If airfreight is the barometer of global economic health, then 2012 has been fraught with illness. Tatyana Arslanova, executive president of AirBridgeCargo Airlines, doesn’t dispute this fact, but says the difference between faltering and surviving in the market lies in one’s ability to adapt. “It’s a tough and challenging environment, and we have to fight to survive and to provide better solutions,” she says.
Although Arslanova admits that Moscow-based ABC wasn’t immune to market fluctuations thisyear, she cites some pretty impressive statistics. The all-freight offshoot of Volga-Dnepr Airlines recorded 8.5-percent, year-over-year, growth in the first eight months of 2012 — a vast improvement from the sluggish worldwide cargo data the International Air Transport Association and other organizations gathered during this period.
Key to ABC’s success throughout the year, Arslanova says, was the launch of routes to profitable destinations. In January, the carrier introduced three-times-weekly freight service to Chengdu International Airport, connecting the capitol of the Sichuan province to major European destinations, including Moscow and Amsterdam. An ABC route from Moscow to Chongqing commenced four months later, a service complementing the carrier’s route to the prolific manufacturing hub of Zhengzhou.
“We feel that the logistics traffic is moving to central China, so we started routes to Chengdu and Chongqing to provide better services for key shippers,” Arslanova says.
March also saw the expansion of ABC services, with the carrier commencing freight service from Germany’s Hannover-Langenhagen Airport to Beijing Capital International Airport, via Moscow. It’s a move that reportedly capitalizes on the carrier’s recent 49-percent stake in Air Cargo Germany. Even so, Arslanova points out, the common denominator of all the new routes is Russia. “We see that the Russian market continually grows,” she says. “It’s going against the stream of worldwide traffic.”
Going against the stream is a theme that has characterized Arslanova’s entire career. After joining Volga-Dnepr Group’s marketing department in 1995, she quickly scaled the corporate ladder, eventually transitioning to vice president of marketing and strategy. When the time came in 2008 to lead subsidiary ABC’s marketing department, Arslanova jumped at the opportunity, spending more than a year developing and executing the carrier’s business plan. Her biggest role, to date, came on Jan. 1, 2010, when she was appointed chief executive of ABC.
Arslanova doesn’t downplay the demands of the position. “There are huge responsibilities in terms of safety and security as well as having the right people in the right places so we can survive in this cargo environment,” she says. “It’s a challenge.” Also challenging, she says, is being an all-freight operator in today’s market. Despite ABC’s route expansion and the notable growth the company recorded earlier this year, Arslanova admits that ABC has been “suffering” lately.
“But we believe in the future, and for us it’s time to change — time to change in terms of services we can provide,” she says. Fortunately, Arslanova says, “We have a lot of ideas about how to change, how to be more innovative, and how to deliver cargo faster, and [foster] its future development.”
Taking paper out of the airfreight supply chain is one of her key goals. ABC, which is an associate member of IATA’s Cargo 2000 interest group, began test flights using air waybills this summer, two years after the carrier launched its e-freight initiative. Arslanova has high hopes for the project — especially in ABC’s domestic Russian market, where, she says, the Customs process is often cumbersome. “Our pilot flights were successful,” she says, “and we are looking forward to implementing e-Customs.”
Arslanova’s focus on sustainability has also extended to fleet planning. Since the beginning of the year, ABC has taken delivery of two Boeing 747-8Fs, elevating its 747 fleet to 12 freighters. The aircraft, which are being utilized on ABC’s core routes between China, Moscow and Europe, replace older Boeing Classics, Arslanova says. She calls the 747-8Fs a game-changer for ABC, explaining that they allow the freight carrier to maintain the highest standards of environmental compliance, as well as the “youngest freighter fleet in the industry.”
The new aircraft are also positively impacting ABC’s charter operations, Arslanova says. Since the beginning of 2012, ABC has chartered flights ranging from commercial to humanitarian operations. Some of the company’s more memorable assignments from 2012 include hauling a 1,146-pound walrus from Russia to Germany and transporting 100 tonnes of food supplies to International Security Assistance Force personnel in Afghanistan.
To Arslanova, these assignments highlight ABC’s ability to serve niche markets and address varying customer demand. “For us, it’s always about key decisions,” she says, “decisions about which markets to serve and which solutions to provide, and the growth [opportunities] we can provide.”
