AIC TALK 丨Stanley Wraight: Embracing digitalization, aviation training is imperative

International Advisory Panel (IAP) is the brain trust of Aerotropolis Institute China (AIC). It brings together world leading experts in airport development, air transport, supply chain management, urban planning, biomedicine, branding, digitalization, etc. The expertise of IAP provides AIC with a global vision, keeping our clients abreast of the world’s best practices and international industrial trends.

In this episode, we interviewed Mr. Stanley Wraight, a veteran in aviation logistics. He is the Co-Founder and President of Strategic Aviation Solutions International (SASI) Global, expert on the IAP of AIC. In part I, Mr. Wraight shared his outlook on the trends of aviation industry, explained the difference of air cargo industry in different countries, and suggested which talents are most needed in the air cargo industry.

Question 1:

Could you name the FIVE keywords that represent the main trend of the aviation industry over the next five years?

Stanley Wraight

First is TIME. Every e-commerce buyer expects immediate delivery. They are used to get their order delivered in maximum 72 hours, no matter for themselves or the company.

The second thing is TRANSPARENCY. What do most e-commerce platforms users demand? A tool on their desktop or mobile phone, allowing them to trace and track their orders all the time.

PIRCE comes after time and Transparency. Only after the criteria of time and transparency are met, do people start to talk about the PRICE. In the next five years, price strategy will not work. The airports continuing with price-cutting and subsidy-rising race may not thrive.

Forth, QUALITY. It’s all about fulfilling your promise made to your clients. To successfully deliver the order in three days means not only sending on time, but also keeping the goods intact and without damage or claims.

EDUCATION is the fifth thing in my mind, training people to understand the whole supply chain, so as to make every stakeholder on the same page and understands the others concerns and objectives.

Two stories I experienced explain the importance of the five elements above. One of the largest German car manufacturers and exporters told me that if a potential supplier cannot meet the demand--48-hour factory to factory delivery and completing the process in a transparent way, they are not even allowed to bid for the contract. The cheapest price is not the biggest advantage while the first criteria for getting the ticket to the bidding meeting is the ability to manage time and transparency.

The second story is about training and education. The International Civil Aviation Organization (ICAO), the UN aviation branch, has been sending out recommendations to governments around the world on safely and securely processing cargo. ICAO said that they can tell the governments what should be done but what they can’t tell yet is how to do it. So, they asked SASI to develop a training program. Last year, we, together with TIACA, were entrusted to produce the first ever air cargo training program for ICAO with the first course focusing on safety and security in the supply chain.

Question 2：

As a veteran of air cargo industry, your footprint is all around the world. What’s the major difference in terms of risk management practice between China, Russia and North America?

Stanley Wraight:

This time, I do not want to talk too much about security and safety, which is of course highly important. China and Russia adopt some of the strictest regulations in the world when it comes to cargo handling. The rest of the world, however, is not so strict and that’s where we have to keep an eye on.

“Transparency allows stakeholders to prepare, to have quality, and allows businesses to operate at the lowest possible cost with the highest amount of efficiency.”

----Stanley Wraight

l  Transparency is important when new rules are coming in.

New rules make cargo more complex. That’s why I come back to transparency. For example, there’s new rule requiring any package in a postal mailbag to be treated the same as cargo, which means complete documentation should be sent in advance to the destination, no matter where it is. Postal authorities never have to do that before, but have to next year. Meanwhile, the rules for cargo airplanes, which used to be linear and less restrictive than passenger before, were also changing.

When it comes to the golden triangle (Asia--Europe--America--Asia), these rules are sort of coming together now, and they have all taken the same approach. China always developed its air logistics industry based on the demand from its export economy, to support the massive growth. China needs a strong air logistics business, so the Chinese government always encourages airlines to develop cargo capabilities and capacity and airports to build cargo facilities. In the last 15 years, China has achieved what would have taken the western world 40 years to get to, because they didn’t have the same large demand and rapid growth. Chinese airports have relatively good physical infrastructure, but what is not yet implemented is a world class policy and capability on airports re digitization.

l  Digitization can help make a difference.

What comes next will be supply chain digitization. The UN Resolution 33 in 2005 calls for the digitization of all logistics, i.e. the single window concept. It is now being reinforced globally in airports and seaports. Most “Belt and Road” countries have subscribed to an e-freight based on UN Resolution 33.

According to Dr. Fang LIU, Secretary General of the ICAO, her next task is to encourage and facilitate the digitization of the air cargo supply chain. It’s a strong statement from ICAO. The aviation industry has to realize that transparency and time go hand in hand with digitization.

Digitization helps export. If a Chinese airport can start partnering with an airport overseas that has the same philosophy of transparency and time, the data systems of two airports can talk to each other to allow a complete ability to offer a product door to door. Transparency from that perspective will boost economic development of the industries in and around each airport and in the whole region. It will allow scheduled airlines to offer competitive products, and leverage the fact that a nonstop flight between any two airports is the fastest delivery possible airport to airport, if you make the two airports involved capable of handling cargo efficiently, scheduled passenger airlines can be faster in delivery than even integrators who use hubs.

