News / Etihad Cargo: AI and a new freighter strategy in the 'peak of all peaks'

A slimmed-down Etihad is looking to boost its cargo capacity and credentials, betting on a strong future freight market.

And it could secure additional capacity of more than 3,000 tonnes a year – without any fleet changes – just by using its capacity better.

To that end, it has signed-up with Speedcargo, a technology company that uses AI to measure cargo dimensions and optimise space planning and capacity utilisation.

At the moment, it’s only a proof-of-concept agreement, to see whether the Cargo Eye and Cargo Mind products will transform operations, but maximising cargo across flights and ULD configurations could add more than 3,000 tonnes a year, according to Martin Drew, SVP sales and cargo. It will also cut labour costs.

“It’s all done by eye now,” he told The Loadstar. “But it will help show how to build pallets, and will result in big improvements in the optimisation of capacity, which is our most valuable asset. There are some impressive numbers.”

Etihad is not just boosting capacity via technology; the market can also expect a fleet announcement, hinted Mr Drew.

“We are defining our freighter strategy, and there is an appetite among the board members to grow the cargo side. The internal process is ongoing, but it’s likely an announcement will be made soon.”

Etihad, in common with many carriers, has shrunk during the pandemic – but also boosted its cargo arm. From a fleet of 70 widebodies in 2018, (A330s, A380s, 787s and 777s) it now has 45 widebodies, primarily 787s. It hopes to build back up to 70 aircraft within five years, adding the A350. It also, of course, has five 777 freighters.

“The pandemic has allowed us to simplify our fleet and cut complexity. We are now a mid-sized airline, and it’s all about being the right size and the right shape. We don’t need to be the biggest,” he said.

Alongside its freighters, Etihad also removed the seats on five of its 777s, creating, said Mr Drew, “an airline within a airline”. But the passenger freighters come with limitations, both on the commodities that can be carried and the airports that will serve them.

They are particularly good for garments and can offer their wares in markets such as Cambodia, Bangladesh, Vietnam and India. The shipments go to Abu Dhabi where they are palletised for onward transport.

But, Mr Drew admitted: “It’s an expensive method of operating – the cost per ATK is 2.5 times that of a 777 freighter. And there are some constraints on the flights.”

He is confident of a continued strong market, however, and expects them to operate “into the middle of next year”.

The market at the moment is, of course, a busy one.

“The peak of all peaks; it’s definitely gone up a level,” he said. “And yields are pretty incredible.”

But amid reports of carriers tearing-up contracts to opt for higher-paying customers – with Middle Eastern airlines particularly in the frame – how is Etihad managing its desire for cash alongside its duty to forwarders?

“BSAs and contracts continue to be part of our business,” said Mr Drew. “We’ve always had BSAs ex-Asia, and we are now seeing them out of Europe, which was unheard of previously.

“It’s always important to strike the right balance – how much capacity is committed, how much goes to the spot market. It’s about not leveraging market conditions and being fair. Our mix of BSAs and spot hasn’t deviated much from our original policy, although it does depend on routes.

“It’s about not being seen to take advantage of a situation. We take a long-term view. Some carriers are taking advantage, but when we return to normality we want to be remembered as fair and supportive.

“When passenger widebodies come back, from a forwarder standpoint, they will be able to return to choice, and it’s important we remain a preferred carrier, so we have to strike the right balance. We have some flexibility within our BSAs and with surcharges, but we don’t want to take advantage.”

Mr Drew acknowledged that Etihad had been “a bit late to the party”, in terms of gearing-up additional capacity during the pandemic – perhaps owing to the fact that he only took over in November last year, after the resignation of Abdulla Mohamed Shadid, who had some fierce critics.

But it was a great time to come back to cargo, said Mr Drew, adding: “It’s been quite a year. To be back in cargo is great after five years away. I missed it massively. Cargo has been a lifeline, I hate to think what we’d have done otherwise.”

His previous role was on the passenger side.

“The timing couldn’t have been better. The passenger market was bleak while cargo was booming. It was a great way to escape it and I’d really, really missed cargo.”

However, he retains his role as global head of passenger sales – a useful time to combine the two sides.

“Passenger colleagues want to hear about cargo. Cargo has always been highly valued in Etihad, but now everyone wants to be part of it.”

Carriers have to now deal with the tricky balance between passengers returning to the skies while cargo is full steam. Etihad is developing a network now based on passenger breakeven load factors.

“Airlines have been crying out for this for a long time. Cargo has allowed us to rebuild the network as passengers return,” said Mr Drew. “We have more capacity than normal on key cargo routes, and now there is a huge amount of pent-up passenger demand.

“It will take some time to fully return, but cargo will be a constant for us and has a much bigger role in terms of deployment of passenger aircraft. While looking at new passenger routes, cargo is also asked now. And that is something that is going to continue. “