Get smarter or get squeezed

AFTER eight years away doing other jobs within the airline – including heading the carrier’s maintenance, repair and overhaul business – Tony Charaf returned in 2012 as chief cargo officer for Delta Air Lines.

He found a cargo business with a significantly bigger footprint in Asia than when he left in 2004, but one that had not progressed massively on the switch to electronic methods of working.

“Candidly, what has surprised me the most in returning to cargo –which I love, by the way – is that our business continues to rely heavily on paper and that technology has not changed dramatically,” he says. 

“When you look at the advancements on the passenger side of our business, you immediately notice the impact of technology: electronic tickets, airport kiosks, online booking, access from mobile devices, and the list goes on and on. All of these are designed to make it easier for our customers to do business with us. As an industry, cargo needs to catch up and leverage the advances made on the passenger side, and the sooner the better.”

Delta Cargo has itself not been slack in this regard, and consistently has led IATA tables for electronic airwaybill adoption, with penetration of up to 40 per cent. Charaf says the aim is to take this above 50 per cent this year. “This is something we are fully committed to,” he says. “We view e-freight as an essential strategic initiative, not only for Delta Cargo but one that will really boost efficiencies across the full air cargo supply chain.” 

Asked the secret of Delta’s success in this area, Charaf says a key component is demonstrating to for-warders the benefits that e-freight can bring them. “We can show them that submitting their information to us electronically increases the accuracy of that information, and that reduces the number of adjustments and the chances for human error. Also, submitting information electronically requires less time for acceptance by our receiving agents and moves the transactions along much faster. In the end, this benefits us all.”

He sees the recent multilateral airwaybill agreement reached by IATA as also being important in the months ahead. “We officially joined on 18 April, which means that, along with Swiss, we were the first airline to join. That demonstrates our commitment to leading the industry in this area.”

Another area in which Delta has led has been in accepting XML messages from forwarders. The carrier has now been receiving IATA-standard cargo XML messages from Kuehne+Nagel and DHL Global Forwarding since late last year, one of only two carriers to do so.

“We started with XML because the messaging is much cleaner and more detailed. It gives you a full copy of the airwaybill [rather than the abbreviated one in the EDI message], and it is clearly the next generation of electronic messaging,” Charaf says. “We fully support XML and we are active in promoting it throughout the industry. We do see the need for Delta and other airlines to act as technology enablers to get the necessary buy-in and support from our customers.”

One could read into that statement some dis-appointment that other airlines and forwarders have not followed suit with XML.

Charaf admits that one problem is that XML requires system changes, which involve costs and training. He gives credit to Delta Cargo’s system provider Unisys for being ahead of the game in this respect. 

“Changes to processes typically meet with resistance. Shippers also naturally ask: What is the return on investment? Ultimately, we need to get to a critical mass to justify the cost. Another challenge involves defining the standards. There has been a struggle to get consensus on what the standards should be.”

For those without the capability to send EDI or XML messages, Delta Cargo has also been striving to imp-rove its customer experience. At the end of last year it launched a new deltacargo.com website with improved des-ign, navigation and shipment tracking capabilities. Later this year it will also be improving the booking functionality on the site, part of a package of usability and interface enhancements. 

As well as being an essential part of bringing cargo into the internet age, Charaf also sees all these improvements as a way of coping with continued yield pressure. Put simply, he feels that, in a tough market, carriers have to become more efficient and more customer-friendly to retain business.

“Yield pressures and excess capacity are aspects that are not new to our business and will not be going away in the near term,” he says.

“The market ultimately determines where rates and yields are, so our focus needs to be on delivering strong service levels. Delta Cargo will do this by investing in our people and providing them with the tools that they need to serve our customers.”  

Another aspect of this is a renewed focus on process improvement and operational reliability. In particular, the carrier has been introducing new technology and standardising processes at its Altanta hub. This has included a new Cargo Logistics Manager system that connects scanning technology at the hub to its existing IT platform. 

“This gives our cargo ops team real-time visibility in one centralised location to all the freight, including US Mail, coming into or leaving Atlanta,” says Charaf. “After the system is piloted in Atlanta, we expect to roll it out to other stations later this year.”

All of this is taking place against the backdrop of global economy that has still not returned to pre-recession growth levels. Charaf says the US is flat, Europe continues weak, and that while the Asia-Pacific offers the strongest growth prospects in terms of GDP, its growth levels are still not back to pre-crisis levels. Exports from the USA to Asia are slow, he notes, with Latin America – particularly Asia to Latin America – being a rare bright spot. 

He is cautiously optimistic, though, that 2013 will see a turnaround for air cargo, but sees no signs of it yet, listing too much capacity chasing declining freight volumes, and trucking and ocean freight that has become more efficient and dependable over the years and so is taking some higher value goods away from airfreight. “Add to that, competition in the industry is keen, which means that we all have to work even harder to grow our business,” he says.

On the capacity front, Delta will essentially not see growth in 2013, but cargo is getting some useful new routes to Asia. B767 Seattle-Haneda flights were due to start on June 1, with a Seattle-Shanghai route following from June 16, with the same aircraft type. A B777 route between Detroit and Beijing also started earlier this year and, on transcontinental US routes, widebodied capacity has been added between JFK and Los Angeles and JFK and Seattle.  

Delta’s main fleet change during the year will be the arrival of the first of 88 B717-200 aircraft in the fall, to replace the carrier’s 50-seat regional aircraft. Charaf says this injection will provide important new capacity for cargo, particularly for small package express and US mail shipments, which are target areas for growth.

Delta will also be investing in its existing premium products in the coming year, with a particular focus on automobiles and parts, high value secure cargoes, pharmaceuticals, express biomedical and perishables. 

“One improvement we can point to is our GPS technology that we offer customers, especially those with premium products such as pharma,” says Charaf.

“This is a service we offer on every flight in our global network. It provides our customers with an added layer of reliability that allows for monitoring and tracking throughout the entire journey.”