Qatar Airways Combination Approach to Air Cargo
Airlines have long struggled with the decision of whether to invest in maintaining a dedicated fleet of freighters or to go the route of carrying cargo in the bellies of their passenger aircraft. Having freighters opens up options to airlines that belly-space-only operators do not have. However, the current trend in the industry is putting a stronger emphasis on utilizing belly space, as this is seen as the more economical means of carrying cargo. Why invest in a pure freighter when you can utilize the capacities of wide bodied passenger aircraft like the 777? Looking deeper into the issue, the needs of the cargo business look much different than that of the passenger business. Having a balanced approach may seem like an obvious choice, but is not feasible for everyone. Airfreight Logistics recently sat down with Mr. Ulrich Ogiermann, Qatar Airways Chief Officer Cargo, to gain insight into how they have succeeded in offering balanced cargo options.
Mr. Ogiermann came to Qatar Airways with a unique background, as he worked for other airlines that were both pure freighter airlines and passenger airlines with cargo capabilities. Now working with an airline that utilizes both freighters and belly space lets him bring his experiences from both aspects of air cargo. Mr. Ogiermann began by explaining why location is so important to Qatar’s operation.
“We are in a very advantageous spot here with our operation at the crossroads of Asia, Africa, the Indian subcontinent and Europe. We’re able to run our operation differently than others with more of a hub-and-spoke approach. Having a hub like this means we can utilize the space much more efficiently than you could if you’re at the end of the chain, like in Europe. There’s a lot of pressure on cost for the operation. In a combination carrier, freighters are more expensive to operate. One advantage that we have is that we are able to work 24 hours per day. There are no curfews. That’s the biggest hindering point for making use of assets that are very expensive like freighters.”
This combination of advantages allows Qatar Airways to operate in a flexible manner. What works for one company though, may not work for another. Some airlines may be forced to only use belly space limiting the density of their operation, and at the end of the day it may not suit the needs of the customer. The area an airline operates directs them to what cargo options they may be able to offer as well. For example, belly space options to Thailand are more abundant as tourism is more developed with more passenger flights than others in the ASEAN area. On the other end, Vietnam has more frequent freighter routes due to their manufacturing that requires this larger space; while the passenger product is not as developed yet, limiting the belly space option even further.
The combination of efficient belly space, plus freighters where you can flexibly adjust to the needs of the cargo business is the most ideal and cost efficient combination you can have
“Sometimes you must compare the efficiency of the passenger product from a cargo point of view; you have to ask yourself whether running a freighter would be a better option,” said Mr. Ogiermann. “Combining very efficient high density belly space with the ability to tailor the capacity for various markets with the freighters, I think it’s the ideal combination. It’s much more complicated if you’re a pure belly space operator. It doesn’t always give you the capacity when you really need it. The cost situation of a pure freight operator is a very difficult proposition though, especially if you’re based in a high cost environment like Europe. The combination of efficient belly space, plus freighters where you can flexibly adjust to the needs of the cargo business is the most ideal and cost efficient combination you can have. If you only have freighters, especially with the 747F, you are forced to operate point-to-point operations. It’s becoming more difficult to do this; you don’t have the markets where you can operate point-to-point and have an efficient operation. With a 747 freighter, you are forced to hop around and have multiple stops on a route which completely kills the economics of the operation.”
“Where we’re at now in Doha is the most exciting place to be in terms of the cargo,” said Mr. Ogiermann. “We have the resources and state-of-the-art warehouses, which are already in the process of being expanded. Initially, we’ll bring handling capacity up to 4.4 million tonnes within the next two to three years, with the final phase of the overall development at around seven million tonnes of active capacity here in Doha. It’s fun being in this environment where we are a growing airline with a very modern fleet. We have grown very fast and there’s more to come.”
See Qatar Airways Cargo’s world-class cargo facility at Hamad International Airport in action in this video:
What helps to expand this facility’s capacity and keeps everything in check is a proprietary IT system developed by Qatar Airways. Airfreight Logistics had heard about this “CROAMIS” IT system before, and wanted to learn more about how it came to be and why it’s been so successful for Qatar. Mr. Ogiermann explained, “The industry is moving towards e-airway bills, electronic interactions, and booking systems. One of the key success factors here is the IT infrastructure. The off-the-shelf products we found were not suitable for us, so we decided to develop this software as a joint venture with an global IT company. It came about very quickly, as they have the resources and we have the knowledge of what we want. We are starting to market and offer this product to others in the industry as well, and we’ve had incredible feedback. It’s developed as an end-to-end system and designed from a pure cargo carrier’s point of view. From handling, billing, accounting, booking, and optimization of flights, it covers the entire chain. One of the important features is the tracking and tracing program that allows detailed tracking of the shipment on your mobile phone. It’s great for customers to see where their product is at in the shipment process. So it’s a complete, integrated approach based on the latest technology. It’s a big step for us, and we are confident that this will be a very successful product in the market.”
Beating the Heat
One element that is hard to ignore is the extreme weather in a place like Doha. The growing popularity of using air transport for temperature-sensitive products like perishables and pharmaceuticals means that extraordinary measures must be put in place so the cool chain is not broken. We asked Mr. Ogiermann about how Qatar Airways Cargo handles this.
“The use of refrigerated trucks in Doha has really expanded; it ensures the cool chain isn’t broken. Our refrigerated trucks are always used for products that require cooling; we make sure the unit is consistently under temperature control. We store products in these trucks if the connection time is short and have them wait on the tarmac. If the connection time is longer, even at a distance of 200 meters, we will drive the goods in these trucks into the refrigerated area of the warehouse. We’ve invested in these vehicles to make sure there’s never a gap in the cool chain. It’s practical and easier than other means, you can control the temperature the entire time, and it’s the type of service we like to provide.”
Outlook for 2016
Around the industry, people are not very optimistic for this year’s outlook. If you look at the global trade in terms of volume, it’s on a downward trend compared to last year. The supply of aircraft capacity is going up, with a 6-7 per cent gap between supply and demand, which is not in favor of the airlines.
“We are confident we have the ingredients for success lined up, but this is a testing time for us,” said Mr. Ogiermann. “There are some bright spots in the outlook though with pharmaceuticals, manufacturing spots changing, trade patterns are changing, and e-commerce on the rise. There’s a lot of growth in the perishables, garments, and textiles area as well. Pharmaceutical products are of great importance for us, we have been working hard to get trade lanes certified by the big shippers. I think the biggest areas we will see growth is in pharmaceuticals, textiles, and perishables this year. The path to ordering and the way goods are being shipped to customers is changing thanks to e-commerce too. We all know everyone is using the internet more and more to order goods. The question with all of this is: is the volume changing or is it just changing the way things are ordered and shipped? I think many people are scratching their heads on this. Either way, we have taken the necessary steps in order to assure that we are ready to face the challenges ahead.”
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