Episode Transcript
[00:00:00] Speaker A: Welcome to the Lodestar Air Cargo Podcast. This episode is sponsored by Air Charter Service, the aircraft charter broker of choice for thousands of shippers globally. If charter is the answer to your shipment, contact us for a no obligation quote.
[00:00:24] Speaker B: Welcome to the very first episode of the Lodestar Air Cargo Podcast with me.
[00:00:30] Speaker C: Mike King and me, Alex Lenane. And this podcast really will do what it says on the tin. We'll be crystallising the best of the Lo Star's air freight coverage so that those in the business of buying space are equipped for success.
[00:00:42] Speaker B: Indeed, we'll be taking on the thorniest of issues and getting the biggest interviews and all that starts today.
[00:00:48] Speaker C: Coming up later, we have what I'm pretty sure Mike is Amazon's first major air cargo interview when Mike talks to Tom Bradley, Director and GM for Amazon Air Cargo. And I promise you it's going to be an interview worth listening into.
[00:01:01] Speaker B: Thank you, Alex. Me and Tom are discussing everything from Amazon's expansion plans to how they will satisfy third party customers, and from AI in the supply chain to whether Amazon Air Cargo wants to become or already sees itself as an integrator.
[00:01:18] Speaker C: First up. In fact, our first guest is someone who's pretty much seen it all in air freight via a slew of leadership roles at major carriers, including 27 years at KLM Cargo where he served in a number of leadership positions including Vice President for Asia, Europe, Africa, the Middle east and most recently the Americas.
[00:01:36] Speaker B: As the company's Vice President of worldwide customer service during and after the merger with Air France Cargo, he was responsible for the integration of all Air France and KLM cargo offices, aligning processes, cultures, IT systems and people on a global scale. He's now president of United Cargo, with responsibility for all aspects of United Cargo's operations, customer service, sales, revenue management, product quality and technology solutions.
[00:02:03] Speaker C: And he has a Bachelor's degree in Commercial Economics from Utrecht University in the Netherlands and a postgraduate degree in marketing and is married with two sons. Now. I've always found him to be a true Dutchman. Great fun to talk to, refreshingly honest. So he is one of my favorites in the industry.
[00:02:18] Speaker B: Jan Krems, welcome to this inaugural Lodestar Air Cargo podcast.
[00:02:23] Speaker A: Thank you.
[00:02:24] Speaker C: Nice to see you.
[00:02:25] Speaker A: Good to see you guys.
[00:02:27] Speaker B: Jan. So I think to start, this is the first time I've had the pleasure of meeting you, so I'd love to know your freight origins story, if I can call it that. And that's before we tackle the current state of play and the future. Now, I know you live in Spain but where did you start out and how did you get into this fantastic industry and end up joining United? What, about a decade ago?
[00:02:48] Speaker A: Yeah, so I have to go back at least I think, and I. About almost 40 years, to be honest. I've never thought about going into logistics or going into. Into an airline or in cargo. But I was doing studies, I was doing evening studies, working during the daytime. And then I was working at a Second Choice tube factory. And from there I was trying to see what would be wise to do. I went into the army and then I came out of it. My mother found an ad and said, hey, this is something nice, maybe to start working at klm. And then when I looked at it and I said, hey, they asked, you want to go on the passenger side, on the cargo side? I said, coming from Second Choice tubes and coming from, I mean, the army, I was in Lebanon for seven months. I think maybe it's better to start on the cargo side than on the passenger side. And I went in there as a trainee and I said, okay, let's do cargo. So I started on the Cargo side in 87 and with the aim always to go abroad and work somewhere, because that's what I said I would love to do, so I'll start it there. And at the end, I've been 27, 27 and a half years at KLM. Before I ever moved to United, I was with KLM. I think KLM was an amazing company to work with. I mean, I learned a lot how you deal with teamwork, the open mentality, you were always allowed to speak up. They gave you a lot of responsibility already when you were younger, they said, just try, see what you can do and then take it from there. So, yeah, 27 years with KLM. I had an amazing time there, great company to work for. And yeah, and then I moved later on I moved to United.
