Cargolux CEO, Richard Forson, examines the factors affecting air cargo’s future, both positive and negative.
Air cargo is enjoying a resurgence after years in the doldrums, with Cargolux one of those reaping the benefits. But there are a number of critical aspects of the industry that could yet affect its future growth and Cargolux CEO Richard Forson believes that all stakeholders must engage in ensuring air cargo’s success.
Are you satisfied with Cargolux’s performance?
I think any cargo unit will be happy with their performance last year. Cargolux is no exception. We had a very successful year. I have just signed off on our 2017 accounts for approval by our Board and they are extremely positive.
But, as I say, we won’t be the only one. Market circumstances were good, and everyone will have taken advantage of that.
Nevertheless, a sign of Cargolux’s strength is a solid start to 2018. We are ahead of forecast and all 27 aircraft in our fleet are fully deployed. During the Chinese New Year, the dip in traffic out of Asia has to a large extent been offset by our performance in other areas.
Is the partnership with Emirates SkyCargo making any difference yet?
The agreement was finalized in May 2017. We have to be cautious on the commercial side because
it is important to be compliant with all aspects of relevant regulations governing such relationships. We have to be certain we do everything by the book.
There are several ongoing discussions. Our ground handling at Dubai has moved from Dnata to SkyCargo and we have wet-leased an aircraft to them. Possibly, there may be a second wet-leased aircraft in the near future.
The interaction between the parties is excellent and a deeper level of cooperation would be desirable. But compliance is foremost in our thoughts.
Why are you part of Henan Cargo Airlines and what are your plans for the airline?
Zhengzhou Xinzheng International Airport in Henan is an important hub for Cargolux. There are 15 frequencies a week during peak periods and it is our biggest hub in China.
One also has to be aware that we will only be a minority shareholder in Henan Cargo Airlines. The main benefit we see out of our intended partnership is that we will be able to offer more destinations and flexibility for our customers through block space agreements and interlining.
The project is proceeding slowly because there are a number of approvals to obtain and crew to recruit, a market that is already under pressure.
The shortage of pilots is a major issue in China and it is not straightforward to recruit pilots if they are already flying with other Chinese airlines.
We are exploring the use of Western pilots but that is an open question right now. We are seeking clarity from the authorities. The situation to recruit in China is under increasing pressure on the demand side due to additional aircraft coming into service, including for domestic express freight operators.
I know it is a contentious topic, but the technology for autonomous operations exists. Look at drones. This will be interesting in the longer term
How can the speed of e-cargo implementation be improved?
For any asset-heavy industry, it takes longer to adapt to changes in the market. Having said that, there has been talk of e-cargo for many years. However, as an industry, we have been too slow in converting to a digital environment.
There is a real desire to improve the interaction with our customers, provide a seamless service, and to reduce cost and paperwork. However, obstacles include poor data quality, incomplete coverage, lack of common data standards, and the use of legacy technology.
One of Cargolux’s prime focuses is digitizing as many processes as possible including the process from ‘quotation to cash’. We want it to be as quick and efficient as possible.
What about the perishable and pharma trade? Is air cargo moving quickly enough to adapt to pharma requirements?
Recently, there has been a huge amount of investment from airlines and airports in serving the pharma trade.
Pharma is still a premium product at the moment, but it will soon become a commodity because of this. Every airline will be able to offer a certified cold chain process for pharma. That is a good thing, but it does mean yield premiums will be eroded.
Perishables are also a growing market and many cargo units are focusing on this sector as a result. But perishables do not bring you the best yields. Achieving a yield to volume balance is a crucial business decision. And perishables come with quite a few restrictions on what else can be carried due to different temperatures, proximity to live animals on board, and so forth.
Do airports need to do more to accommodate cargo operations?
Yes. Cargo is still second place to the passenger side of the business.
