Tim Strauss says aloha Air Canada Cargo
27 / 10 / 2017
When Tim Strauss met the Air Canada Cargo team in Montreal for the first time, he was greeted by a sea of people wearing Aloha shirts, lei garlands, shorts and grass skirts. All that was missing was the theme tune from Hawaii Five-0.
Says Strauss: “If you want to talk about a warm welcome, I don’t know that you could have done anything more to break the ice. They were willing to be silly and I was delighted.
“If they had given me a moose head I might have been expecting it, but it was a little surfboard.”
Strauss joins Air Canada from Hawaiian Air Cargo where, in a little less than five years, he saw cargo as a percentage of total airline revenue increase from 1.7% to nearly 4%, compared with a US carrier average of 2%.
His tangible legacy is a fleet of three ATR-72s, set to arrive in Hawaii by the end of this summer, whose primary role will be to fly cargo on inter-island routes.
Strauss takes over from Lise-Marie Turpin who has retired as vice president, Air Canada Cargo. Turpin was presented with the Air Cargo News 2017 Hall of Fame award in April, recognising her work at Air Canada, most recently signing the innovative freighter deal with Cargojet, and her contribution as the chair of IATA’s influential cargo committee (see interview in the last issue).
Says Strauss of Turpin and of his new role: “Our thought processes are very similar, as is our approach to how we do business and how we treat people. I’ve been here only a week but I feel at home, and I sense that there is a lot of good that can be done.”
Strauss, who perceives a “golden period” for North American carriers, says: “Cargo can be and should be a major contributor, particularly for an international wide-bodied carrier. In tough times everybody pulls back and, as they get healthy again, cargo is not always the first thing thought of by the passenger airline, but it certainly has a significant contribution margin.
“Lise-Marie and her team have done a phenomenal job, and I think that Air Canada’s executive team recognise that cargo is a growing and important piece of the business.”
In 2016, cargo revenues of C$512m increased by C$6m or 1.1% from 2015, reflecting traffic growth of 15% largely offset by a yield decline of 12.1%. Traffic increases were recorded in all markets on higher capacity.
Wealth of experience
Strauss brings a wealth of air cargo experience, starting with Purolator Courier in the US and several senior roles at Emery Worldwide, where he was vice president of operations: “Emery had the major hub in Dayton, Ohio, and 13 satellite hubs around the US which were mostly trucking operations, but they all tied together.”
From there he joined Northwest Airlines as vice president of global operations for cargo when the carrier was interested in the express model and operated 18 Boeing 747 freighters across the Pacific.
“The idea was to take the express model of your cargo carriers and transplant it in Northwest, which we did, successfully”.
Adds Strauss: “We increased the connectivity, with better loading times. We focused on all those process things that increase speed and velocity. It was also great fun.”
He became vice president of sales for Europe and Asia at Northwest, where 80% of the business was Asia focused.
He moved to Delta, prior to it buying Northwest Airlines, in charge of global operations. Delta had acquired the Northwest freighter fleet of B747-100Fs and -200Fs, at the end of their productive working life. Delta continued the process of shedding the freighters.
Strauss then took a series of air cargo consultancy roles, one example seeing him work with industry stalwart Des Vertannes at IATA and another in a study commissioned by investment bankers.
Hawaiian made an approach and Strauss took on the cargo job which, despite it not being an airfreight giant, “had a lot of potential”.
Percentage of cargo
He continues: “When you try to compare yourself with a very large industry and you are in a small airline, you have to look around and ask: what is the right metric?
“We settled on the percentage of cargo revenue in the overall company because that told us whether we were growing as fast as our airline, and whether the other guys were growing as fast as their airline.
“When I started, we were at the lowest percentage of revenue, at about 1.7%, and when I left we were just under 4% of revenue. No other US airline was above 2%, except United and Hawaiian.
“We more than doubled the revenue of the cargo division, taking advantage of some natural highlights that continue to be there for Hawaiian as a mid-Pacific transit destination.”
Hawaiian focused on high-value fresh foods, most of which has to be imported by ocean freight from the US west coast.
Says Strauss: “We were able to grow very rapidly, at a time when the industry was actually contracting, but we were growing at 30% a year.
“Hawaiian was an anomaly in the industry and had a couple of core things that we did extremely well and which allowed us to grow our share with existing customers and to introduce a number of new customers into the system, including Federal Express.”
Fred Smith’s mantra ‘on our own metal and never to touch a passenger airline network’ was changing, due to a customer switch from a one or two-day delivery to four days, and Hawaiian benefited.
That switch, to a deferred basis using passenger airline hubs, saw an upswing in FedEx’s use of supplemental services on certain trade lanes: “So we got it to Hawaii and they took it the rest of the way,” says Strauss.
Hawaiian is buying the ATR-72s to leverage the inter-island advantage for palletised airfreight – machinery and heavier goods – against a non-existent road network and the slower vessel speed by sea.
