Aviation
ETIHAD CARGO TO GROW THROUGH PARTNERSHIPS
June 8, 2017
EY77F [3]
Etihad is using its own metal and developing partnerships with other airlines to grow, strategies which it believes are complementary and can go hand in hand, especially at a time when competition is tough and yields are down. (Photo: Etihad Airways)

Despite large numbers of upcoming aircraft deliveries, Etihad Airways is looking to grow its cargo division with the help of its partners rather than on its own.

 

The airline currently operates a freighter fleet consisting of five Airbus A330-200Fs and five Boeing 777Fs, with another 777F due to join in 2018. In terms of passenger widebodies, Etihad also has A350-900s, A350-1000s, 777-8s, 777-9s, 787-9s and 787-10s on order.

 

“Combining freighter and belly capacity provides a stronger platform overall,” says David Kerr, vice president of cargo at Etihad Airways. “What’s worth considering is the partnerships that we’ve had in the past and will continue to develop as a source of cooperation on capacity, such as with Alitalia, Air Berlin, Avianca, AirBridgeCargo, AerLingus and Royal Air Maroc. So I think that’s an opportunity for growth and shared risk.”

 

According to Kerr, using Etihad’s own metal and developing the partnerships are complementary and can go hand in hand, especially at a time when competition is tough and yields are down.

 

“We’ve been on a cycle of investment in new markets with flexible capacity and then brought around equipment to sustain that long-term,” he says. “The market in general is challenging that model so we’re seeing less of that at the moment. That’s where the partnerships fill the gap, in that we’re able to solve some issues for our wider global customers. Without our partnership growth, we’re moderating capacity in 2017, but with our partners we continue to grow.”

 

The partnership with Avianca Cargo on the Milan-Bogota route was launched in November 2014 and was first operated with a 747-400F wet-leased from Atlas Air. Etihad Cargo took over and deployed one of its own 777Fs in April 2016.

 

“I think that partnership could potentially deepen,” Kerr says. “We may add frequencies or different points into that network. But it supports the broader trade lane between Europe and South America in both directions and we don’t see that changing fundamentally. It’ll be more about the frequency and the breadth of the schedule within that trade lane.”

 

While South America suffered from an overall economic recession in 2016, Colombia was one of the better performers. The Organisation for Economic Co-operation and Development predicts that the country’s GDP growth will rise to 2.5% in 2017 and 2.9% in 2018.

 

“The Avianca results have actually been strong and the route’s performing well,” says Kerr. “Their freighter and belly connectivity into Bogota and then heading into Europe, particularly in the perishable business, has been one of the growth areas. Southbound markets such as Brazil were challenged, but because of the partnerships we have a diverse number of destinations we support. We’ve seen growth into places like Chile, Colombia and Mexico. If we were just flying to one point we wouldn’t have that diversity.”

 

As part of Abu Dhabi International Airport’s expansion master plan, a midfield passenger terminal was originally scheduled to open towards the end of 2017, but after a recent visit to the site by the Abu Dhabi Executive Council, the executive authority of the Emirate of Abu Dhabi, the opening was pushed back to 2019. While the delay will partially affect the cargo business, the plan also includes new cargo infrastructure which, over a phased programme, will enable the carrier to handle close to 2 million tonnes of cargo across its network.

 

“We’ve got a design for a new facility that will be ready by the end of the decade,” Kerr says. “Recently we’ve also invested in expanding our existing platform and that allows us to comfortably accommodate our growth over the next five years. We’re substantially a transit hub, so we’ll have the ability to quickly connect bellies and freighters tail-to-tail. It will fulfil the latest requirements around security, and will have transparency of data as it flows through the hub. Those are all priorities that have been integrated into the plan.”

 

For the remainder of the year, Etihad is continuing to see strength in Southeast Asia and China, but Kerr says that he would also like to grow the Americas network.

 

“I think what we’re seeing is a trend where austerity policies are starting to be reversed, and growth and investment are starting to take place,” he says. “That’s more encouraging to us than concerns about increased protectionism. Although that could potentially dampen any growth, the underlying trends that we see are positive. Global trade relies on open markets as much as possible. Any given economy’s growth as an economic engine can contribute to global trade and air freight as a result.”

 

After a challenging first quarter, Kerr says he expects Etihad Cargo to outperform the remaining three quarters year-on-year, and the early signs are already pointing to that being the case.

 

At the same time, the airline is monitoring the needs of new regulatory requirements and preparing for the implementation of a new IT system that will substantially improve the transparency of data, something which Kerr says Etihad needs to support both in response to customers and as an overall industry initiative.

 

“The fundamental upgrade of IT infrastructure and improvement of process is essential for air freight to compete,” he says. “We need to be relevant to the changing dynamic of global trade and digital commerce.”

 

 

By Jeffrey Lee

Asia Cargo News | Abu Dhabi