In the midst of the Covid-19 pandemic, passenger flights were grounded worldwide and airlines scrambled to adapt for cargo. Etihad decided that this was the moment to step up and be counted. Melissa Moody discovers what happened next.
It was on the 24 March that all flights out of the United Arab Emirates were grounded; a mere 48 hours later, Etihad started operating its passenger flights as cargo-only.
“By that time, we were kind of prepared for that eventuality. Before, it seemed to us that it would never make sense to operate passenger aircraft on a cargo-only basis, but there became markets in which it started to make sense,” says Leonard Rodrigues, Etihad Cargo’s head of revenue management and network planning.
The airline’s quick turnaround worked with market conditions to increase its revenue in the second quarter of the year, when many others struggled. It focused on modulating its network activities “to put capacity where the demand is” and as a result operated humanitarian flights for the UAE government to more than 60 cities, 40 of which were not previously covered by the carrier.
“The total volumes [of cargo] have been decreasing compared to 2019. However, the speed at which you need to react and go to different places that have a shortage of supplies is what has been guiding us,” comments Rodrigues.
The strategy worked. Driven by an increase in demand and a spike in cargo fares, Etihad Cargo reported an improvement of 37 per cent, equivalent to some $130 million, compared with the same period in 2019, when 254,345 tonnes of cargo was carried.
With grounded flights leaving a reduction in capacity, the carrier had to learn to prioritise and identify where they still needed to fly to, with each flight carrying its own set of new regulations, making it a “much more operationally challenging environment.
“Traditionally, over half of air cargo is carried on passenger aircraft in the belly-hold, but we were unable to do that. Instead, we focused on the demand itself – whatever needed to be carried in Q2 absolutely needed to be carried. A lot of it was personal protective equipment (PPE), and supply was extremely scarce during that time, so that’s what led to an increase in revenues,” notes the Etihad executive.
The digital age
The carrier’s resilience during the pandemic was also helped by its focus on digitilisation. It admits that it never tried to differentiate itself by being the biggest, having the largest reach or number of aircraft, but instead its focus on the digital age of aviation has kept it on top.
“What we value as our key differentiators are agility and digitalisation, knowing they go hand in hand. It’s really key that digital solutions are cutting edge; the more digital you are, the easier it is to be reactive to different changes in the environment,” says Rodrigues.
That philosophy not only applied to its network, but its staff too. What the company called its “hero front-liners” had to stay on the ground, albeit in reduced numbers, but some staff traditionally based in warehouses worked from home.
The airline gained speed on the process in the first months of the pandemic and it was technology that allowed staff to work from home for the first time. Work put in beforehand enabled a smooth transition, with the decision made over a matter of hours and no negative business impact.
Looking beyond the pandemic, its digitalisation includes a new partnership with E2open, a provider of intelligent supply chain solutions. Scheduled to be fully operational by November, the partnership will enable Etihad to automate cargo screening against global regulations and sanctions, leveraging E2open’s global trade content. The automated solution will improve efficiency, streamline workflows and minimise the risk of fines and penalties, as well as reducing the time associated with screening cargo.
The external provider will allow the airline to improve its compliance by feeding back any red flags on ambiguous goods, in addition to helping its customers by simplifying the challenges navigating through the relevant trade regulations, sanctions and embargoes. “It’s an enhancement of our capabilities,” Rodrigues affirms.
With Covid cases globally on the downturn and countries starting to open again for passengers, Etihad says that it’s had to re-plan and re-forecast what the new normal is going to look like.
“Etihad Cargo wants to have a very positive outlook on the future, yet we still expect a slow recovery,” Rodrigues comments, with predictions from the carrier not expecting air travel to return to pre-Covid levels until 2024.
During the peak of the pandemic, Rodrigues explains that cargo was the sole source of revenue for the company and, even as people start to take to the skies again, cargo is still “the main fuel to any restart strategy”.
“The reality is that there’s going to be a slow resumption, and that will have a relatively strong impact on cargo. There’s the probability that we would see expansion in the form of markets that used to focus primarily on cargo, which probably now make sense for cargo and passengers together. But also as a consequence of this new reality, we know that we are going to be using close to the maximum of our air freighters.”
He notes that the increase is already visible because the world is still within the pandemic, but the higher utilisation will extend into the future with more freighter flights than before.
“It’s a way to rebalance the overall supply and demand within the passenger world. I think what is clear is that airlines’ priorities are now not to try and redo what they were doing in the past, but to try and see what cargo can enable them to do in the future to, at some point, get back to their new normal.”
Etihad is also clear it has not forgotten about commitments in sustainability. Its partnership with Boeing for its 787 ‘green-liners’ is still fruitful and in January it made a commitment of zero net carbon emissions by 2050 and halving of 2019 emissions by 2035.
“Whilst Covid is having a major impact on every airline, this is one of the commitments we’re not going to let go of – we want to continue in the direction of becoming the most sustainable carrier where possible,” concludes Rodrigues.