It’s the same for import. A Chinese importer can choose a customer who uses a well digitized airport overseas and makes sure that all the import processes are geared through that airport to the Chinese airport they use like CGO in complete transparency. That’s important for imports of biological medicines, food stuffs, live animals and high-value goods.

We are pleased to see the data systems coming in now among many American and Canadian airports, though it’s going to take a few years. Europe is far ahead of the rest, and the Gulf states as well. We are working on airports in Philadelphia, Toronto and Vancouver. All of them have important trade lanes with China and are moving to digital platforms which is a great development. Chinese airports should introduce it as well, so together with these airports they can develop what SASI calls “digital and logistics corridors” with the foreign airports.

l  Cargo is important not only for economic reasons, but also from health, safety and welfare perspectives.

In the European community, a lot of airlines, like Air France and KLM, moved away from cargo, because they did not have the product to compete in E-commerce and felt freighters could not be profitable. They offered capacity to third parties and recorded a very low revenue. That’s why they could not make money with the freighters. But that’s changing now. People are starting to understand that if you don’t have a freighter, how are you going to move the emergency PPE in the future, how are you going to offer competitive services that complement your belly capacity to e-Commerce shippers? How can you support your industry, your state, your health and your community?

Hungary recently bought a freighter and gave it to one of their airlines to operate and always be available for the state to move emergency commodities. Countries have to start looking at air freight capacity from the health, safety and welfare perspective to support their residents who need health care and capacity in global emergencies.

When vaccines are developed, how could we transport these “antidotes” around? That vaccine has to be moved and it can only be moved by air. Will the air cargo and logistics system break down like what it did with PPE? How are we going to be prepared to handle it? It’s a big challenge.

Question 3:

Things are changing fast, including the logistics industry like you said. New knowledge and new talents are needed to move the industry forward. What do you think are the most needed talents right now in the industry and why?

Stanley Wraight: 

l  You should have talents who understand technology.

Large companies like FedEx, UPS, DHL use their own data systems to take care of their own business, which works quite well. But there are thousands of companies that don’t have it as it’s a very expensive proposition to develop it alone. For those companies, the next generation staff has to understand digitization, what is possible and how to use it. The world is going digital in connecting all the people. For example, if you import live animals from South American into China, the importer wants to see everything and know everything that is happening along the way. Re documentation like the certification for agriculture or health which originals will move digitally in the future allowing more and more pre clearance before arrival reducing risks, so you have to know how to handle that in every aspect of your game.

l  You also need skills and people who have an operational understanding of the benefits and the weaknesses of those systems and how it applies to you.

Generic solutions, or common solutions, come from associations like IATA and TIACA, but they are not one-size-fits-all, you need to know how to maximize your own unique selling points and local advantages. As an airport, an environment and an economic marketplace, you have to understand what you need and you have to use those platforms to promote your unique selling points (USPs) . By knowing your USPs and applying technology to it, you can really develop your airport and your economic platforms into the best in class in China. That’s the second thing.

The most overrated piece of equipment in the airlines and airports is the airplane. All airlines in the world using the same airplanes. So, where’s the difference? It’s on the ground and can only be on the ground.

UPS and FedEx use airplanes as “flying trucks” as they describe them. They spend only 10-15% of their money on airplanes, while 85% of the funds available is spent on the ground and data systems. But, if you go to a scheduled passenger airline, it’s 85% spent on airplanes and only 15% on the ground, a complete reversal.

The scheduled airlines have to understand that the airplane is just a tool to make money and a tool to serve their customers. It’s not the solution, because your competitors have the same airplanes, with the same cargo carrying capability on the same routes. Where can you as an airport make a difference? It’s on the ground.

Having this in mind, you must find people who know are trained and understand what the air logistics supply chain is about, what it will be is most important. They know how to help airlines solve problems and make their flights profitable. The more the airline makes money, the more they will come to your airport because you have USPs, which are exclusively on the ground, processes, procedures, staff, no delays and quality.

Question 5:

You just mentioned USPs. You may see the fierce competition among airports in China. Some are even offering enormous economic concessions to attract in particular freighter flights. Instead of indulging in this unsustainable type of competition, what can airports like CGO do to create its USPs and stand out among others?

Stanley Wraight:

“Airports should have a mindset change, and focus on economics and sustainability of the flights and its stakeholders, and the ability to carry on.”

——Stanley Wraight

Every airport in China is offering economic incentives. They think lower landing fees are what attract airlines. For some, it works. Because, for a charter operator flying from the US to China, if one airport offers bigger incentives than others, they will go to the one that offers the most incentives. They go there not because of the incentives, but because they have a customer that want them to fly to China. Then, they just go around to find who will give them the most discount to increase their profit.

But, if they have to go anyway, why don’t you make a difference and make them choose you not because of the incentives but because you can help them make profit in different ways. It’s a different philosophy and the airports have to embark on that type of thinking.

