FROM MAGAZINE: Capacity crunch to continue until Q2 of 2021

With the Covid-19 pandemic countries around the world are under lockdown with varying intensity and air travel has practically come to a halt. With it a significant drop in air freight capacity. What we have seen in the past few weeks in the global air freight industry is something no one had prepared for and there is no rule book to refer to. But air cargo has become the lifeline to help the world survive this pandemic with essential supplies; besides it becoming the lifeline of airlines world over. Qatar Airways Cargo, the largest cargo operator in the world, has been at the forefront of delivering critical supplies very early on with its fleet of 28 freighters and some of its advanced passenger aircraft deployed for cargo-only flights. In an exclusive interview to STAT Media Group, Guillaume Halleux, Chief Officer Cargo, Qatar Airways, spoke about the complexities of overseeing such an operation. Edited excerpts.

Could you tell us what the last 7 to 8 weeks meant to Qatar Airways Cargo?
The past 7 to 8 weeks have been hectic. It was chaotic in the first 3 to 4 weeks. Then the world, as we know it today, has become a new normal. The way it started was chaotic because the countries were just progressing in their border management. Therefore, airlines were forced to cut capacity pretty much overnight. As such, we could not rely on our belly capacity, so very quickly our freighters became the only lifeline and the most reliable assets. Luckily we have 28 freighters so they did help a lot.

Demand for air freight peaked quickly. That created a challenge for all of us to answer our customers who was screaming for capacity. New customers - governments - stepped into the market. We are not used to dealing with governments. Governments, through their embassies in Doha, reached out for help to bring goods from China. This obviously created a new dimension in the commercial relationship between us and our forwarders at the same time. We had to deal with the exhaustion of our staff. For example, our staff in Shanghai was equipped to handle 3 to 4 freighters a week suddenly they had four freighters a day. So a huge imbalance in the work flow internally which had to be fixed. We brought the world famous Qatar Airways cabin crew to join the cargo customer service department to answer customer queries.

Take us through the operational challenges of operating some of the record number of flights per day. How do you create such excellence in operations under extremely challenging circumstances?
I think the key to it is to give a purpose. When I reached out to the pilot division and I explained to the chief pilot that we need to put some airplanes into the air only for the benefit of cargo and that the pilots would have to fly to countries which were put under high risk. We needed to convince the pilot and many others in the company that this was the right thing to do. It's way beyond making money. It's serving a purpose.

Air cargo, for the past eight weeks, has become the lifeline of the world. Without air cargo those foot soldiers - nurses and doctors - in New York, Paris, London, and Delhi are powerless; because they have nothing to fight and nothing to protect themselves. So when you create that awareness internally to a group of people who understand that they are a part of something that is unprecedented they just volunteer. I can tell you that we had more volunteers than we could accommodate in the cabin crew and the flight deck crew to fly our freighters and cargo-only passenger flights to China and other locations.

Then we had to fix operational issues. And we could feel the whole power of Qatar Airways is behind us. We faced issues that we never knew had existed. For instance, we never had to plan cargo on empty passenger flights. So an Airbus A350-1000, which is a great aircraft for cargo, turns out that without passengers it is nose heavy and creates problem in the trimming of the aircraft. This is something we never faced before because there were always passengers in the back to balance the weight. The aircraft is nose heavy because we have the Qsuites on board which are heavy cabins in the front of the aircraft.

Qatar Airways Cargo recently supported UNICEF by transporting 36 tonnes of medical cargo to Tehran in Iran

How do you make things happen when your people are working from remote locations and from their homes?
It's the biggest challenge. I think we have done a number of things. I think what is key is that we stick together as a team even though we are not in the office anymore. So for our colleagues in the passenger business, they are working from home but the activity is reduced to bear minimum. But for us in the cargo, not only we have the inconvenience of working from home but the work has increased by four to five times. When in normal circumstances I will send people to China to support the operations. But I can't do that because the borders are closed and nobody wants to go. So it is very complicated. Keeping daily contact with our staff in the field is very important.

It is a new normal and we have seen images of beautiful passenger planes deployed to ferry cargo in their bellies, on the seats and in passenger cabins. How has Qatar Airways made the transition into this new normal?
As an industry, why are we doing this? We are doing this because it is stainable. To fly a Boeing 777 freighter and flying a B777-200 passenger aircraft, the flying cost and the direct operating cost per block hour is not that different. In the freighter, you get 100 tonnes and in the other you get 14 over deck positions or roughly 25 tonnes. So for the same cost you carry roughly four times less on a passenger freighter than a full freighter. That is sustainable only if the market price is at a certain level, which is the case right now. How long will the market remain at that price is what will determine if airlines will continue to fly those passenger freighters.

The other element, obviously, is how long will it take for the passenger service to resume because in terms of priority passengers will always win. In terms of economics, as long as the price per kilo allows, it that will continue to happen. Putting cargo in the passenger cabin; we tested it. We know how to do it. We have SOPs in place. We have approvals from Qatar Civil Aviation Authority. We have done all that but we have never done it in real life. The reason being we have 28 freighters. That is massive main deck capacity and massive capacity without being desperate to the point of using the cabins of passenger aircraft. I am not saying it is bad. All I am saying is, it is extremely labour intensive. I have a faster, quicker and more reliable solution to bring to the market with my freighters and therefore we have never done it.

