Etihad’s route to time-critical excellence
THE global cold chain and time-critical logistics market is projected to reach US$652.55 billion by 2025, partly fuelled by the exponential growth in health expenditure around the world.
According to the Organisation for Economic Co-operation and Development (OECD), which has 36 member countries, the USA spent the most on healthcare in 2018, equivalent to 16.9 per cent of its Gross Domestic Product (GDP), Switzerland was the next highest spending country, at 12.2 per cent, whilst Germany, France, Sweden and Japan, all spent almost 11 per cent of their GDP.
These figures point to an exciting potential future filled with opportunities in the global transportation of pharmaceuticals and life-science products for years to come.
Although currently a niche sector in the overall air cargo supply chain, businesses excelling in the time-critical area can further cement their reputations for expertise because of their ambitious and expensive investments in infrastructure and processes, along with the technology, complexity and training involved in successfully transporting a single shipment.
Etihad Cargo has placed itself among the leading freight airlines in this sector as it strives for further excellence, not just in pharma but across all of its time-critical services. In January, it became the first carrier in the Middle East to be awarded the International Air Transport Association’s (IATA) Centre of Excellence for Independent Validators (CEIV) certification in Pharmaceutical Logistic. The certifications cover both the airline operations of Etihad Cargo, as well as cargo handling and warehousing at its hub at Abu Dhabi International Airport.
“Continuing to invest in our infrastructure is going to be key for us going forward,” reveals Abdulla Mohamed Shadid, managing director of Etihad Cargo. “Here we are 11 months later, and we are still the only Middle Eastern carrier to obtain that dual certification.”
The cargo and logistics arm of Etihad Airways has further cemented its position as a leading international air cargo carrier after announcing on 22 December that it has been awarded IATA’s Centre of Excellence for Perishable Logistics (CEIV Fresh) at Abu Dhabi, insists its managing director.
The airline is the first Middle East airline to hold both of IATA’s CEIV Fresh and CEIV Pharma certifications.
Shadid continues: “We have aspirations to extend that to other certifications from IATA, including live animals which we will target probably next year.”
The certifications form part of a wider strategic plan to propel the young airline ahead of the more established legacy carriers.
“We took a decision [to rest] the A330 freighters and we received a bit of criticism at the time because we were doing it when the markets were doing well”
Take for example, Etihad Cargo’s decision to halve its freighter fleet in early 2018. “At the beginning of 2018, we had a fleet of 10 freighters, which included five B777s and five A330Fs. We took a decision [to rest] the A330 freighters,” explains Shadid. “Etihad Cargo received a bit of criticism at the time because we were doing it when the markets were doing well.”
“[However], we are now enjoying the fruits of that decision because we wanted to re-size the fleet to operate a fleet that is optimal for our business model,” the managing director adds.
Shadid appears unconcerned about the 2019 global airfreight downturn. “We took the right decision last year to rationalise our footprint. Despite lower yields and lower volumes, we are still able to maintain the targets we wanted.”
At the beginning of December, the International Air Transport Association (IATA) revealed global airfreight markets showed that demand, measured in freight tonne kilometres (FTKs), declined by 3.5 per cent in October 2019, in comparison with the same month in 2018 — marking the 12th consecutive month of year-on-year declines in freight volumes.
Shadid describes the current period of overcapacity in the air cargo industry as inevitable. “Overcapacity is a trend that continues with more widebody passenger aircraft entering the market, so it is something that we ought to continue to monitor. I think the flexibility of our business should allow us to react to any overcapacity that might become too destructive to the business model.”
The managing director also insists the strategy the airline took regarding is fleet and network “has helped us to weather some of the toughest periods that we were experiencing earlier on this year. “The plan we put in place last year was to develop a long-term strategy,” Shadid explains. “This industry is very cyclical — it has its upturns and it has its downturns.
“A solid business should be able to weather all business cycles, especially downturns. So, whilst we are in a challenging period for the industry, there is inevitably a time when we will come out of it,” he assesses.
Meanwhile, the airline is capitalising on the burgeoning air cargo which has emerged from the trade war between the USA and China, this year. “Current [national] policies being undertaken are actually shifting certain air cargo markets, so we are seeing previously secondary cargo markets becoming more and more active, bringing new opportunities,” observes Shadid.
“For example, we are seeing growth in Vietnam and Indonesia, and we have managed to reshape our network to be able to capitalise on those shifting trends and the emergence of new markets.”
According to a report by United Nations Trade Conference and Development (UNCTAD), US tariffs on Chinese products resulted in Taiwan gaining a massive US$4.2bn in additional exports to the USA in the first half of 2019, by selling more office machinery and communications equipment.
Mexico also increased its exports to its USA neighbour — by $3.5bn — mostly in the agri-food, transport equipment and electrical machinery sector, whilst the European Union gained about $2.7bn due to increased exports, largely in the machineries sectors, notes the report.
Vietnam’s exports to the USA swelled by $2.6bn, driven by trade in communications equipment and furniture.
These are some of the reasons that Shadid reiterates the holistic vision for Etihad Cargo in the future. “Our aspiration is not to become the largest carrier in the world. Instead, we aspire to be the more sustainable,” he proclaims. “I think what will differentiate us are the investments we are making, including our commercial overhaul, our digital infrastructure, our physical infrastructure, along with what we have done with the fleet and network. They will set us apart, whilst maintaining and improving the profitability.
“All of these decisions combined will continue to produce results for us over the long-term, and over the short-term also produce a cushion, let’s say, for the economic downturn we are witnessing,” he concludes.
Originally published at https://aircargoeye.com on December 22, 2019.
