Stan Wraight has worked in air freight for nearly 50 years, helping build up several airlines including KLM, Atlas Air and AirBridgeCargo. Now, as executive director of Strategic Aviation Solutions International, he tells Gavin van Marle how the industry has changed- and what he expects to see next.
What was your first experience in aviation?
It was in 1965, when I joined KLM as an 18-year old on a summer job. KLM was ferrying newly purchased DC-9s from California via Montreal to Amsterdam. My boss took me out to see the new airplanes and we went on board. It was the first time I’d seen an airplane up close. Of course, anyone could go on the ramp in those days. My first flight was the same year – I went on a 727 from Montreal to New York, and I remember looking out of the window and being amazed.
Why did you start in the air cargo industry?
What began as a temporary job, starting at the very bottom, pushing a mail cart, turned into a lifelong career. When KLM offered me a permanent position, I jumped at the chance and decided to finish my further education at nighttime.
I really got the bug when I saw the procedures involved in aircraft operations. I was fascinated by the infrastructure around the airport. It was an industrial atmosphere in a sexy industry.
I moved into the cargo division, and stayed there because I liked it. We did a lot of government charters, live animals, dynamite, and heavy machinery. There was a real diversity and complexity, and you saw the operational side from top to bottom.
But I’ve never wanted to learn how to fly. They say that a pilot’s job is 10 seconds of terror followed by six hours of boredom, and ending with another 10 seconds of terror. I would rather have eight hours of fun a day.
What changes in the industry do you think have been most significant since you started? And what has the impact been?
The most significant was the introduction of the 747. Until then, cargo was carried by DC-7s and DC-8s. The 747 was a game-changer. I remember when I first saw one, coming round the corner of a warehouse, and my jaw dropped. It was massive. The first 747s were passenger aircraft. KLM was so cargo-friendly it had its own customized system to load passenger bags on to the upper deck, which left the whole lower deck for cargo.
And then came the combi aircraft and the freighters. Air France, Lufthansa, SAS, BA – even American Airlines had one. Cargo became a very vibrant business, and a core one for a lot of airlines. It was taken very seriously, and there were a lot of professional people in it then. It was a really exciting business with lots of competitors and good talent.
What happened to change that?
The fuel crisis of 1973, when Opec proclaimed an oil embargo. Prices spiked. Cars were queuing for gas, flights were cancelled. The airlines decided to cut costs – and that was the beginning of the end. A generation of good management left the industry. The second issue was that the carriers made the mistake of moving towards containerization and palletisation as a solution to their cost problems. But they didn’t’t realize that the new Iata pricing system would encourage the freight forwarders to take control of the cargo at both ends. The airlines went from seeing 125 to 150 small, high-yield shipments per flight to far fewer, low-yield ones. So they cut more costs as all the high revenue left.
And then the integrators came. They offered small packages for a big fee and overnight delivery. And then just kept getting bigger and bigger.
What other challenges does the industry face?
The business is very cyclical. When the first 747s came in, they cost $60 million. Today, the list price is more like $300 million – but although they have much better operating costs than they did, they still carry much the same amount of cargo. That hasn’t’t really changed. So the industry is spending much more on the asset – which means it has more costs to cut and it ends up giving away more of its market. And when the yield drops, they cut costs again.
Of course, there have been other things to deal with too – SARS, wars and so on, that have triggered wider, deeper and longer economic cycles.
All this has affected the people in this business. The airlines cut the fat – and sometimes the bone as well. Over the years the industry has lost its allure, and that is where we are at now. Aviation is a commodity today. It is not attractive for good people unless there is more money in it. But if you can’t afford to pay well, it’s hard to know how to progress. Today, working for an airline means nothing compared with what it used to. It used to be something.
What should airlines be focusing on?
There is a massive investment in keeping the passenger product up-to-date and competitive, and they take this investment from what they see as ancillary parts of the business, like cargo. I think that’s one of the biggest problems we have today, and we need to show management that cargo is core. It should be a business that someone wants to make a career out of and be proud of. Very few airlines – and those are mostly in Asia – see cargo that way. In Europe, very few airlines give cargo what it needs. In the US, continuous management changes show what they think of cargo.
What will the next phase be?