General economic malaise has led Arslanova to scrap expansion plans for 2013. Anticipating flat growth for the year, she reveals that ABC won’t be adding capacity on any of its routes in 2013. Instead, Arslanova says, ABC’s objective will be to “continue improving productivity and efficiency” on existing routings.
Even so, Arslanova maintains that she is constantly on the lookout for new, profitable regions to serve. The U.S., in particular, is rather attractive to her. Although Air Cargo Germany is completely taking over ABC’s traffic between Europe and North America, Arslanova would love to break into new U.S. markets.
“We operate in Chicago right now, and we are looking to expand our network with our partners to Atlanta and other destinations in four years,” she says. “We want cargo from the U.S. to Russia.” Arslanova reveals that roughly 50 percent of ABC’s traffic goes directly to Russia — which, she says, is a boon to operations since the Russian market is hot. “Our advantage is the [market access] we can provide to our freight-forwarding customers.”
Arslanova says staying afloat in a stormy market requires ABC to adapt to customer demand and foster a culture of innovation. This concept applies to her as a leader in the global airfreight sector, as well, she explains. Arslanova says the recipe for her success — as well as the continued success of her company — involves three key ingredients: “an innovative management style, understanding our business model and understanding how to be sustainable from a long-term prospective.”
The year was 1990, and Chris Leach needed a job. So with a young family to feed, and an intense desire to help people using the skills he had first learned as a university student and had carried with him all his life, he started Air Charter Service as a humanitarian-focused charter brokerage. This small company, which began life as a small operation out of his basement, has since grown into one of the big three charter players in Europe.
Twenty-two years isn’t a long time in the grand scheme of things, but in that period, Leach has grown his company from a bedroom brokerage to a multinational corporation that boasts 16 outposts around the world. While the current economy has slowed down this quest for globalization a bit, Leach still sees a demand for up to 50 Air Charter Service offices around the world — it just might take him a bit longer to get there than originally planned.
“We’ve been opening three offices a year for two or three years,” he says. “Off this relatively tough year where we’re standing still, I think our emphasis over the next couple of years will be on consolidation, building up the offices we have. The number of new offices we’ll be opening will slow down to one or two each year.”
Yes, the economy has been tough recently, but Air Charter Service is doing well enough amid these trying times. Leach recently compared the health of his organization during the period from July 2011-July 2012 and found that while a competitor was down 38 percent in gross revenue, Air Charter Service had only experienced a downtick of 7 percent. Leach says he was quite pleased with that, but he still envisions bumpy skies ahead.
The main challenge next year starts with uncertainty, a state that has plagued the industry for a number of years. This lack of predictability is driven by the volatile economy, of course, but a few signs of life are cropping up. The U.S. economy is getting healthier, he says, and China has shown prospects for growth.
Even with these promising developments, Leach still sees trouble ahead for Europe. “It’s very hard to predict the future,” he says. “All the major economists disagree.”
Being in the general charter business, Leach is somewhat used to a bit of unpredictability. The general cargo business — a world in which he’s lived for his entire career — is susceptible to huge swings in activity. In 1985, for example, Leach was working as an employee with Transamerica Airlines. That year, he saw a significant increase in general cargo flights from London and Europe to
North America — hundreds of flights — and when the rates changed the next year, there were literally no charter flights.
The market went from a demand for hundreds of flights in 1985 to zero in 1986. That seems to be quite a stressful prospect for some, but Leach takes these kinds of things in stride.
“There can be quite extreme swings in cargo charter demand,” he says. “I guess it could be [stressful]. I’ve always done it; I don’t know.” Leach buffeted his company from these extremes by branching out beyond general charters. The company does quite a bit of work for globe- spanning musical tours and other entertainment endeavors like movies.
Leach also has worked hard to establish the oil and gas side of the business. He calls these two arenas nearly recession-proof — “specialized stuff becomes your bread and butter,” he says — which provides a somewhat stable existence for the company. In the middle, resting between the volatility of charters and the stability of oil and gas is automotive work, another key driver for the company.
Air Charter Service is now a monolith in an industry where, he says, the top three global players in Europe combined soak up $1 billion to $2 billion worth of charters per year. He thinks this leaves little room for a new, scrappy entrant in the business — certainly not for someone taking the general approach he pursued all those years ago.