[00:04:32] Speaker C: Yeah, and that's quite a career you've had even before you started in cargo. But. So KLM is pretty much known throughout the industry for its focus on cargo and training. I would say historically, it's been one of the most important combination carriers that there has been in terms of pushing the industry forward. How has your experience at KLM shaped your approach to United cargo?
[00:04:56] Speaker A: First of all, I mean, I have to be careful sometimes that I'm not too negative about the partnership with the French at a certain stage. But I can tell you that KLM was, I think, the best in the industry for years on the cargo side, really very much driven. I always talk about people With a cargo heart. People had a cargo heart in klm. The way it works, the friendship you build together there, the way we move towards customers, the way we move with each other. It was very international, very open. And that really helped me on seeing what could we do and what could I take with me from KLM into United. So what I said, teamwork was very big. The open mentality, a lot of responsibilities you got. So when United came more than 11 years ago or to certain stage, I met, by the way, then, I mean, Continental and United were together or became together the head of this move to Chicago. I was living in Chicago at that stage and met a lot of people who moved to this side. One of the guys was Greg Hart. He was the coo. We both met each other on a. They call it a riff fest party where we both had a couple of drinks too many. But that's how we met and we spoke about. I mean, he said I was looking at somebody at Cargo. He said Cargo is not one of the best issues and best departments at United. And we really look for somebody who could set it up. Now, long story short, in the beginning I thought, I will not move to United because, I mean, I don't know these people. I don't know the organization well. We hardly saw them on the cargo side. But talking to Greg, talking to a lot of other people, found out that maybe United is the right choice also. I mean, it was tough SKLM to work with Air France. It did not work out the way we thought it would be. So I thought maybe it's a good opportunity. I was in the US anyway, so I thought. And the family, this, my sons wanted to stay in Chicago, my wife in the US because we were living at that stage in, in Atlanta, so moved back to Chicago and at the end we decided to do that. So I've been there now 11 years. And in 11 years I had an amazing time and. And to be honest, never look back.
[00:07:06] Speaker B: Yeah, and we've had quite a few tumultuous years. All these geopolitical issues, the pandemic, maybe we'll have some peace at some point in the near future and airspace will open up. But there's been an awful lot of airspace closed. All of this has impacted operations for carriers in many different ways. What would you say have been your biggest challenges at United in this period?
[00:07:26] Speaker A: Yeah, so the biggest challenges are a couple. First of all, the wars in the countries are not helping at all. I mean, we are a big player on Israel, for example. We have an amazing team There. And that was a very important market. Now because of all the unrest there, we closed that and we had to find different ways of flying there. We do that by using a freighter to help our customers still to fly from Newark into Israel. But it cost extra money and we could not fly it with our own flights. Then India is an amazing important market for us, especially on the pharmaceutical side. Because of the war between Russia and Ukraine, we cannot overfly Russia at the moment. Now, I mean, even if you fly, then you have to fly around. It will cost you so much payload. So we cannot take anything there. During COVID we did amazing things with freight only flights. We did about 17,000 of them that we used our passenger fleet to use for freighters. We got the right rates where we could work that. After Covid, one of the challenges we have is that shippers really said, hey, there's so much money we had to pay during COVID now we feel we should get subsidized and get lower rates. So we had a lot of discussions with our forwarder partners to see how we can deal with it, because that was not fair, that was not true. But that was a challenge we had. Then the weather, the whole climate change is having an effect on our flights, our planes. I mean, if you really see that we fly, let's say from a. From the US into China, payload wise, because of the weather and because of the heat, it's very tough to take enough cargo with you. So especially ex Asia back to the US it cost during certain periods a lot of payload to really get enough cargo on board. So these are a couple of things. I have a lot of others, but these are the challenges we face day in, day out. If it's then the war part, if it's the weather part, is it a challenge with the customers? But. And also, I mean, a lot of we call it Mickey Mouse carriers who don't understand the business, what it really is, and try to really ruin the market with low rates and really try to disturb the market as it is. And that's also not helping. But we get more and more mature, the industry gets more mature and more professional. So I'm at least happy to see that.
[00:09:48] Speaker C: You just mentioned that there can be advantages in geopolitical crises and air cargo loves a bit of disruption. But do you think that the benefits only really work for freighter operators rather than combination carriers or passenger carriers? Can they ever make the most of a challenging situation?