We had one customer with one project who really insisted on it and then for operational reason he dropped the idea. So we were ready to do it but I don't see it as a priority for Qatar Airways because of the configuration of our fleet right now. Other airlines are in a different situation. If you are an airline that is a belly only with no freighter capacity, I think it makes a lot more sense for you to develop that product of cargo in cabin because this is the only choice you have.

Recently Qatar Airways Cargo transported 56 SkyCell containers of pneumococcal and varicella vaccines from Brussels to Mumbai

How many of Qatar Airways passenger aircraft have been deployed for "cargo-only passenger flights" currently? And can you tell us what the mix of aircraft types?
It's a mix of B777s and A350s predominantly. The A350 is the best aircraft we have so far in terms of direct operating cost per block hour so we tend to use it as much as we can. It is also a cargo friendly aircraft. The only issue we have with this aircraft is the weight and balance complexity because of the QSuite product. The B777 is always the best for belly cargo so we use that extensively. On a few routes we do have a B787 and also a few A330s.

How nimble and agile are you to bring in and take out capacity at a time when the marketing conditions are so dynamic?
At the beginning of the Covid-19 pandemic it was like you had no clue about how the next hour would look like. You would plan something and one hour later you change the plan. Now I expect things to be on the positive side as the countries will reopen. What used to be working within the office hours has now become 24/7 with the support from Qatar Airways' integrated operational control with a very flexible crewing department.

Our pilots have been awesome in this crisis. They have been extremely supportive and agreeing to change flights and heading to difficult places. So as you have the flexibility in your DNA, I guess you are more prepared to handle situations like this. By nature, Qatar Airways Cargo was already extremely flexible. I mean agility was one of our characteristics and our customers know us for that.

How has the relationship with your key customers changed in the new normal? How have you restructured your cargo operations for them?
I will start by saying that I am never a big fan of these moments - the crises. Even if they create a huge upswing in terms of revenue. I don't like it because it creates tension. It creates friction in the relationship. Everybody is getting nervous, agitated and possibly upset. So we were forced at some point to cancel all our BSAs (block space agreements). That was a very difficult decision to make. We made the decision based on the simple fact that our capacity and our network are not at all the way it was when we had all those agreements in place.

You sell your capacity based on your network, your schedule and your frequencies. All that was changed so much that we were just not able to honour the BSAs. We opted to provide capacity and pricing on a short terms basis by week and by month. That obviously created a lot of discussion with our customers. My point was we are doing this because we fly. Other airlines have just stopped. So don't penalise us because we are trying everything we can to keep capacity in the air and I am not talking only about the freighters. I am talking also about passenger flights. Pre-Covid 50 percent of Qatar Airways Cargo volumes moved on the passenger bellies and so the passenger bellies are extremely important to us. We may have a big freighter fleet but the bellies are 50 percent of what we do. When the bellies are heavily impacted obviously your product is impacted. Obviously staying close to your customers and keeping their communication alive is key.

Charter prices went through the roof to the levels that are unheard of. At some point I made the decision with my team to cap our price for medical goods. So we capped our price 30 percent less than, what we call, the market price. In other words, you want to ship commercial goods then this is the price. You want to ship medical goods then the price is 30 percent less. It was welcomed by our customers because it made their discussion easier with their customers.

Qatar Airways Cargo is known for its product verticals like QR Pharma, QR Fresh and QR Live; in which veritcal do you see significant drop in business?
So currently our volumes are significantly less than normal. Revenues are high but the tonnage is less than normal by double digit which is a reflection of the lack of capacity. At the end of the day my 78 passenger freighters do not make up for the number of passenger flights that are missing in my network. QR Fresh and QR Pharma did not go down much. They went down less than capacity; actually QR Fresh increased. And then we did not have a category for Covid cargo. This was a mix of things - ventilators, masks, hand sanitizer, test kits and PPEs.

We see a drop in general cargo for sure. The good old industrial general cargo is much less than before simply because factories are still shut. Even if they have resumed production they are not at the level of production as they were before. E-commerce is actually doing quite fine.

Going forward, what do you think will be the mismatch of demand versus supply?
I don't think there will be a day when we say ok this is it, the Covid is behind us. Yes the capacity crunch will remain at least until the end of 2020, probably even a year from now until summer 2021 because the bellies are not going to come back. So as long as that belly capacity is out, there would be a capacity crunch. I don't think it will be as strong as it is now. Those one or two million dollar charters will be gone. I think that's a good thing because that's not normal. But there is no way that we go back to the levels of pre-Coivd anytime soon.

Demand will decrease because the Covid demand will gradually fade out. But the big question mark is when will the traditional airfreight commodities make a comeback? Fresh and pharma, yes, we know for sure. But what about the rest like automotive, high-tech, fast fashion?

As a leader with a rather large team, how do you keep your teams' moral up?
It is extremely difficult because of the variety of the nationalities we have in the team. But there are some common rules that apply to everyone. Keeping the communication channel open constantly is important. So that nobody feels that they are on their own specially when they are at home and it is easy for them to feel isolated. Second, as I mentioned earlier, give a sense of purpose to what we do. We are carrying cargo to save lives and that is a huge element that brings people together. If it had not been for that, I can tell you that some of my departments, offices would have collapsed already. They are still working. There is a purpose to what they do. There is a purpose to what we do.