Leach says that if room exists, it’s for someone who can take a specific corner of the market and do that very specific job really, really well. If that person came to the market and filled a niche — anything from animals to humanitarian — then they might be able to take a little chunk of the pie.
“You’ve got to get a niche these days,” he says. “It would be very hard for them to join this race to globalize that ourselves, Chapman [Freeborn] and Air Partner are involved in. But there’s always room for a hard-working, entrepreneurial guy in any line of business.”
John Lloyd, director of Virgin Atlantic Cargo, admits the carrier is unlikely to ever be a cargo giant. Despite difficult conditions, this past year marked the carrier’s best financial performance in its 28-year history. Air Cargo World talked with him about the carrier’s future developments and the industry’s standing with the public.
How healthy is the peak season looking?
The whole year has been pretty tough, but things are picking up. The peak season will be marginally better than last year, but then, it is easy saying that since last year was so bad for the industry. The difficulty is predicting targets for the next two or three years when no one can predict the next six months.
What projects are you working on?
We are currently getting our e-commerce strategy up to speed. We are switching to online booking in the next couple of months that will allow interfacing with revenue management systems in real time. We are able to do that because we already put a lot of work into launching our modified Mercator system — Voyager. This will really help us to jump ahead. Pushing e-freight will be close behind that.
The way things are with the economy means we are working with restricted resources, but fortunately [the budget] has been allocated already. So we are just getting our heads down and finishing what we have started before starting something new.
Aside from the sluggish global economy, what is your biggest challenge?
High fuel prices really are not helping anyone. Fuel costs are 47 percent of our turnover. What really annoys me, though, is the attitude in the UK to business, especially aviation. It is like no one wants the economy to improve. Things like new airports just take forever to develop here, whereas other countries just get on with it. Security regulations are a problem, too. I know of some cargo being trucked to the continent and then flown onward from there because it is easier than clearing it in the UK.
How would you describe the air cargo industry to someone outside it?
It is interesting and exciting, and the public needs to understand that and how much their lives would change without it. Half the shelves in supermarkets would be empty. People have forgotten how lucky they are to be able to walk into a shop and be able to buy food all year round, no matter the season. We need to raise that awareness, and if we did, I think we would have more weight behind changing governmental policy decisions.
How did you come to work in cargo?
I started work in a bank, but that was really dull. I looked around for jobs near Gatwick and joined Gatwick Handling in 1986. Virgin was just starting up, so I joined in 1987, and I just worked my way up from being a ramp officer. We have a good selection of people here that have done the same. A lot of aviation and cargo companies go for external recruitment, people from outside the industry. That is important, but you need a blend of both types.
What is different about how Virgin executives compare with other airlines?
One of the things that sets us apart is the influence from Richard [Branson, president of Virgin Atlantic]. His whole attitude has been, “Why can’t you do it? Why can’t you improve things?” That attitude is spread all the way through the company. While he is still not as involved as he was, directors still try to think what Richard would do. Mind you, that has definitely changed since I started. As the company has matured, we have tried to keep the challenging culture, but we have also become more disciplined and balanced.
What is your personal leadership style?
One of the things that is really important to me is loyalty from my staff. We are very much a team, and we talk about things a lot. There are some very talented people here, and it is important to get their input and their buy in. Of course, the decision is ultimately mine, but I am not a dictator.
Fortunately, I only have five senior management direct reports, so my team is quite small. With us now all in the same office after a recent move, it makes it all much easier. We are all very close as well. Some of them I have known for nearly 30 years.
What advice would you give your younger self when he was first joining the industry?
If I had spent more time in a logistics company when I was younger, that would have helped me a lot. Is it a good career move now? There is so much pressure everywhere nowadays, no one can say it is easy, but if you have a handle on both the logistics and airline side, that will give you a good grounding.
The problem is, though, that you do not often see many people moving from handling to forwarding or into airlines or vice versa. The industry feels fractured and segmented. If you have a broad experience across all the sectors of the industry, you will have far more opportunities.
I can’t believe I have been here this long. We have gone through a massive period of growth, trying to keep things under control. Now the growth has slowed a little, but we still have a lot of work internally to do. We are never sitting around bored! It helps me to enjoy my work and the people I work with. The time really has flown.