[00:10:08] Speaker A: The thing is, sometimes when you're only allowed, let's say we do the combination flights we cannot fly to all the places in the world, so. Or we use freighters to link our network with our passenger network. Or we have interline agreements. We have many interline agreements where we take cargo from certain onds or destinations and feeder them in our where we have a big hub, let's say we do a lot from Southeast Asia. If it's from Vietnam, is from Thailand, is it from the Philippines that we feeder into into our hub in Japan, where we have 12 to 14 flights a day and then we ship it to the US So in a lot of cases as a combined or combination carrier, we cannot always fly to all the destinations, but finding different ways. Or we charter freighters, although I will never have our own freighters or own them, but I would love to have access to freighter capacity. So we play that game. Or we use interline agreements. Really interline agreements, not just spa rates, but really dedicated space on partners. They have it on us, we have it on them. And then feeder into. Into the main hubs where we have a passenger flights coming in. So it's to be a combination airline. If you do it the right way, then you can make it an advantage.
[00:11:24] Speaker C: Well, it looks like you have because your results for last year, your revenues climbed 17% and they're up almost, I think 30% in Q4, 24 over 23. So how did you do that?
[00:11:37] Speaker A: First of all, I think a couple of things. First of all, it's the spirit of the people. It's always easy to say that. And what I said before, we have people, we had it in klm, but also we have it in United with a cargo art. We are very, very customer focused. We really have short lines. And that customer focus is so important to really understand how we tackle and how we deal with it. Quality is the base. So we have to make sure that our quality of our product is doing well. So that if you have that, that's a given and then start to work on your customers. I mean, we have an international group. I think that's very important. It's not only a certain nationality, but it's really a mix of all different people around the world. That helps a lot. The Red Sea helped a bit at the beginning. Also during the year we saw that that gave us some extra business. Asia in the, in the past we flew about 100 times a week to China. We don't fly there. I think we fly 14 times a week at the moment. So we have a bit more limited capacity. But the capacity that we have ex Asia is really booming. I mean the race we can ask throughout 2024 that really helped. We do a lot. What I said about Inteline, we made a lot of money with Inteline to feeder into our network. We have some ad hoc freighters that we use for certain customers. That really helped to give us the base and give us the business. And then our mail. USPS is maybe our biggest single customer for maybe even for the total of United. We did a lot with them as well in 2024. That worked much better. It's the domestic mill, but also the international mill that we did. Also we have a freighter flying to Micronesia for the mail. That helped a lot. So everything together really, really gave us the results that we have in 2024. Although in the beginning of 24 I was a bit reluctant to say, hey, it would be an amazing year. But throughout the year we really saw the growth going there and that was yeah, very happy with, with the outcome at the end.
[00:13:38] Speaker B: Are you expecting this to continue in 25? And what's your general view on the demand environment? What are your major unkn operationally and maybe where do you see the opportunities?
[00:13:48] Speaker A: Yeah, so there's still markets where we feel opportunities. Three times a week we have a call with the team, we just before I spoke to you guys, we had the call with the team where we discussed, hey, what is happening in the industry? What is happening with E commerce for example? I mean we are not big on E Commerce because we said with the capacity that we have, we prefer to give that capacity to our steady partners that we have globally. And when there's some space available, we work on E commerce. Domestic E commerce is growing and especially with the network that we have, we can do a lot there. But I still see, especially on the high end pharmaceutical side, on the high end perishable side, I see really growth. We always said that added value is the most important thing. I mean general cargo customers can walk away for 5 or 10 cents. But if you really have added value, I mean you can really keep and build grip on your customers. And that's why we really felt on the pharmaceutical side we really grew amazingly well. And we still see that's also happening in 2025. Also new markets in Southeast Asia though we don't fly to a Vietnam or we don't fly to a Thailand, we still find out with the interlines, with the capacity that we can generate, we still see a lot happening there. Europe, we are big. Us, we are big. It's still I feel in Asia and in the Asian market that we can grow. Still opportunities in Africa and also in the Middle east is getting back to normal. We also see opportunities there. So I don't, I'm not negative about 25, I'm positive about 25. But will I see the same growth as we saw from 24 over 23? I don't think so.