First, be the pioneer, not the follower. To make it your USP, in my opinion, for example, you should not go to just Alibaba, but the e-retailers other than those major ones. Alibaba, Amazon, FedEx, UPS and DHL do things well but they do things on their own. But there are 110,000 e-retailers around the world. E-retailers that don’t want to deal with Alibaba or Amazon. They want to deal directly with the airlines, and if they can, if you allow that happen, you’ll be the airport of choice.

Second, look at the products the airlines want to introduce. That’s what we call “product portfolio” in our training. Airlines around the world like Lufthansa, Emirates, and British Airways with IAG created separate companies to produce products, like Zenda of British Airways, “Hey World” of Lufthansa, Emirates Delivers, etc. Emirates Delivers, for example, that only sells it with the USA now, has over 20,000 individual shippers using their product. They would love to introduce that product in China, but you can’t do it right now because you do not have the system they use.

When you negotiate with an airline at the airport, traditionally you are talking about above-wing/below-wing services, catering, cleaning cabins, taking cargo to and from the airports. Nobody ever sits there and goes to the airline and says, “What products do you want to introduce in cargo? And we can help you make a profit with cargo, because we can help you as a partner in marketing your products as a partner, we can help you with ground logistics for those products if we know what you need, where we can help you.”

Third, marketing and public relationship are important. When you talk to a freighter operator, the conversation is always about cost, and never about marketing. I’ll give you two examples.

When designing the San Jose California logistics terminal, we met with Hainan Airlines that operates a flight from San Jose to Beijing. They told us that they only averaged around $750.00 return for an economy class ticket. The belly cargo revenue is the only way that a flight can continue to fly. Hainan explained that they were having problems with the airport because they couldn’t handle perishables like fresh fruit, cherries and strawberries out of California. They couldn’t handle anything because cargo in San Jose wasn’t considered a core business in the past, and the airport’s cargo facility was 40 years old. When designing the new building, we spoke to the airlines, and asked what products they want to introduce and what will help them profitable. They told us and we designed the building accordingly. Though the construction is delayed because of the Covid, when the new building comes in the cargo contribution on that wide-body aircraft to and from Beijing will keep the flight flying.

The other story goes back to when I was the CEO of AirBridge and Chairman of the Board of a European all cargo airline, every airport was sending me marketing tools and promising me lower the landing fees. But I told them:

“There is only one thing that will bring me to your airport--revenue. If you tell me that the freight forwarders, shippers and importers will support your airport for both import and export and my airplane can make money, I’ll come.”

For an airplane from Europe to China and back to Europe, it’s roughly half a million dollars cost for the direct operating costs of flying. Do you think five or six thousand dollars savings on landing fees is going to make a difference? It’s not. If an airport tells me, “if you come here, we’ll put in the processes and the IT Data systems, and we’ll help you and support you with all the forwarders, manufacturers and e-commerce companies; and introduce the products you want to introduce.” That will attract an airline to come to your airport. That’s a mindset change for airports. They now don’t think that way. 

Fourth, Chinese airports should start focusing on importers.

The investment to start a new route for an airline is huge. For a freighter operator, choosing CGO or Johannesburg or anywhere else is an economic analysis. You’d better make sure the economic analysis for that airline as an airport favors you and it’s not just about export from China. You have to start focusing on the import as well, with as much priority because it’s not just the export. Exports are economically driven and automatic. If products manufactured in China require air, it’ll fly. But if the airplane doesn’t come in with proper economic returns for the airline, no matter how much money they charge for the export, they can never make money on a sustainable basis.

How to reverse the situation? It will be possible, if you support them on the import with greater emphasis so that they didn’t coming in empty. If they come in full, the airline will not have to charge so much from the exporters in your catchment area to make money on that route. They can charge a fair price instead of a high price which is required to cover the inbound flight coming in empty.

This is going back to talent and training. The skill sets are needed in every airport community, and every stakeholder in the area has to understand the operating economics of an airline.

Who is Stanley Wraight?

Stanley Wraight is the Co-Founder of Strategic Aviation Solutions International (SASI), which he established in 2005 with two partners with extensive backgrounds in forwarding, airlines, integrators and express. SASI is engaged in global consulting and management services for airlines, airports, international trade organizations and financial institutions.

He has over 40 years of senior air cargo management experience in operations, marketing management and CEO or board level experience with four major global cargo airlines. Having lived and travelled extensively in America, Asia and Europe, he is extremely aware of the cultural and business requirements in each part of the world. His extensive management background includes his positions as Vice-President of Global Cargo Sales and Marketing for KLM Royal Dutch Airlines; Senior Vice President of Sales and Marketing for the U.S. firm Atlas Air Worldwide Holdings. He led the team that founded Volga Dnepr’s AirBridgeCargo in 2003, which has grown to be a global scheduled cargo operator.

Stan also serves or served on the boards of various companies including scheduled and all cargo airlines, an all passenger LCC airline based in Europe where he was also Vice President and engaged in ACMI services and strategy, ground handling companies and E-Commerce logistics entities. SASI is also fully engaged in TIACA and developed the “Air Cargo Professional Development Program” for them to give back to the industry some of the extensive knowledge base required for potential young managers in air cargo logistics.

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