Delta’s renewed cargo focus

01 / 08 / 2017

In 2013 Delta Air Lines was the largest US cargo carrier in terms of cargo ton miles. Since then, the airline has seen its leading status erode and since 2015 it has lagged behind both American Airlines and United Airlines.

The airline’s slip down the US cargo leader board coincided with the cargo division becoming “more closely aligned” with the overall company, basically meaning that cargo sales became part of the global sales team and that cargo operations were integrated into the airport customer service division.

At the same time the cargo division was rolled into the overall airline, chief cargo officer, Tony Charaf, retired from the role and was not replaced. Instead Ray Curtis led the cargo sales side of the business and Scott Barkley took charge of operations, both reporting into different executives.

This year Delta has finally started to register growth in its airfreight traffic  after declines in 2015 and 2016. Over the first five months of 2017 demand was up 3.5% year on year to 829m cargo ton miles.

This achievement comes a year after the company appointed someone to head up the overall cargo business, with Mercedes Benz stalwart Gareth Joyce scooping the role, although the growth does also coincide with a pick-up in the overall cargo market.

Adding value

Joyce says Delta lost ground on its rivals in cargo traffic terms because of a focus at the overall airline on putting “the right capacity on the right lanes”.

Joyce says: “We make sure we fly value-adding routes, so there has been capacity consolidation that Delta has been very focused on over the past few years and of course being a belly carrier our capacity as a cargo business follows the capacity of the airline.

“That has been the single biggest influencing factor, where our airline has focused on having the right kind of capacity in the right kind of markets versus just having a volume of capacity. That is evident in our results across the entire business.”

Although the airline does not release too many numbers related to its cargo business in its quarterly results, Joyce’s explanation does feed through to its revenues per cargo ton mile flown, where it is ahead of both United and American.

He also admits that there has been an insufficient focus on Delta’s on-time performance on the ground, which he describes as “the ticket to the game”.

“In the last 12 months we have really focused on the business and made sure our ground operations match our airline operations and that has translated to now being a leader in the industry in on-time performance.”

Joyce says the airline has gone from being close to the bottom of Cargo iQ’s door-to-door on-time performance rankings to, in March, being in second place.

“We sat down and built a robust strategy 12 months ago and at the very core of that strategy is the customer experience and on-time operational performance,” he explains.

“Everything we have done in the last 12 months has been subservient to that strategic objective. There is not a person in our Delta organisation that doesn’t know that is our number one priority.

“We got our resources aligned and then invested heavily in our organisation − we went and hired strong leadership that had the operational capability to drive process improvement and performance at our warehouses.

“Then we developed process improvement opportunities on a continuous improvement basis using area of constraints. That means analysing  where you have constraints in your operational environment and then engineering them out.”

Other investments in the cargo business come in the shape of RFID tags, GPS tracking, developing its digital capabilities and targeting IATA’s CEIV Pharma certification.

The company will deploy its RFID technology across the cargo business and has been running pilots this year. 

The data generated will be used to “hone its performance”.

The GPS tracking will be offered on certain products. For example, the Dash Critical and Medical product that was launched in March.

The new service, with distinctive pink packaging, provides real-time tracking and monitoring of any eligible shipment and customers can ship items up until 45 minutes prior to scheduled flight departure.

On CEIV, the airline is hoping to achieve certification across all of its stations after Atlanta achieved the accolade in July.

The airline will also continue its push on electronic air waybills (e-AWB) and Joyce would like to achieve 100% penetration as quickly as possible so that Delta can then move onto more sophisticated opportunities, using the data generated to make the business faster and more reliable.

IATA’s last e-AWB round-up report showed that Delta used e-AWBs in 74.7% of transactions, positioning it as the airline with the fourth highest penetration and the highest ranking US airline.

Joyce says e-AWBs create speed and efficiency, a better customer experience and improve data input quality.

Commoditised industry

These measures are all part of the airline’s focus on delivering a high-quality product that customers are willing to pay more for.

“I often hear in the industry that the market is being commoditised because of the surplus of capacity in the market, which is absolutely true,” Joyce says.

“But I have never experienced an industry where customers were not willing to pay a reasonable price for a high-value service and product.

“As we are driving our business, our conversations with our large customers are not revolving around price. They are revolving around on-time performance, understanding their needs and being a reliable and dependable partner.”