[00:15:26] Speaker B: Just on Asia or particularly the buildup to the Lunar New Year, we normally see a bit more activity. And this year, I guess everyone was quite excited because certainly if you're in air freight, if it was a port strike, everyone's thinking, well, that could give a boost. There was also the possibility of tariffs coming in with a new president. It didn't really happen either for shipping or for air freight in the lead up to the Lunar New Year holidays. And I'm getting a real mixed message when I talk to people over in China. Some people are saying the factories are closed early, for example. What's your take? What were you seeing out of China in January?
[00:15:57] Speaker A: I always was worried at the beginning. So we have a team in Asia where we spoke to, we saw a bit of a dip, but. But that's also normal if you go. And we go also back a year because sometimes our memory is not. We don't have a long memory. But then we found out that last year it was a bit the same. It came back up. We thought that the E Commerce was stalling a bit, that shippers were waiting with E Commerce till the moment Chinese New Year would start. That did not totally happen. But with the capacity that we have, I'm not negative at all. And we are back already towards filling the flights. We are in the, in the period that we build and that we make the contracts for the, for the year to come with our customers. And we even see that rates that we are negotiating are even a bit higher than at the beginning of 24. So I'm positive, especially on Asia side, I was worried a bit, as you explain and describes. But maybe it also had to do with the momentum of when was Chinese New Year and what moment the factories were closed.
[00:17:02] Speaker B: Yeah. So it was a bit earlier this year than last year.
[00:17:04] Speaker A: Yeah, yeah, yeah, yeah, yeah.
[00:17:06] Speaker C: So Jan, you said before that United doesn't carry much E Commerce, but you will definitely have benefited from the capacity demand for E Commerce. Are you worried about restrictions coming into E Commerce? Possible changes to de minimis rules in the US and other authorities around the world? Looking at it, are you concerned?
[00:17:24] Speaker A: No. The thing is also, I mean these things happened before and then you see what is happening I'm not concerned at all. I always see, let's see what is happening. There's enough business at least to fill our flights. I always say we have to see what's happening. What is Trump going to do? No, I'm not worried. And the only thing is E Commerce. What I said is not for us that big. I mean we work on E Commerce, we have E Commerce customers, but we look at how we deal with it with the capacity we have left for that. But in principle, our base capacity is for our customers that we have throughout the good and the bad times. And that's for us much more important.
[00:18:01] Speaker B: Yeah, with air cargo disruption always leads to a benefit. But it seems to me that there's a possible peace dividend here as well. You mentioned before about we've got this ceasefire in the Middle east, opens up a bit more airspace. I guess the big win is peace in Ukraine. There's talks that feel like they're going to happen soon with the new president. You've said previously that the opening up of Russia airspace would be great for you to get back into that Indian market you referenced early, especially pharma. Is that where you see one of your big opportunities in 2025 or beyond?
[00:18:31] Speaker A: Oh yeah. India is an amazing market. Interesting. And not only on the pharmaceutical. I also see if you see there's getting much more money into these countries, for example, I mean if you see for example the high end, the high end perishables, how much demand there is, for example, in a country as India, then export out of India on the pharmaceutical guide, the growth there is also phenomenal. If you see what the expectations are, then there's a lot of other commodities ex China that would be interesting. And also commodities towards China. And then you can play also there the game towards different countries. How you deal with capacity in and out of India and then with partner Emirates, we do a lot, we work a lot with them to see how we can make connections there in and out. But yes, India would be an amazing imported market also on the passenger side, we know that, but especially also on the cargo side.
[00:19:25] Speaker B: So the opening up of that airspace then that would be near the top of your wish list for 2025.
[00:19:31] Speaker A: At least one of the top three, I think. Yeah.
[00:19:33] Speaker B: What are the other two, can I ask?
[00:19:36] Speaker A: No, no. I mean just flying to certain destinations in Southeast Asia that will be. I mean Vietnam is amazing booming market and I would love to see that we have more capacity there or we rent capacity or we deal with capacity there or we fly our own but it's again from the us it's very far and there's a couple more countries there. But I really feel that will be interesting. Yeah. And having Israel open again. First of all, it's so sad what is happening there, but I would love to. A very important market for us passenger wise as cargo wise to certain stage. We had three flights a day to Tel Aviv. At the moment we don't fly to Tel Aviv. We fly with a charter, a cargo plane. We do that for customer at least to make sure that we help the customer and feed it. But that's not. Yeah, that's not the situation we would love to see. So those are the ones I really will be very happy for.
