Qatar Airways Cargo takes aim for top spot

26 / 06 / 2018

When Guillaume Halleux joined Qatar Airways as vice president cargo Asia Pacific in 2016 he found a company managing relentless growth, with new freighters and passenger aircraft arriving on a regular basis, new routes being launched and the overall airfreight industry entering an upward cycle.

Before joining the airline, he worked for the Air France KLM group in London, Paris and Hong Kong, as well as spending some time at the group’s Sky Team Cargo alliance in New York.

He also held a sales position for freight forwarder Bolloré Logistics, working in Vietnam and then Singapore.

Halleux says that he was attracted to Qatar Airways because of the speed of its development and because its service levels have continuously improved over recent years.

“I am very happy with the choice I made to join, because the ambition is there. It is up to us to make sure we don’t lose what makes us so special, which is flexibility, agility and the human touch,” he says.

Frantic growth

In October last year, Halleux was promoted to chief officer. Halleux says the frantic pace of growth he has experienced at Qatar Airways Cargo has been in stark contrast to many of his other roles in airfreight where he was essentially managing decline.

He adds that managing fast growth can be tiring but says overall it is “super enjoyable” and “great for adrenaline levels”.

The company has the aim of becoming the number one air cargo carrier in the world and is making rapid progress.

IATA’s World Air Transport Statistics show that while in 2014 Qatar Airways Cargo ranked as the world’s sixth-busiest cargo airline (not including express operators) with 5.9bn scheduled freight tonne kms, by 2016 (the latest figures available) it was ranked third with 9.2bn scheduled freight tonne kms — an increase of 53.8% over two years.

“I have worked with companies that were downsizing, that were regressing, that were shutting down,” Halleux says. “It is sad but it is easier to manage because you control the timeline.”

Another key difference compared with his time at other airlines, he explains, is the support cargo gets from the overall company and the amount of influence the freight business has in decision making.

For example, Halleux is part of the fleet planning committee, a reflection of the fact that 50% of the airline’s cargo volumes are moved in the bellies of passenger aircraft.

“The group is very cargo minded and cargo friendly,” he says. “I’ve worked at airlines where cargo is not listened to, but that is not the case here.

“Cargo has a voice; it is respected and listened to. There are a number of aircraft type decisions — passenger planes — that are being made because of the input of cargo.”

Fleet expansion

Qatar Airways Cargo currently operates two Boeing B747-8Fs, eight Airbus A330-300Fs and 13 B777Fs.

But there are plans for the airline to continue increasing the number of freighters it operates. In April, Qatar Airways Cargo signed up for a further five 102 tonne capacity B777Fs, valued at a list price of $1.7bn.

This is in addition to another two B777Fs that will soon join the fleet to replace three of its A330Fs, which are leased and due to be returned in the first quarter of next year.

“The remaining five [A330Fs] that we own, we are considering what we are going to do with them but at the moment we can’t say if the five B777Fs will replace the five A330s or come on top, or even a mix.”

Halleux says that Qatar Airways Cargo decided to opt for the B777F rather than adding to its fleet of larger B747s because the nose loading jumbo only really comes into its own when it is fully utilised.

“Not every market can give you 140 tonnes with the right commodity mix in order to max out the weight of the aircraft,” he explains.

“Currently we have them in Hong Kong and Korea connecting into Germany and returning. For us that works well and our load factor is high.”

Blockade

One other major development that continues to affect the airline is the diplomatic crisis that resulted in Saudi Arabia, United Arab Emirates, Bahrain and Egypt imposing a land, sea and air blockade on Qatar, starting in June last year.

As a result, Qatar Airways was forced to cancel all services to those locations and alter routes because it is no longer able to enter their air space.

This led chief executive Akbar Al Baker to warn that the airline would post “a very large loss” for the financial year ending March 2018.

However, for the cargo business, it created a very different challenge. The closure of land borders with Saudi Arabia meant the airline was essentially called upon to perform an airlift of food into Qatar.

Although Halleux was not based in Qatar at the time, he still felt the effects of the blockade: “June last year was a tsunami,” he says.

“Luckily, because our commercial presence is quite strong, our customers did not really hold grudges against us because they recognised the crisis.

