19
COVID-POST The short
answer is that
we need a new
business model
Stan Wraight, Strategic Aviation
Solutions International
dragging its heels.
“Will we see an
improvement next year? I
doubt it – there will be slow
growth, perhaps, but I think a
more realistic timespan is two
to three years. There’s a lot of
retail stock that needs to be
moved. And what if, as the
experts predict, we suffer a
second wave of this virus later
this year?”
An intransigent sector
aircraft, and more emphasis on
Like Burgin, Stan Wraight,
cargo, since there are fewer
President/CEO of Strategic
passengers. The cargo division
Aviation Solutions
needs to capitalise on this
International, looks back on
– hence the requirement for a
decades of time spent within
new business model. No more
the freight sector. He, too,
cheap offers of ground
bemoans the seeming
handling: we need
intransigence of a community
digitalisation and we need
for whom tradition is all, while
products geared to serving
forward thinking is considered
express freight and valuable
something that verges on
freight. Some handlers,
anarchy.
particularly those owned by
In a recent White Paper on
airlines, have got this already
– but the bigger ones,
especially those owned by
private equity, are
struggling.” the sector’s problems, one that
also embraced life after
COVID-19, Wraight made
some cogent comments about
the status quo of cargo, points that he believed were unknown
inside the boardroom.
In this, he was indebted to Des Vertannes, ex-Head of IATA
Cargo, who whilst there, came up with some telling statistics.
Understanding this data before any thoughts of shaping the
future are formed would appear to be essential.
Vertannes found that as a percentage of global airline
revenues, First Class travel represented 4% of airline revenues.
Business Class contributed 16% of airline revenues whilst cargo
represented 12% of airline revenues. So, Wraight observes, for
global airlines over the last decade, cargo has produced three
times the First Class revenues total and very close to that of
Business Class revenues.
He argues that typical North American airlines report only 3,
4 or 5% of total revenues deriving from cargo but a huge chunk
of that passenger revenue accrues from domestic or trans-border
US/Canada fl ights.
“Without that domestic factor, what would that cargo
percentage be? Using European carriers as benchmarks it’s 10%
plus; Middle East carriers 15-25%, depending on which one; and
for Asian carriers, well over 20% is the norm.”
The cargo contribution
He goes on to state that one major European airline has advised
that pre-COVID-19, 70% of all international fl ights were not
profi table without the cargo contribution; while another major
operator discloses a fi gure close to 60%. So, Wraight asks, how
many carriers that fl y transcontinental long haul, with widebodied
aircraft, realise as passenger yields continue to decline,
how important cargo in the bellies is to the economic
sustainability of intercontinental services right now – and more
especially, in the future?
“The short answer is that we need a new business model,” he
told ALI.
“The world post-COVID-19 won’t be what it was before. In my
business I take a holistic view: I’m looking at what’s happening
in Asia, for example. There, I see countries like Japan and Korea
talking about relocating businesses. Then I look at US/Chinese
relations. President Trump may, or may not, get another term;
but policy making in four-year cycles only works if a large
amount of common sense is added.
“Air cargo, I’m forever hearing, takes 1-2% of the world’s
tonnages in terms of transportation yet the value of the goods it
carries is 30-35%. A B747 full of computer chips and the like is
far more valuable than thousands and thousands of tonnes of
coal. That’s the anomaly in all this.
“Why will the landscape be different? Three things come to
mind. The fi rst is the manufacturing sector. We are now seeing
changes in the model: nearshoring, in other words bringing the
manufacturing closer to the market, is becoming more evident.
There’s also reshoring, where the manufacturing is fully brought
back home. When this happens, so the requirement for air
freight declines, which means that it will be the specialities that
are left for shipment. These will require a high class, quality
operation: a new business
model will have to be
implemented.
“Next, there is the
economic factor. Look at the
consumers. They’re in a state
of shell-shock at the moment.
They are used to spending on
their credit cards but they are
putting off expenditure right
now and paying back debts. It
will take time for them to pick
up again from where they left
off pre-COVID.
“Third is the air passenger
market: how many planes do
you see in the sky? The
passenger market has been
badly hit. Until a vaccine is
found there is no travel
insurance for COVID-19 and
lawyers over here are saying
that if staff are sent on
business travel and contract
the disease, then they could
sue.
“International traffi c, I
think, will take three to fi ve
years to get back to 2019
levels. People are making plans
to holiday in their own
country now – and if you do
decide to go abroad, you may
face 14 days’ quarantine when
you return.
“So what we have is fewer
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