Many airlines are still at the early stages of formulating strategies to target the rising tide of e-commerce traffic. IAG Cargo, however, has been an early advocate of linking its longhaul flights with its European network. After an initial heavy push in 2014, the carrier added 2,000 more same-day connections to the roster last year.
The effort by IAG seems to be bearing fruit. “In 2015, we saw an increase in the number of shipments from North America and into Europe, with our consignment count 10 percent higher than the previous year,” reports Daniel Johnson, manager of global products, adding that IAG has also registered a rise in narrowbody-to-narrowbody connections.
Rich Zablocki, vice president for global product development, North America, at CEVA Logistics, said he has seen benefits, too. The program, he said, has allowed forwarders to combine smaller shipments for multiple destinations into single consolidations and saved money by achieving higher weight breaks. “The service has been reliable and cost-effective for CEVA,” he remarked. “We do find this a good way to minimize the number of what are called ‘minimum shipments,’ meaning we avoid the high cost of minimum fees while getting special attention for what otherwise could get lost in a sea of heavy freight.”
A spokesman for Air France-KLM Cargo described the commodities that shift between the airline’s longhaul and regional flights as “small, relatively urgent shipments” and also “mail and e-commerce types of freight.”
E-commerce is set to play a larger role in Europe, said Anselm Eggert, head of e-commerce at Lufthansa Cargo, pointing to growth projections for B2C e-commerce volumes. He said he sees an advantage for airlines that can link longhaul routes to regional belly networks. For example, cargo arriving from Asia can be delivered to any destination across Europe within a day, he said.
“E-commerce needs air transportation to get to destinations faster than over the road,” said Bob Imbriani, executive vice president, international, at forwarder Team Worldwide.
To make these connections work, however, requires investment and augmented service levels. IAG, for one, said it offers performance guarantees backed by online tracking in real time. Above all, handling processes need to be ramped up. This begins with pallet build-up at the origin station, including express labelling and “last in, first out” loading, a spokesman for Lufthansa Cargo noted.
The most concentrated efforts are made at the airline’s hub, though, where special mobile squads recover such shipments, as Lufthansa does at Frankfurt. Also, IAG’s Johnson pointed to the carrier’s investment in better processes and infrastructure support, especially in the Premia facility at IAG’s London hub. The carrier increased its capacity to handle loose cargo by over 50 percent, introduced new export and import offices to accelerate pick-up and delivery of small express freight, and enhanced operational procedures and optimized space, he said.
Through its express handling subsidiary, Sodexi, Air France-KLM Cargo developed a new express facility at Paris that opened last year, located near the passenger aircraft parking positions. “By doing this we are focusing towards the expectations of the growing e-commerce,” the spokesman said.
Quick transfers are crucial to making e-commerce air shipments cost-effective. “Our intra-Europe delivery means that cargo can arrive within 24 hours and connection times can be as quick as three hours,” Johnson remarked.
However, not all customers have embraced the fast connections, or the higher costs they incur. The Air France-KLM spokesman reports that many clients are prepared to lose one day in transit time for the sake of lower costs by trucking e-commerce cargo from the gateway to the final destination.
Team Worldwide, for example, is inclined to pick up its consolidated shipment at the gateway, break it down and tender individual shipments of high urgency or value for small package service on a regional narrowbody flight. This is obviously slower than having the airline perform the service, but it ends up with a lower price tag. Past experiences with airlines offering through service with connection over a gateway turned out very costly, with rates “quite high, almost like the integrators,” Imbriani recalls.
There may be an additional price benefit from competition on intra-European narrowbody routes. Some of the low-cost airlines have become better attuned to cargo, especially the small package segment. “Low-cost carriers have definitely become more of an option,” Imbriani added.