi’s ambitious logistics strategy, Etihad Cargo began the year of our 15thanniversary with the biggest challenge yet: to implement a major transformation leveraging its foundations to evolve into a more sustainable and agile business.
To do this, we had to define and play to our many strengths whilst introducing new ideas, redefining our commercial approach to market whilst getting closer to our customers, taking advantage of new technologies by betting heavily on digitalization, and streamlining our freighter operations and service delivery. All of these combined to create a more efficient enterprise that delivers a better value proposition to our partners and clients.
This of course meant some fundamental change to our operating model, starting with our fleet and network strategy. 2018 saw this strategy play out positively, with the simplification of our fleet to focus on the Boeing 777 freighter, whilst refreshing our freighter network to focus on key trade lanes leveraging Abu Dhabi’s geographical positioning to maximize freighter to bellyhold flows.
Since October, this saw us improving connectivity across our network via Abu Dhabi while introducing key additional capacity into markets like China, India, Vietnam and Spain. We also extended our key partnership with Trinity Logistics in the US to continue our three weekly services into Rickenbacker (LCK), Columbus, in a multi-year agreement.
These changes bore fruit immediately, with each of our freighter load factors, our freighter-to-bellyhold flow ratios, and our freighter profitability at an all-time record high.
We also introduced a number of new initiatives targeting product verticals across different industry segments, and these have delivered some record results for Etihad Cargo in 2018.
Although general cargo is the beating heart for our industry and has witnessed steady growth over the past year, premium product verticals have outpaced general cargo in terms of growth, and we have seen it through the flows at our hub in Abu Dhabi. We project this trend will continue, especially with cool chain products.
Pharmaceuticals have witnessed the fastest growth and will continue to do so over the coming period, whilst a similar trend is seen in perishables, for which we recently launched our FreshForward service, designed to ensure items such as fresh fruit, vegetables, dairy, fish, meat and flowers move seamlessly across Etihad Cargo’s global network until they reach their final destination.
Others include VAL (valuables and precious metals) for which Abu Dhabi has become a global centre and Etihad Cargo a key player in this field since we entered this segment almost 5 years ago with our SafeGuard product.
The recent emergence of the cultural district on Abu Dhabi’s Saadiyaat Island has further introduced a flow of valuable art and musical instruments that we carry to and from our hub in Abu Dhabi.
There has also been a steady increase in the transportation of motor vehicles by air which historically was previously confined to sea travel, and we also saw growth in luxury cars transportation over the past years which led to the launch of our FlightValet product in July 2018, which carried a record number of vehicles in 2018.
Finally, live animals continue to take a larger share of the air cargo growth and of remarkable note is our SkyStables equine product, which saw us carry a record 2,000 horses in 2018.
On the partnerships front, Etihad Cargo is rethinking our global approach which historically was limited to interline arrangements only. While partnerships are not necessarily a focus for all cargo carriers, they will continue to be a major driver for growth for Etihad Cargo and we will see a lot of progress in this area over the coming 12 months, particularly for commercial and operational partnerships, codeshares and interlines.
A successful example of this was our commercial tie up with Emirates SkyCargo during the summer which saw an increased flow of volumes between our hubs in Dubai and Abu Dhabi.
A similar approach will see us deliver deeper ties with 5-6 select global carriers over the coming period, a couple of which are in advanced stages and we hope to be able to share more about over the coming months.
The year has also been the beginning of a ‘digital revolution’, with our full migration to ‘SPRINT’, the IBS iCargo fully integrated technology platform as the digital answer to our evolving cargo management needs, and this is one of the key areas we’ll see ongoing transformation over the next year, not just at Etihad but across the industry as a whole.
Already three months into the new system cut-over, we see a remarkable shift in the way we use data to manage our business and make commercial decisions.
Online bookings have also proved to be an instant success with more of our customers (especially in Asia) choosing it as their preferred booking channel. 2019 will see us start to roll out direct system interfaces between our iCargo platform and those of our major clients to allow seamless integrated bookings without having to pick up a phone, send an email or log online. Ten years from now this will become the industry norm.
This projected digitisation is fundamental for the industry. IATA has already signalled the direction our industry is headed, with their recent announcement that the electronic Air Waybill (e-AWB) will become the default contract of carriage for all air cargo shipments on enabled trade lanes starting 1st January 2019.
Like all technology, some markets have naturally embraced it faster than others, but the efficiency and opportunity of the streamlined process that e-AWB provides means it will continue to be adapted globally at a rapid pace, to near 100 percent adoption within a very short time.
At Etihad Cargo, although we offer both e-AWB as well as conventional paper-based AWB stock to our customers, we will be actively rolling e-AWB to our Customers on all our enabled trade lanes starting in January, to both support the IATA initiative as well as a natural step to offer a better service offering.
This digitisation will work hand-in-hand with more traditional initiatives to bring standardisation to the industry. Cargo IQ is a prime example of the future of the industry and while not everyone has adopted it yet, I see that changing steadily as we move forward, given the transparency and consistency it provides; it will very soon become the industry standard.
At Etihad Cargo we are proud to be one of the very first members, and we will actively support its growth and implementation.
Finally, from a Hub and infrastructure perspective, Etihad Cargo will continue to be a key part of Abu Dhabi’s ambitious economic development plans and there are numerous cross-Abu Dhabi entity initiatives that will make Abu Dhabi a world class hub for logistics.
Considering that high value product segments such as pharmaceuticals, perishables and valuables are growing faster than general cargo in our hub, a suite of considered investments will be made in our hub to better position us to cater for those segments.
These will include expansion of our dedicated cool chain rooms, as well as a new pharma build and break zone within the existing cargo facilities. A forward handling pharma storage zone is being considered for shorter dwelling transit units, as well as expanded delivery docks to facilitate quicker customer deliveries, including perishables.
These projects have already commenced, and majority of the works will be completed in 2019. And this is all but a stepping stone for a calculated long-term plan that will see Etihad Cargo move its hub operations to a new state-of-the-art facility within 5-6 years, the details of which will be defined before 2020.
At the end of 2018, it’s humbling to look back over these twelve months (or nine months for me personally); our team has worked incredibly hard to execute the strategic change we have undertaken, and I am proud of the positive steps forward we are taking.
We have achieved so much in a limited space of time, and can proudly say that we have developed the best year yet in the history of Etihad Cargo. But this is the start of our journey, and I look forward to both the opportunities and challenges ahead, and how we will see our industry evolve over the coming year.