Putzger perspective: Are yields too good for change?

By Ian Putzger

Photo: Shutterstock

Chief financial officers of cargo carriers could be excused for taking a sabbatical, safe in the knowledge that pricing will remain in the stratosphere for some time.

The mix of low inventory levels, continuing volatility and the continuing congestion in maritime supply chains with tight capacity was spelling lofty rates already, and the Russian invasion of Ukraine has exacerbated the situation.

At a stroke about 10% of the airfreight capacity between Asia and Europe disappeared from the market, due to the ban on Russian airlines and the payload restrictions for carriers barred from Russian airspace.

The ongoing dearth of capacity presents an easy opportunity for airlines to continue to rake in money many without much effort, but could it threaten to delay an overdue shift in airline strategy to secure their relevance and competitive edge beyond 2022?

Some people in this industry have called for a long time for a change in this respect.

Stan Wraight, president and chief executive of Strategic Aviation Services International, for one, has warned repeatedly that airlines risk losing their premium business if they don’t step up their game.

He recalls how carriers lost the high yielding express business to the integrators because of their inability to recognise the change in the business and adapt to it.

He calls for a fundamental shift in approach: “If you think like an airline, you’re doomed. You need to think logistics,” he warned.

It is not what happens in flight where carriers distinguish themselves, but on the ground.

This requires a different skill set from what was expected yesterday. Airlines need to recruit, retain and train people who have a bird’s eye view of supply chains from end to end.

It also calls for a transformation of how carriers are structured, and the underlying mindset. Carriers have to break down the traditional silos – both internally and externally – and share information with partners along the supply chain, Wraight argues.

“It’s what beneficial cargo owners are doing and expect you to do,” he says.

To begin with, airlines should be clear who they need to talk to. The historical approach based on selling to exporters misses the point, according to him.

Decisions on transport are taken by beneficial cargo owners, who are often not exporters, he noted.

Airlines need to grasp the overall picture, beyond the airport to airport segment, and position themselves accordingly, if they don’t want to lose the rest of their premium business.

Lufthansa Cargo: Ukraine crisis will cause 10% global capacity drop

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