[00:20:30] Speaker B: I'm sure. I read somewhere while I was researching for this interview something about Greenland and Mongolia as possible destinations. I don't know Greenland before all the talks of annexation, we are flying to Greenland.
[00:20:41] Speaker A: We're going to fly. So I mean really, if you see destination wise on the passenger side, cargo wise, I still have to find out what would be the best, the best commodities. And Mongolia also, I mean that's also a new destination for United and I think a lot of people are really keen on going there.
[00:20:57] Speaker B: So I'm definitely. Am both of them the same.
[00:21:00] Speaker A: The same. I would love to go to see Greenland and Mongolia. But that's I think also the strength of United keep on growing, keep on looking at new destinations, keep on seeing what is possible, how are things possible. And, and, and United always also discusses with cargo if there are new services, new destinations, hey, what is wise? How can cargo help? For example, if we fly to Beijing, the first flight we came in and out China and at a certain stage people said, yeah, we see they come in, then they go, they don't fly in. Yes, no, yes, no. And at a certain stage people just say if the flight is there for a month or two, then we will start putting passengers in. So in that interim period, cargo is very, very important. So to start up destinations. In a lot of cases when a very strong cargo markets, then cargo is very important. So the discussion is always within United also, hey, what is the possibility that cargo can contribute to the bottom line?
[00:21:58] Speaker B: How important is the US domestic market for. For United in 2025? I'm speaking to Amazon Cargo later on in this podcast. So they're also serious players in the U.S. i mean, is it a big market for you?
[00:22:10] Speaker A: Yeah, it's a big market. What I said, USPS is mainly is domestic. So we do daily tons and tons of mail, domestic we see a lot of E commerce players on the domestic market coming to us. They want to work with us more and more. Also maybe the FedEx and the UPS's are coming to us to see more. They use commercial carriers more in a lot of cases than maybe their own network. Also, if we see we fly a lot with Widebodies within the US that helps also to connect. So Asia, let's say connect to the east coast. If you fly in, in LA or San Francisco and use a widebody to the east coast or the other way around. If you talk about Amazon, Amazon is also one of our main customers. I mean we do a lot for them globally. So we work very close with them. If we could partner domestic also there and opportunities, I mean we have, I think 4,000 flights a day in domestic only. That's very expensive capacity that you can do a lot of nice things with. So we are really looking at opportunities also domestically to see how we can tackle that.
[00:23:20] Speaker C: Can I just ask, Jan, you mentioned that cargo was very much part of the conversation when you're looking at new destinations. But is it the same as it was during COVID Has cargo taken more of a backseat or is it still as important to United as it was.
[00:23:36] Speaker A: During COVID No, it's different than it was during COVID because then really. And that's also I think, the strength of United because when we talk about the E team or the board, they really were open to talk to us, to see how we could work together. If it was the pilots, if it was network, if it was tech ops, if it was airport operations, how could we use, for example, the planes for cargo? We had long discussion. Should we modify the planes? Should we take the seats out? Should we do different things? And I always said don't do that because at a certain stage when the world is back to normal, you like to fly. You start flying immediately to a destination. And if you really have to stay another six to two to eight weeks, wait till you get the chairs in or the seats in back again. So with the support we had and we said if we can keep our network current and we can keep the pilots current, and then we try to find the right business, the right cargo, let's start doing that. So we did that. We had 17,000 of these passenger cargo flights and that really helped the organization and the company very, very much. Now we are back to normal. It's not that, let's say the discussions are different, but a lot of discussions are still. I mean, an airline cannot. An airline. So it's United without cargo is very tough to deal with. If you saw the results, almost $1.8 billion was our revenue of cargo discussions like what I said about Beijing, I mean how much cargo can you contribute towards a destination like Beijing? Now if you talk about maybe $100,000 per flight one way, that's really xx China, that's really very, very important to deal with. So the discussions are there also for. Oh yeah, another example, for example was if we talk about San Juan from Newark, yeah, let's start flying there three times a week. We said that such an important pharmaceutical market there. So maybe instead of three times a week let's go to six times a week. Then said, hey, let's go with a narrow body. We said, yeah, but we can get so much cargo out. Maybe it's wise to start flying with a widebody. And then at a certain stage, and that's already for a couple of years, we start flying or we fly with a widebody six times a week to that destination. So the discussions are there and when we can really support and help with cargo, that discussion is always part of the discussion when opening a new destination or, or hey, what kind of fleet are we going to use or what kind of plane are we going to fly to certain destinations? So yes, I mean, but I always, I said that before also before COVID cargo was important for United we were always part of discussions. During COVID it was more intense and after Covid at least the organization understands the importance of cargo. But always cargo was very, very important part of United Airlines.
