60 Seconds with Virgin Atlantic Cargo’s senior vice president for cargo, John Lloyd
Justin Burns, ACW: How was business in 2016?
Lloyd: We’ve actually managed to increase our market share in what is still an extremely competitive, challenging and unpredictable global cargo market. We expected 2016 to be difficult because of all the economic factors impacting trade and consumer buying. We’re working hard to meet our budget for the year and have certainly seen a welcome improvement in tonnage and revenue in the second half of 2016.
It’s not often July and August are strong months for air cargo volumes but that was the case and I am pleased to say this has continued for us, although the strong pressure on yields is still very evident. We’re close to our target for the year.
Justin Burns, ACW: What trade lanes performed the best?
Lloyd: We’ve seen further improvement in business from the UK, particularly to some of our US North East destinations as well as Miami and Los Angeles. We have also seen an increase in the amount of cargo we are generating using our trucking services from mainland Europe for our flights ex London. Inbound, these same markets are ahead of target and we are achieving revenue improvements ex Dubai, Johannesburg, Lagos, Delhi, Hong Kong and Shanghai.
Justin Burns, ACW: How has pharma performed?
Lloyd: We have seen our market share increase this year, particularly on our transatlantic routes. We see a good opportunity for growth, partly because of the strong capacity share we have, the biggest pharma trade lane, and based on our service levels. However, we cannot rely solely on pharma. We’re also seeing growth in our high value, perishables, fish and express volumes and in specialist markets, such as automotive.
We’ve committed more resources to developing our Cool Chain business this year. The world’s biggest pharma market is transatlantic so with our 30 per cent share of cargo capacity to and from the US we are in a good position to target new pharma business. This is something we see continuing to grow over the next few years as we enhance our pharma product. The reason there is so much focus on pharma is it has a sustainable future given the growth projections from the healthcare sector. The UK to US pharma market is forecast to grow seven per cent a year to 2020. We also see new opportunities for our daily services to other major pharma markets such as India and China.
Justin Burns, ACW: Tell me about your tie-up with Delta Cargo for dnata cargo handling facilities?
Lloyd: The new agreement we signed with dnata covers cargo handling for Virgin and Delta at Heathrow, Gatwick, Manchester, Glasgow and Edinburgh as well as at six regional UK airports. In the US, we have previously co-located our handling in Atlanta, Boston, Las Vegas, Miami, New York (JFK and EWR), Orlando and Washington Dulles. There are efficiencies to be gained from having both operations under ‘one roof’ but we expect the biggest benefit to be for our customers.
Our ‘door waiting’ times, are among the best at Heathrow, but dnata is looking to implement new technology to reduce truck turnaround times. We’re also looking to further improve our premium products. The ‘one roof’ strategy with Delta enables us to leverage our combined business and make us easier to do business with as the JV develops.
Justin Burns, ACW: How will having A350s boost cargo?
Lloyd: The A350 is a very good passenger and cargo aircraft and another step in our fleet modernisation programme. Our new $4.4 billion order for 12 Airbus A350-1000 will see the first join our fleet in early 2019. We expect the A350s to deliver a significant improvement in lower deck cargo capacity of between 10-22 per cent, depending on configuration.
Justin Burns, ACW: What are the biggest cargo challenges?
Lloyd: Generally, it’s a simple case of overcapacity on major routes and not enough cargo so that impacts yields. It’s hard to see this changing in the short term so we have to focus our customer service and performance to make sure we maintain and, hopefully, grow our market share. Another challenge is it is becoming increasingly difficult to forecast the market accurately because there are so many factors impacting global trade.
Justin Burns, ACW: Where do you see air cargo in 10 years?
Lloyd: The world is changing and we live in a consumer society where customers expect products to arrive quickly and securely. Speed and predictability are what sets air cargo apart from other modes so what I hope to see is a greater appreciation of the value of air cargo and a more sustainable and predictable business environment. And I hope we don’t have to wait 10 years for that to happen.