The sobering period of cutting costs, downsizing the carrier’s freight activities, leading to a contraction of its cargo business belongs to the past. “Our restructuring job is widely done, now we have started investing again,” exclaimed CEO Pieter Elbers at a press meeting held today (13 July) in Amsterdam.
What Elbers meant was demonstrated to the media together with KLM managers and some of the carrier’s clients right on the spot: the launching of the freight airline’s new sorting system. Built by German firm Loedige Systems in cooperation with Dutch specialist Vanderlande it can automatically process different items like bags filled by post offices with mail as well as pharma or e-commerce shipments, as long as they don’t weigh more than 32 kilograms. “It catapults us right onto the next level,” enthused head of cargo Marcel de Nooijer after the button was pushed and the system went online. It robotizes work, making monotonous tasks done up to now by sorting personnel superfluous.
The staff concerned won’t be laid-off but offered new assignments within KLM Cargo once being qualified by means of training programs, Marcel assured.
Concentrating on special cargo and tailored services
He pointed out that the new sorting system is more ergonomic thus less health hazardous to the operating personnel and way more efficient compared to any manual processes. And it ups the handling reliability because less movements and transits of goods on the ground reduce the number of mistakes, as experience has proven.
Special products are outpacing general cargo since years, contributing 28 percent to the carrier’s total turnover. “We are on the way to 30 percent,” noted Mr de Nooijer.
In view of this ongoing trend, it is no surprise that KLM’s freight arm decided to invest in future technology at its AMS hub to fast and efficiently process this segment of special goods. An investment that was propelled by the fact that transporting pharmaceuticals, medical items, express shipments or alike price-attractive commodities generate higher profits.
Hons praise cargo
The kick-off of the sorting system was attended by a number of hons, among them was Amsterdam’s Deputy Mayor, Kajsa Ollongren. She outed herself as a true cargo aficionado, pointing out the importance of this business not only for KLM but for her city and the entire Netherlands. “For many travelers cargo is not visible, but it’s one of KLM’s three main pillars next to the passenger business and technical services,” she said. Most of the carrier’s employees are living in and around Amsterdam, so any innovation leading to the well-being of KLM and its air freight unit is good news for my city as well, she stated. With its new sorting system in operation, KLM becomes fully equipped for e-commerce, express, mail and pharmaceuticals, Mrs Ollongren concluded.
Her words were complemented by Bertholt Leeftink, Director General Enterprise and Innovation at the Dutch Ministry of Economic Affairs. Said the official: „Most of all, this state-of-the-art sorting system is beneficial for KLM but when looking beyond the fence it strengthens and enhances our country’s role as leading European logistics hub.”
Finally, KLM CEO Pieter Elbers testified in his speech that cargo was, is and will continue being an essential part of KLM’s future activities. „Currently, we serve 82 long-haul destinations. Such a large network could not be operated without the valuable contribution of air freight,” the helmsman confessed. Touching the fleet issue Elbers said that KLM Cargo’s transport capacity is based on three pillars, four Boeing 747-400Fs operated by Martinair, the airline’s large Combi fleet and the lower decks of the passenger aircraft. The Combis, he said, will be kept until 2020, while for the four Jumbo freighters there is no end in sight.
Marcel de Nooijer added to this that focusing more on smaller and mid-sized accounts is an essential part of the strategic approach as are vertical partnerships and capacity sharing models with SkyTeam Cargo members such as China Southern or Delta Cargo.
Touching the current market situation Marcel pointed out that there are a number of positive drivers but also challenges that have to be mastered.
Growth of e-retail, driving the express and time definite product is such a positive factor. Increasing consumer demands in emerging markets together with market stimulation by global sourcing and global consumption are other encouraging signs. On the negative side mounting trade barriers, structural overcapacity, modal shift to ocean and rail or changes in production by 3D-printing or miniaturization are to be watched very closely.
Less space, higher efficiency
Actually, the decision to implement the automated sorting system is partly result of the growing appetite of KLM’s passenger division in combination with operator Schiphol Airport. More space was needed to extend one of the existing piers for accomodating travelers and build new gates. Consequently, a provisional cargo terminal blocking the expansion will soon be scrapped, giving room for the projected pier enlargement. A decision that will cost KLM Cargo roughly one third of its existing warehouse space. Being squeezed between growing volumes and less handling space, KLM Cargo decided to make the best of it and invest in future technology. Higher and faster throughput of shipments enabled by the robotization of handling processes was the management’s answer to the challenges.
The sorting system itself has cost the airline no more than €12.5 million. However, Elbers pointed out that it’s only part of a larger investment program to put KLM Cargo technically, operationally and commercially up front again. This includes spending in new IT infrastructure for digitalizing processes step by step, product enhancements or smarter and more efficient road feeder services particularly in KLM Cargo’s home market Europe, to get shipments stemming from Germany, the Nordic countries or Eastern Europe faster and more efficiently to its AMS hub. “The years of our belt-tightening policy are over,” Elbers exclaimed. This way announcing a U-turn in the carrier’s strategy from downsizing the freight business to growth again.
A turnaround that’s much appreciated by the employees. “We sense a new spirit and optimism within our freight division and that’s a terrific feeling,” concluded AFKLMP Cargo’s Communications Manager Gerard Roelfzema the Amsterdam press meet.