Some airports are good and have made significant investments in their cargo operations. Singapore and Hong Kong are good, as are Dubai and Doha. And I believe JFK in New York is looking at new cargo infrastructure.
But at Amsterdam Schiphol, cargo carriers have lost slots because of the growing passenger business. Most airports are not investing enough in cargo. There are a variety of reasons for this but mostly it is about serving the growing passenger market first. It will become more difficult for cargo carriers to get slots at key airports during peak passenger periods.
What is the best approach for improving cargo security?
There are a multitude of security measures with which we have to comply. It increases cost and there are no quick ways to solve this.
Of course, we need to know what we have on board. We want to be secure and we will comply with all requirements.
Technology is certainly part of the solution. We are beginning to see its impact on the passenger side and it can be implemented on the cargo side too. It will help to improve not only the security but also the facilitation of shipments.
Again, though, it comes at a cost, including decisions to not operate to certain airports because of security concerns or not loading export cargo where we are not happy with the screening process.
We work in close collaboration with our aviation authority who have oversight over our operations. Lithium batteries are a good example of additional security measures that we have self-imposed on our operations. Safety of operations is always the number one priority. The lithium battery market is potentially huge given the fact that many motor manufacturers are now developing electric cars.
With all of these challenges, it is worth noting that the shortest time in the whole shipment process is the time spent flying. It is clear that processes on the ground must be improved, from security to infrastructure to regulatory approvals.
Can cargo do more to help with aviation’s environmental targets?
The environment is a serious topic for Cargolux and we include it in our official financial statements so there is complete transparency.
There are a number of ongoing programs to reduce our carbon footprint, such as recycling initiatives. The biggest impact of all, though, is investing in new technology aircraft that will reduce noise, NOx, and carbon emissions through better fuel burn and cleaner burning engines.
We also have some very specific programs to save fuel while never comprising the safety of the flight. We do our utmost to limit our impact on the environment.
How difficult is it to attract staff to air cargo rather than the passenger business?
If you look at the forecasts from the manufacturers, then it seems clear that there will be a problem. A huge number of pilots and maintenance staff will be needed to handle the aircraft on order. It will be a problem for airlines, both passenger and cargo.
There are plenty of initiatives underway to address this. But as you look ahead, the question is to what extent technology can be used to help deal with the issue. I’m wondering if you will need crew at all, especially for cargo operations. I know it is a contentious topic but the technology for autonomous operations already exists. Look at the use of drones. This will be an interesting development in the longer term and, in my view, it will certainly develop first on the cargo side.
Modern aircraft today essentially fly themselves and the pilots are there to monitor and to react to any unusual events. But we know that machines can react quicker than humans. If they are programmed correctly and can learn from situations through artificial intelligence, then one can very well ask the question, do we need a pilot at all? Acceptance from the general public will certainly be an issue on the passenger side but perhaps not to the same extent on cargo operations.
In general, what is your outlook for the air cargo industry?
The air cargo industry depends heavily on the level of global trade. At the moment, the geopolitical situation is tense, and we could see a tit-for-tat trade war. That would obviously hurt air cargo. One positive thing though is that main deck freighter capacity is not increasing. The capacity increase is coming through the passenger side but as passenger aircraft begin to fly longer and longer missions, belly capacity for cargo suffers. So, cargo carriers will remain relevant. The nose door of the 747 gives you the ability to handle outsize shipments, for example. It is a big advantage. Although the 777-200F program will continue and possibly be replaced by a 777X version, the aircraft isn’t a direct replacement. It will be interesting to see what the manufacturers will do as even a derivative of passenger aircraft costs billions to develop into a freighter.
90 destinations are served by Cargolux across five continents
27 is the number of aircraft in Cargolux's fleet
One of Cargolux's prime focuses is digitizing as many processes as possible including the process from 'quotation to cash'
1970 Cargolux was founded in 1970 by Luxair, the Salen Shipping Group, Loftleiðir and different private interests in Luxembourg