E-commerce driving revolution in air freight: 'make it happen', says Saudia Cargo chief

The air cargo industry has received an opportunity to revolutionise and get investment – and it must take it.

Rainer Muller, executive director of Saudia Cargo, urged the industry to “make it happen” and to ensure it gained the advantages of the rise of e-commerce.

Speaking to The Loadstar at Air Cargo India last week, Mr Muller said: “Integrators have shown us how it can be done. Now, the e-commerce industry is showing us again.

“There is one difference. The air cargo industry is more involved in e-commerce development because now we are not just transporting envelopes, but different commodities with different requirements. I see this as something that requires a higher involvement from the industry.

“We have to make it happen.”

One boost for the cargo side of the airline business is the direct impact on consumers, rather than just B2B business. Mr Muller said he thought the passenger divisions of combination and belly carriers were getting a closer understanding of logistics – which could, in turn, ensure that cargo divisions could ultimately see more investment.

“In every household, you see the parcels come in. But still one of our tasks as an industry is to make everybody understand that a major part is being played by the air cargo industry.

“This is a big chance for all of us to plant an idea in the minds of everyone that those parcels didn’t just fall from the sky. We made it happen. IATA has been trying to get this message across – now we all can.”

One of the potential struggles for airlines is the lack of capacity – or unwillingness to invest in maindeck capacity on the back of just a year of relatively healthy volumes.

But several airlines have pointed out that the quickest and cheapest way to boost capacity is to increase utilisation – a method Saudia Cargo is working on.

“Target number one is to utilise our existing fleet in an even more efficient way, and put more hours on to it,” said Mr Muller. “We estimate we could add 10-15%.”

Saudi Arabia is served by several e-commerce platforms, including noon.com and souq.com, the Middle East’s largest ecommerce platform, acquired by Amazon. Saudia is in talks with several players.

“There is already a significant market, but I foresee further growth,” said Mr Muller. ”But that growth has to be in line with available capacity.”

But, he said, despite being a large country, the domestic e-commerce business was unlikely to need narrowbody freighters.

“There are ongoing discussions to use the bellies of our domestic network – I think domestic express can be covered with our passenger network.”

The e-commerce-driven capacity crunch has led to a change in the way customers are booking, he added, following the “bottlenecks” of the past year.

“Compared with two years ago, a number of customers are trying to secure capacity for the medium and long term. That’s a change. It allows customers as well as airlines to plan in a more efficient way.”

Charter is a key sector for Saudia, accounting for almost 10% of its business. Mr Muller said the carrier had seen more growth in charter work in 2018, and “major customers” are interested in long-term charter agreements.

“That is both e-commerce customers and forwarders on behalf of specific customers. Based on their experiences in the high season of 2016 when, and the same but on a wider scale in 2017, there were bottlenecks. Now the whole industry is trying to plan more in advance to avoid these situations.”

He added that the carrier was also seeing more blocked space agreements.

And infrastructure also needs examining to make sure it is fit for purpose, Mr Muller said.

“Our facilities have been designed for certain volumes, and they are by far exceeding that. And there are more additional requirements; special processes, cool chain, express.

“They need different processes and space – so we are looking at the layout of our facilities and considering expanding capacity to allow us to adjust to new requirements. I expect this to be a continuous process.”

He added: “The pace of change has quickened. E-commerce platforms are changing the dynamics of the industry. This is a big chance for our industry – and a big challenge.”