Joyce has also overseen the implementation of a net promoter score system to understand how customers view the company.

The customer review system is based on answers to a single question: How likely is it that you would recommend our company to a friend or colleague? Scores are ranked on a 0-10 scale and companies often follow the question by asking for more detail on what they like or dislike about the company.

Joyce says Delta’s score has improved over the last six months and he adds that the feedback has helped the company understand what customers value.

Joint ventures

The company is also hoping to improve its customer offering through the creation of new partnerships and the expansion of existing tie-ups.

Shortly after Air Cargo News spoke to Joyce, the airline signed off on a partnership with Korean Air.

The two airlines said the joint venture agreement, which includes belly cargo capacity, will create a combined network serving more than 290 destinations in the Americas and more than 80 in Asia.

This deal came shortly after Delta signed an agreement with Aeromexico Cargo on the cross-border US-Mexico trade under a flight and trucking partnership.

Delta will provide service in the US through its connecting hubs in Atlanta, Detroit, Los Angeles, Minneapolis-St Paul, New York, Salt Lake City and Seattle. 

Aeromexico will offer Delta’s customers greater access to Mexico through its hubs in Mexico City, Monterrey and Guadalajara.

Delta and Aeromexico Cargo have co-located warehouses in Mexico, Boston, New York-JFK, Miami, San Francisco and Chicago, with Orlando and Detroit opening soon.

Last year, the airline also moved closer to its European cargo partners – Air France KLM and Virgin Atlantic. The move saw Air France KLM Cargo take over sales and customer service responsibilities for the US airline in France and Germany, following on from Belgium in 2015, as well as the full integration of their networks. They also use the same facility in Paris-Charles de Gaulle to reduce the need to truck between two locations.

A similar move followed with Virgin Atlantic Cargo as the two companies signed long-term contracts with dnata to co-locate their cargo handling at 12 UK locations.

Joyce explains the idea behind the partnerships: “As an airline our growth pattern will continue to advance on the global front. On that landscape we have the European theatre, the Asian theatre and the South American theatre.

“In all three of those we are very well positioned to grow not only because of our own investments in routing and fleet and network but also with our joint venture partnerships.

“Into Europe, with Virgin and AF KLM, we have the biggest bandwidth of capacity between North America and Europe and so we have tremendous flexibility and routing options.

“Our partnership with Aeromexico gives us massive capability to provide all sorts of options for customers moving products in and out of South America, not only from North America, but also Europe and Asia because of our route platform.

“In the Asian theatre we are developing our hub structure beyond what has been a very strong platform in Japan through discussions with Korean Air.

“When you add those global partnerships to what is already a very strong platform domestically and globally for Delta we have a lot of richness coming our way to offer very flexible solutions for our customers.”

Network expansion

In terms of the airline’s investment in its own operations, it will begin to take delivery of “cargo friendly” Airbus A350 aircraft in the second half of this year with more arriving in 2018.

The first five will arrive in 2017 and will be used on Asian routes where they will replace Boeing 747s.

Delta is also investing in its main hubs, with Atlanta, Los Angeles (LAX), Seattle, Salt Lake and LaGuardia all being upgraded.

On the route front, new flights are being put in place from New York to Lisbon, Berlin and Glasgow, while the airline has brought back its Atlanta-Brussels route, expanded capacity out of Paris and Amsterdam and, as part of its Korean Air tie-up, launched an Atlanta-Incheon route on June 3. 

While progress has been made at Delta Cargo over the last year, Joyce recently had his role expanded to include airport customer service.

The extra responsibility of in-airport customer service means Joyce now plays a leading role in the airline’s largest business unit that encompasses approximately 30,000 employees across eight airport hubs and more than 200 airport stations globally.

However, Joyce says he is still committed to cargo and adds that a new vice president cargo role will be created in line with the expansion of his own position.

“I will still remain very focused on the continued development of the cargo business,” he says.

“It was the task I was given when I joined the organisation, I have a personal interest in it and I have deep personal commitment to continue the positive trend we have developed in the business over the last 12 months.

“I take my challenges very seriously and personally, so I know there is still an enormous amount of opportunity ahead of us and I relish the opportunity to lead the team and business to unlocking that potential.” 

It seems then that we will be hearing much more from Joyce and the Delta Cargo team over the next 12 months.