United Cargo equipped for a new era
16 / 11 / 2013
A MAJOR MERGER and switching to an entirely new IT system must be two of the more stressful things that a company has to deal with, so imagine what it has been like for United Cargo in the past eighteen months having to deal with both.
The merger between United Airlines and Continental was formalised in October 2010, but it has only been recently that the United Cargo team have finished dealing with the details, such as renegotiating supplier contracts.
Meanwhile in July it cut over from its old legacy system to a next generation Mercator one, which it has dubbed United Cargo 360.
Oh, and it was also one of the first airline cargo departments to have the B787 Dreamliner to get used to, a process interrupted when the Federal Aviation Administration (FAA) grounded the aircraft from 16 January to 19 April for safety checks.
So a busy year, then, and as it draws to its close United Cargo's president Robbie Anderson, is looking forward to getting back to a focus on ordinary business activities.
He admits that with all the challenges of the past year and a half, United Cargo took its eye off the ball a bit on the sales side, leading to a loss of several per cent in market share.
“We have not always been able to run the business as we would like, but now we are getting out there and seeing customers and starting to see our quality of service improve. We have a target to recapture US$100m of revenue in the next 12-18 months.”
On the merger front, United Cargo moved quickly to combine operations - it had co-located most of its handling operations within the first year, for example. But as ever the devil is in the details. Anderson points out that once co-located many handling contracts still need to be renegotiated, replacing two agreements with one.
In some cases new suppliers had to be found because the existing ones did not have enough space to handle the merged carrier. In all, he says, 32 vendor agreements had to be changed as a result.
The merger also affected the implementation of the new IT system. United has taken both the SkyChain cargo system and Rapid revenue management suite of Mercator, and was originally supposed to go live with them in 2012.
But the carrier felt this was too much of a stretch, and instead opted to delay cutover until this year.
While it waited, it decided to integrate the existing Continental and United systems to give customers one interface and one point of contact.
This took place on 1 December 2012, and so meant the company had to go through two system changes in seven months. But Anderson says it was worth taking the extra time to get the Mercator implementation right.
Upgrading to a next-generation IT system was memorably described by Oliver Evans, of Swiss (which coincidentally also opted for SkyChain) as ‘like having heart surgery’. Even now Anderson describes the situation as “getting better every day” rather than perfect, but he says he was never expecting a seamless transition.
“There is a great deal of frustration and change management for our co-workers to put up with, but Mercator have worked very well with us, and this was the largest and probably the most complex cut-over they had ever done, as well as their first North American one, so we were breaking a lot of new ground.”
His advice to other carriers considering such an IT systems switch is to spend as long as possible on detailed planning. “It is like building a house. You have to decide not just what doors you want, but what handles, what kind of locks, whether it will open in or out. You have to specify all of this [detail] upfront.”
He also recommends phasing in the cut-over if possible (United decided its system was just too complex for this) and devoting “double the resources you think you need” to the transition process, whether in staff training, change management or support.
With the new IT system in place, one thing that United Cargo will be able to do now is push much harder on e-freight. Anderson describes SkyChain as “the number one e-freight system”, and says with this and the multilateral airwaybill resolution of IATA, the way is now open to really drive e-freight usage forward.
Working through CNS, various US carriers have each committed themselves to promoting e-freight at different hubs, and in United’s case that hub is Chicago, where it will be also working with Cathay Pacific.
Anderson says both carriers are talking to forwarders about the challenges of implementation and they are getting plenty of cooperation. “I am very excited about where we will be within a year,” he says.
As so often, the key challenges often turn out to be processes. “Some countries are e-freight-enabled and some are not. But forwarders want a single process,” says Anderson. “They say: ‘If we are going to deal with you electronically, we want one process for all shipments.’
“So for non-e-freight countries that means we have to print out paper airwaybills [especially] for them. It is ironic that I found myself telling our CFO that in order to go paperless I needed fun-ding to buy lots of printers!”
While all this has been going on, United Cargo has also been getting used to its first B787 Dreamliners, which eventually will be a major part of the fleet. It has seven so far, out of 65 ordered, and also recently announced an order for 35 A350-1000s, which will replace the ageing B747 fleet.
Anderson predicts that the B787s will be a game-changer when they replace B767s, being 23 per cent more fuel-efficient and with 20 per cent more cargo capacity. But the aircraft currently delivered have in fact been replacing B777s on some routes, for example Los Angeles to Tokyo, and Los Angeles to Shanghai.
Examples of the kind of routes the B787 will excel at are already evident, however: in Denver-Tokyo and Houston-Lagos routes already launched, both medium volume long-haul routes, and Houston to London Heathrow, where it will replace a B767.
Anderson says the new aircraft will enable United to launch all sorts of long-haul services where a B777 would not be justified, citing San Francisco to Chengdu slated for June next year. “It will mean we can get into lots of new markets that would not have been profitable before.”
He is also excited by the B787’s potential to reduce carbon emissions, not something you normally hear a cargo manager enthusing about. But Anderson thinks that environmental concerns are going to be as important in cargo in the next decade as enhanced security has been in the last.
United has had a cargo carbon emissions calculator lurking on its website since 2008, but has just upgraded it to meet the latest ICAO and IATA standards. As far as Anderson is aware, United Cargo is the only US carrier to have such a thing (Air Cargo News 18 November – Issue 765.)
He says that emissions are becoming more and more of an issue with freight forwarders and third-party logistics providers, with shippers also starting to ask about the environmental impact of different modes.
He insists that air cargo needs to get educated about this area and start providing proper standardised carbon emissions information.
United has also been looking at carbon reductions in its warehouse designs and in ground equipment, 24 per cent of which is now electric-powered. “That percentage will soon rise,” Anderson predicts, “as we have $50m to spend on equipment this year and the next, and $35m the year after, and we will make sure that what we buy is as environmentally-friendly as possible.”