With cargo volumes way below what the industry saw over the last 2 years, airlines, logistics players and other stakeholders are trying to figure out which sectors could likely drive back more shipments moving by air. One of those that could be a driving factor is e-commerce, particularly exports coming from Asia. With operations between Abu Dhabi and China, Etihad Cargo is well aware of this trend and has been a step ahead in maximising the opportunities. In April this year, it added a fourth Chinese gateway in Hubei and offered a weekly freighter service. The airline also partnered with leading cargo carrier SF Airlines to further establish its presence in China. Leonard Rodrigues, head of revenue management and network planning at Etihad Cargo, shares his insights on e-commerce, the Chinese market and more in this interview.

Can you share more about your operations between Abu Dhabi and China?
Etihad Cargo operates seven freighter scheduled flights to mainland China per week and additional ad-hoc charters to meet capacity demand. In addition to our freighter network that serves Guangzhou, Shanghai and the Hubei Province, we also offer additional belly capacity on board ten weekly passenger services to Guangzhou, Beijing and Shanghai. Via the carrier’s growing road feeder services network in China, Etihad Cargo also offers customers and partners access to 25 domestic destinations, providing seamless connectivity across the Chinese market.

How important is e-commerce in driving the demand in this particular corridor?
There has been a phenomenal global increase in online shopping and cross-border trade between e-commerce businesses. Cross-border e-commerce has always been a key component of Chinese exports. In the current environment, where passenger capacity in and out of China is still lower than pre-COVID, e-commerce represents a large proportion of freighter demand through dedicated charter programmes.

Etihad Cargo has identified e-commerce as a critical market for cargo growth, further driving Etihad Cargo’s focus on building a portfolio of cargo products that enable the smarter and faster management of air cargo. In e-commerce terms, Etihad Cargo’s air cargo services offer the speed consumers and businesses need and expect to answer the growing demand. Etihad Cargo will continue to develop agile business models in response to the ever-growing needs of e-commerce and fully supports the development of Abu Dhabi as a logistics and express hub for the region.

What type of synergies are you looking to unlock with your partnership with SF Airlines?
Etihad Cargo has continued to invest in partnerships, both here in Abu Dhabi and globally, to expand our capabilities at our hub and internationally to further expand our network and product offering. Etihad Cargo’s partnership with SF Airlines is based on a reciprocal block space agreement. We exchange capacity on both networks, providing Etihad Cargo with additional connectivity in China, with greater accessibility to 25 domestic mainland China destinations via SF Airlines’ road feeder services trucking network, and SF Airlines with additional access to destinations across Etihad Cargo’s expanding global network.

We are now gaining familiarity with each other’s hub, and we recently welcomed senior leadership from SF Airlines to our Abu Dhabi hub and will be visiting SF Airlines’ hub in China very soon. We are exploring additional synergies and opportunities for mutual growth, and we are confident both sides have a lot to offer.
Following the success of our recent agreement with SF Airlines to connect our Abu Dhabi and Hubei Province mega hubs, we are also exploring further partnerships that will benefit not only Etihad Cargo’s customers but also further position Abu Dhabi as a global logistics and express hub.

What can you say about Abu Dhabi’s, or the Middle East, appetite for e-commerce?
A unique aspect of Etihad Cargo’s Abu Dhabi hub is its location, which provides the perfect link between the East and West, and the Government of Abu Dhabi’s clear vision of becoming a major global hub for air cargo and specifically e-commerce. Etihad’s shareholder, ADQ, also owns Abu Dhabi Airport and other key logistics investments and is facilitating Abu Dhabi’s vision. For example, a dedicated, state-of-the-art facility with e-commerce and express logistics capabilities is in the works, and specific free zones are being developed for fulfilment centres.

What are some of the trends that you think will drive more e-commerce shipments on planes?
In terms of trends that are driving more air cargo e-commerce shipments, a change in purchasing patterns is having a significant impact, but these trends are not always easy to anticipate. During the pandemic, online shopping led to a huge surge in e-commerce. Now we’re in the post-COVID era, and after a period where e-commerce fell somewhat, it is again increasing due to a paradigm shift in the garment sector. New market entrants based in China are using e-commerce to offer even more choices and buying options to customers, leading to a boost in e-commerce sales and demand. An interesting trend to look out for is new crowdfunded products being marketed and sold through social media. Volumes are still limited at this stage, but their supply chain relies totally on the e-commerce process, so this could be more impactful in the future.

Aside from China, where do you see the most potential in terms of e-commerce growth? Can you share more about the direct services to Chennai?
China is among our top origins for e-commerce, with other top origins including Vietnam, the United Kingdom, the Netherlands, Spain, Australia and the US. India is also witnessing an e-commerce boom. According to the latest data from Redseer Research and Analysis, gross merchandise value (GMV) of India’s e-tailers has risen by 22 percent over the last year and reached $49 billion in 2022. Despite COVID-related disruptions and supply chain disruptions, e-commerce sales have increased by 140 percent since the end of 2020, and despite losing momentum since the peak in 2021, are still two and a half times higher than pre-COVID levels.

To meet increased capacity demand and reinforce our commitment to both Chinese and Indian markets, Etihad Cargo reinstated a twice-weekly freighter service from Shanghai to Abu Dhabi via Chennai in 2022, providing additional capacity into two key global markets. While we have always served that demand, through continuous evaluation of our network, Etihad Cargo identified the need for a direct service, and we will continue to review our network, adding destinations and frequencies, and optimising freighter utilisation to support key trade lanes and customer demand.

How do you see e-commerce logistics evolving in the next decade?
The sector will likely see more partnerships between airlines and e-commerce players. Airlines are already focusing more on the delivery of their airport-to-airport service, as this is their core expertise. These services will then be commercialised by freight forwarders that provide the full 3PL experience. When it comes to e-commerce, this setup will work well in the case of full flights. However, for smaller shipments, this can prove to be inefficient, leading e-commerce logistics to rely heavily on integrators. If we project a trend where the share of e-commerce continues to grow, airlines will see value in developing partnerships that address that need.

What are key logistics decisions that a shipper or e-commerce player needs to make?
When it comes to air cargo, the key logistics decisions that need to be made will continue to relate to rate and capacity. When compared to other modes of transportation, the cost of air cargo is almost always higher. Therefore, for shippers or e-commerce players relying on air cargo, there needs to be a choice between securing long-term capacity that protects a growth in volumes for their business, weighed up against the risk of paying a small premium and wanting to procure capacity at the lowest rate based on the ad-hoc market, with the risk of that capacity not being available. When the share of e-commerce was small, gaps in availability could be used at competitive rates, for example, through the use of standby mail. However, with the share of e-commerce increasing, this trade-off must be evaluated fully.

Express cargo, and express options for other types of cargo, will continue to be a focus for Etihad Cargo in the next decade and e-commerce logistics will further evolve. Etihad Cargo will invest in our product offering so we can offer quick, reliable and efficient transportation solutions across our global network, supported by our extensive road feeder service network to connect with offline stations.