The widebody passenger airplanes are making freighters almost redundant. I think eventually freighters will only operate in niche markets. It’s an asset-based industry, so the challenge will be to understand the mix needed to keep bellies full, and having the right revenue management system in place.
It’s a damn tough time for the airline industry. Management needs the skillset to rethink.
Have the airlines given up? Or is it that they don’t know what to do? Some forwarders continue to think they can squeeze the airlines, and some airlines would like to get some of the power back. Relations are not good, and with the environment created by the Department of Justice, no one can discuss it any more.
Do you think that the new Iata and Gacag are a useful way forward? What else could be done?
I do think Gacag and Iata under Des Vertannes are good platforms, and that’s what we need. Are they relevant? Yes.
But at the moment there are too many platforms with divergent interests and opinions on how the industry should move forward. The airlines can’t compete with the integrators, and need to work out how to make a profit. The separate parts of the whole need to work together in synergy, and everyone has to realize that the wider industry is just as important as the little groups within it. We all talk about e-freight, but how many can actually invest in it and do it?
The platforms are disproportionately influenced by certain players with good management, but who don’t represent the bulk of the carriers, such as those in Asia. So a small group is trying to effect change on a larger one. I don’t know how else it can be done with the current competitive and legal constraints though. I hope a formula can be found to make the platforms more effective. I also think there should be a greater focus on training in the industry. Why do you never hear about it? It’s something industry bodies should focus on more.
How do you think the industry will change?
There will be more and more consolidation. The evolution of the widebody passenger planes will shake out the freighters, and the business will become all about keeping the passenger bellies full. Leisure passenger traffic is still growing and there are a lot of aircraft coming into the market. With so much capacity, yield will drop. Carriers need to work out how to price the product and how to manage it. They will need to take a quantum leap in their thinking, and hopefully invest in cargo and new skillsets.
I think air cargo could then compete against sea freight. Airlines could give a 15-day guarantee, for example, and make sure that every hold is full. It happened with containerization in shipping. Airlines will need to make the belly cater to commodities and make a time-definite product that is slower and cheaper than now, but faster than sea. Getting a contribution is better than flying empty. Airlines need to cater to the low-end as well as the high-end. People don’t really need every shipment to arrive overnight.
What has kept you in the business for so long?
I love it. Transportation and logistics have always fascinated me. I transferred to Europe and learned a lot, and I was given the chance to implement change. We grew the business three-fold and that gave me a taste of what could be done. The industry has given me the chance to travel and live abroad, to work with different cultures.
But what I see now is less encouraging. In North America, where there are so many management changes, and a less friendly cargo environment, I wouldn’t’t join an airline as they are today. Those in the Middle East are different though. They are really innovative and are prepared to invest.
What is satisfying about the air cargo industry?
I enjoy contributing and there is a satisfaction in seeing what can be done. We grew Atlas Air from five to 50 aircraft. When I started at AirBridge Cargo there was nothing except a pile of useless business planning papers on a desk, and six people who didn’t’t know about scheduled cargo. It’s been fun building things and seeing the results as companies – and people – grow.
One of the things I’ve been less good at is playing the political game that you get in some places. The politics within airlines can be intense and sometimes it can be hard to convince people of the business case. At Atlas, it was all about Wall Street and earning per share, and in Russia it’s often about money, rather than the success of an airline.
The times when you really relax and enjoy something are when you look back and see something that you have all worked on succeed. Teams can do some really special things. The reward for me isn’t financial, it’s seeing positive results.
What are the challenges of being a consultant?
It can be hard to convince someone that a particular course is in his or her best interests. You need to be honest, and that can include being critical, so you have to balance the efforts that people have put in against what they should be doing. Management doesn’t want to hear that what they have been doing is wrong. But often people don’t understand that cargo is a real business, not a contribution. It needs to be made competitive.
The airline business is completely different from the rest of the transportation industry, in that passengers and freight share the same aircraft. But cargo is often treated like the unwanted stepchild. If airlines invested even 25% of what they spend on business class into cargo it could become a great business.
What should a newcomer to the industry understand about air cargo?
You need to take all aspects of the business into consideration. And there are a lot. There are cultural, and local complexities, there are government regulations. This business is complex on many different levels.
Air Cargo Management Magazine