United Cargo: A dutchman in America
20 / 03 / 2015
Jan Krems may have just taken over as president cargo at United Airlines after a 27-year career with KLM (Air France-KLM since 2005), but he is no stranger either to the US or to the weather in his new Chicago base.
He was for four years based in the Windy City as AF-KLM Cargo’s vice president Americas, before spending another four years in Altanta in the same role once Martinair Cargo joined the grouping. With temperatures in Chicago having dipped to as low as minus 30 degrees centigrade last winter, he is doubtless already dusting off his snow tyres.
After so long with KLM there will inevitably be some culture changes at his new airline, but a surprising one is that he reckons United is much better at providing KPIs and other performance metrics than his old employers. One might think that measuring things would be a Dutch strength, but Krems has been surprised by both the breadth of data available at United and the speed at which it comes.
"I can see daily what we did on the tonnage and revenue side the day before, whereas at Air France-KLM this data took three or four days to come," he says. "And here the carrier is treated as one organisation with KPIs from across the whole business.
"For example we get the exact time of departure and arrival from the passenger side, and comparisons between our performance and that of our competitors. There is a lot more data on our competitors than we had at Air France-KLM and I like that."
Another difference between the two carrier groups is the percentage of overall revenue accounted for by cargo. At Air France-KLM it is around 11 per cent and at KLM alone it was as much as 20 per cent. But cargo only accounted for 2.3 per cent of revenue at United in 2013 according to Flightglobal Insight.
One might think that this would mean a much smaller voice in the airline for cargo but Krems says that is not necessarily so. "It is a passenger-driven airline and the decisions are based on passenger needs. But if you look at our widebody flights and how much cargo they can take, then you can see that it is a very important part of the mix."
A bigger difference, he says, is that United does not have maindeck capacity, though given the speed at which Air France-KLM is shedding its freighters these days that might not seem to be such an issue. But Krems continues to think that maindeck has a role and does not rule out United using it at some point in the future.
"If we can see that it would give us access to markets we are not currently in or that we have not been in before, then it is something we would look at," he says. "But we would not be owning our own capacity. I have seen in the last few years how exposed that can leave an airline."
That being said he reckons there are still too many freighters flying globally and predicts further reductions. "There are now 530 freighters operating, which is 10 percent more than in 2008 with 10 per cent less cargo. There will always be a market for maindeck but not even 20 percent of the cargo that currently flies that way actually has to. So I see further reductions to come."
Nore is it just freighters which are facing overcapacity. As the passenger business continues to grow, belly cargo overhangs are getting huge on some routes. Krems calculates that on the North Atlantic there is now three times as much capacity as cargo, and that from Canada to Europe the figure is six times. "So while we have seen business picking up, we are not seeing the yield improvement that we want."
The answer to this, he reckons, has to lie in excellent service reliability and specialist products. "The only way forward is to create added value products. I learned that in KLM. We had lots of added value products and so were more stable when the downturn hit."
He is not rushing into any new product launches, however. Firstly he wants to focus on bringing all United’s worldwide stations up to the same level of performance. This effort includes training staff and third party suppliers, and reducing the number of suppliers. The ambitious goal is to have 98 per cent of shipments arriving on time throughout the network.
Secondly, he wants to be sure that existing specialist products in areas such as pharmaceuticals, secure cargo and pets are all delivering on their promises and reaching their full potential. "Before we launch more, we want to make sure that we get those that we already have up to the right level," he says. "Only then can we start expanding into new markets."
One of the existing products getting this close attention is PetSafe, which was inherited from Continental when it and United merged in 2010. While all the technical aspects of the merger are now complete, Krems acknowledges that there are still some pre-merger mindsets that need to be tackled.
His experience as one of the architects of the Air France-KLM Cargo merger comes into play here, though surprisingly this has taught him to pay less attention to cultural differences rather than more. "We maybe talked about this too much in Air France-KLM. The key is just to move ahead and if you see people doing or saying old world things, then to take them aside and talk to them."
Part of the integration process between the two carriers was implementing a new cargo system – Skychain, which in United is known as UC360° – as well as the Rapid revenue accounting system also produced by Mercator. The latter went live in July last year and produced, Krems admits, "a lot of issues". Now, however, he says implementation is "95 percent on track".
Implementing the new IT systems has meant something of a delay in focusing on e-freight, though Krems’ predecessor Robbie Anderson was fully committed to the project. Now Krems says implementation of e-airwaybills is expanding from initial trials in Chicago to more and more customers. He insists the carrier is on track to meet IATA’s goal of 22 percent penetration by the end of the year.
But he admits that customers are progressing at varying speeds on e-freight. "Some are very pro and some have their own internal issues. At every monthly or quarterly meeting we have with customers, e-freight is always on the agenda. But it is not a showstopper if we or our partners have not advanced far enough on it."
Krems also has definite views on e-booking, a topic not much discussed by the industry these days. He reckons maybe 60 percent of bookings can be automated, but the rest will always need a conversation with a customer service centre.
"For bookings under 100 kilos you don’t need to have a discussion before bookings, and the same is true of allocations against block space agreements. But for added value shipments a conversation is necessary and for these customer service centres are essential. So the aim is to automate those bookings that can be, and thus to free up call centres to proactively find and create business."
As to how the automation can be achieved, Krems says CPS and GFX are still important platforms. "But we also use community systems in some countries and are open as to how we interact wth customers. We are happy to adopt whatever is the easiest way for them to do business with us."