So, what of his task at Air Canada Cargo? “Lise-Marie is second to none and has built a great organisation and a successful airline cargo department.
“The people here are extraordinarily bright and they have been aimed at the right things and have the right tools. They know what the job is and they are passionate about it, and have a lot of good will.”
Strauss adds: “I am new enough that, for the next few months, I am going to listen and learn from what has worked well here and what could be added to with experience from other locations. Air Canada has engaged in some freighter activity and that is a natural for me.”
At the time of the interview, Strauss was to meet the management at overnight freighter operator Cargojet, with whom Air Canada Cargo launched its dedicated freighter service in June 2016, deploying Cargojet B767-300Fs on routes serving key markets before adding further flights in October. Flights currently operate between Toronto and Atlanta, Dallas, Bogota, Lima, Mexico City and Frankfurt.
These freighters feed into Air Canada’s bellyholds. Meanwhile, the airline is adding seven new long-haul flights this year, operating mostly with B787 Dreamliners, but also B767 routes, the latter operated by Air Canada’s leisure subsidiary, Rouge.
Says Strauss: “Last year, cargo grew quickly and significantly, and the ability to keep up with this growth and to understand its impact was taxed. We have learned from that, and now we know a little bit better how to approach the new routes that continue to come along.”
He adds: “There are great opportunities for growth, using the aircraft very creatively. The operation is stressing some systems at Air Canada Cargo because the volume increase has been very rapid and some hubs require new processes, and perhaps some capital investment, to take them to the next level.
That is an area where I have overseen considerable hub or terminal construction in my career and I have a natural affinity for the industrial and technical engineering side.”
He adds: “When I was with Emery Worldwide, the Dayton hub capacity at that time was 3m lbs, roughly 1.5m kilos, and we were growing rapidly.
“We doubled the output of the capacity to 6m lbs a night within a 3.5 hour window.”
Northwest’s hub at Narita was another milestone for Strauss: “The Narita facility was quite large and it needed to be, because Japan was our number one base of operations. At that time, Northwest was flying DHL material from Asia into its US Cincinnati hub, and it needed an on-airport base at Narita.
“We figured out a clever way to take what was a very constrained space and built a DHL hub sort facility inside of our own building, going up and up and up, instead of spreading out or with a mezzanine type operation usually seen in a hub.”
Plans are in the works for Air Canada Cargo to update its Toronto hub: “It is at the investigatory stage of industrial engineering, layout and the technical pieces. The IT is now very different to what it was 20 years ago, and there are terrific opportunities to utilise data and analytics in the planning stage of the hub construction, as well as for operation process improvements or customer relations.”
Strauss understands that the Montreal and Vancouver hubs are in “pretty good shape” and that Toronto requires his more immediate attention.
Pharmaceuticals and e-commerce are on the radar too. Air Canada Cargo handles sizeable pharma volumes and Strauss wants to grow the business, recognising that the airline has to keep pace with the changing regulatory environment, but also in tandem with airport partnerships.
“There is an opportunity for us to work with the airports in Canada and to look at system-wide or terminal-wide changes that might be beneficial to a wider air cargo community as well: good for the airport and for the community.”
He cites Miami airport, a major pharma hub, where there is a mix of facilities owned by individual airlines and some owned by the airport authority, with the latter rented by airlines or forwarders. Such a profile allows a wider spread of air cargo stakeholders to expand quickly.
He adds: “It is just a matter of whether the local government or the provincial government sees air cargo as an important component in the pharma world, which is good for the whole community, or whether we take all that on ourselves.
“Either way we will build what we need to, but there is always an opportunity for co-operation, for the betterment of the industry as a whole and the community as a whole.”
He hails e-commerce as “the biggest opportunity in front of the air cargo industry”, but admits: “In truth, I don’t think that we all quite understand what that opportunity looks like yet, because I don’t think that we understand who all the players are and how quickly it is growing. Also, e-commerce is morphing.
“I think that e-commerce requires a little bit of learning but at the same time you have to jump in and participate in it. Obviously, for many airlines, Air Canada included, it means working with the country or foreign postal services who in most parts of the world are the predominant player in the e-commerce business.”
And then there is Amazon: “In the US and Canada our friends at Amazon are changing the business environment, and so they are an important component. They will influence or, in some cases, force others to think about their business model.
“That is really interesting because it is going to change the dynamics between airlines and other elements of the supply chain, including the forwarder and the shipper, and the big distributors such as Amazon.
“Those relationships are all dynamic right now and it is a key to the future. Amazon is doing its thing with dedicated aircraft, running from distribution centre (DC) to DC for the purpose of pick-up and delivery.
“Whether it will stay at that level or move to the next step is hard to say.”
Of his business philosophy, Strauss states: “Relationships and service are the two big things. We have enough of the right products at Air Canada but you cannot differentiate yourself very readily on products alone, but you really can on relationships, both with your staff and with your customers.”