“It was a slow moment of the year for the market, but we still cancelled flights in June so we had aircraft to go and pick up cherries, meat, fish and whatever food we could bring.

“We were fortunate to have our new Climate Control Centre commissioned in May last year, offering 2,470 sq m of cool storage for perishables and food imports that came in large volumes in June in Doha.”

One example of the type of project carried out by Qatar Airways Cargo during the initial months of the blockade was the transport of cattle.

The contract involved the transport of 4,000 Holstein cows on 20 flights from Europe, the US and Australia to Doha.

Upon arrival at Hamad International Airport, the cattle were transferred to Baladna Farm, a huge livestock farm in Qatar owned by Power International.

The farm is built over 700,000 sq m and includes 40,000 Awassi sheep, a breed which is able to withstand high temperatures and produce high-quality milk. The farm also houses 5,000 goats and an animal feed mill yielding 100 tonnes per day.

The plans for the dairy farm were already in place ahead of the blockade, but were brought forward in light of the diplomatic row.

The transport operation allowed the farm to cover 30-35% of the imported demand in the country within two months. Halleux says that after the first month of the blockade the situation began to get back to normal as shipping services from non-embargoed countries were set up.

“In the longer term, the blockade created a slight increase in demand for airfreight in Doha as the food that used to come by truck from Saudi Arabia now comes from other countries, some of it by sea, some by air.

“But Doha for us is only 15% of our business, 85% is transit cargo. So the impact was not that strong overall.

“We lost [services] to Saudi Arabia, Dubai and the rest of the blockade countries, but those extra block hours that we gained allowed us to operate additional flights to Beirut, Tehran and many other additional destinations — what we have lost on one hand we have regained on the other hand.”

He adds that in some cases the airline even gained destinations that are higher yield than locations in the blockade countries.

Keeping it real

Looking at the overall market, Halleux says business continues to progress nicely after a busy 2017, although he adds that Qatar Airways Cargo strives to remain “humble and realistic”.

“We all know our industry is a cyclical industry — it goes up and down. This one is a big up that nobody saw coming and I don’t see any signals of it going down this year.

“But there will be a moment when recession will kick in again, when capacity will kick in again, there will be less demand and the market dynamics will be fully reversed.

“That’s why the key word for us is humility — we don’t brag. The market is the market and we have no control over it. We support our customers the best we can.”

When asked what he believes has caused the current uptick, Halleux cites a number of different reasons: faster product cycles, particularly when it comes to fashion; the growing middle class; general economic growth in Europe and the US; demand for perishables year round and in new regions; consumers wanting products delivered as quickly as possible; and the exchange rate of Chinese renminbi.

Last year, the peak season saw airfreight struggling to cope with demand growth, resulting in congestion at airports and space shortages on aircraft.

This year, freight forwarders have been looking to book up space early to make sure they are not caught out again.

Principled approach

This is a trend also noticed by Halleux: “I would like to stress that we have a few principles in Qatar Airways and one of them is that we stick to our word.

“We didn’t let anybody down last peak season. I heard a lot of complaints about other carriers being opportunistic but we are too big to be opportunistic; if we start to play that game we will end up paying a much bigger price, so we stick to our word and we honour our commitments.

“We have seen clearly from the market a stronger demand for block space agreements and for firm capacity commitments.

“We have also seen charter requests, ACMI [lease] requests and we have answered all of these and there are more in the pipeline. This, to me, is the best indication that the market is strong.”

Looking to the longer term future, Halleux says there is a massive task ahead as the carrier looks to develop its in-house capabilities in line with its fleet and traffic development.

“Our goal is to become the number one air cargo provider in terms of scale, reliability and customer preference.

“So why is it a massive task? Because we need to reinforce the foundation of our own organisation.

“I mean more IT, stronger processes, I mean more innovation, automation. It is the typical syndrome of a company that has grown double digit per year for the last decade. We have been busy growing, now is the time for preparing for the future. We have started a lot, but none of these things have come to maturity.”

It seems, then, that the rapid fleet growth experienced by Qatar Airways Cargo that has seen it shoot up the carrier table will continue for the time being.

With this, the rapid market growth, the need to “reinforce the foundation” and the embargo, Halleux will have his hands full for the foreseeable future.

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