[00:26:33] Speaker B: Just on the fleet. Jan, you've got a few wide bodied orders in with Boeing. Couldn't you just update us on when they're being delivered, where they're going to be deployed? Maybe some of them have been deployed already. Obviously Boeing's had all these issues with deliveries and quality and workforce. Whatever. Everyone, everyone will have seen that reported in Lodestar. Where are you up to with them?
[00:26:51] Speaker A: Yeah, so at a certain stage, every third day for the next six or seven years we would get a new plane, mainly 737 Maxis, Airbus 3 to 1 Neons. And then we had a big order of the 787. I think the nines, I think 100, 250, even possibility to go to 200. Then of course the issues with Boeing. I think our chief Scott Kirby had also an interview concerning the delivery. I think we're getting, we already got new planes in. We get I think again every third day a new plane in, but not as fast as it was planned before, but I think slowly, I think United, Boeing is back on track then we see them coming in. So, yeah, the moment they ordered, they thought it would go faster with all the issues Boeing had. Yeah, it slowed down a bit, but I think they slowly got back on track again.
[00:27:46] Speaker C: So, yeah, you've talked a lot about interline partners, and I'm just wondering, are there any benefits to cargo from being in the Star alliance, or do you choose your partners independently?
[00:27:56] Speaker A: Yeah, so I came from another alliance combination before. I was also very much involved there, and I found out that if you talk to about 12, 13, 14 airlines, nothing will come out of it. So I'm very open to alliances. But then bilateral agreements, bilateral talks with Emirates, for example, we don't have a joint venture, but we have talks with each other and we work close on Interline and other options. And that's good. With Lufthansa, we do the same. I mean, the network of Lufthansa, especially beyond, let's say, the main destinations in Germany into Eastern Europe and whatever, is really helping an organization like us, mainly on the passage side, but also on the cargo side. So that network of a partner helps the same as our network. What I said, With 4,000 flights a day into domestic, our network in the US is helping a partner tremendously. Of course, I mean, with Ana, we also had a good relationship, although that's at the moment stopped because of their. We have to wait till their cooperation with NCA is 100% arranged and then we see how we go back into that joint venture again. But I totally believe in partners, but then in bilateral agreements and where one and one is more than two, I think that's very important. And it's not always that I have to gain from it, but the combination should gain from it. That's, I think, is very important.
[00:29:26] Speaker C: Makes sense. And the other sort of slightly specific question I wanted to ask is I believe that United has picked two out of three of the online booking platforms. I'm just wondering what made you choose two rather than the third one, or whether you're going to go on the third one or just what your thinking was around online booking.
[00:29:46] Speaker A: So online booking is crucial, is important. I think our industry is still a bit behind, although I think we are picking up. I always said if you talk about online booking, I would always go to a certain percentage. We always said in our industry, I mean, 50% of our bookings are under 100 kilos. So you don't want to have a discussion. You don't want to have talk on the phone with it. You don't want to do anything, just put it in the system and then it's done. Then all your pre bookings that you've done or your pre allocations yet you have with customers, you should also do online. Then let's say you have covered about 75 to 80% and then the other 20%, you really need to have the discussion with your customer. It can be booked online, but you still need to see how do we negotiate there. How do we really make sure we give you the right service on shipments like that. Then we work with two external platforms. Mainly we can work with three. And I think we will go to three at a certain stage. But it's also if you see the capacity that we have or the resources that we have within United, that's pretty limited. So we cannot keep doing what we're doing. So we already have to be careful what we do, where we step in and how we grow and how we do that. Because you can try everything and we would love to try everything, but we don't have the resources and the manpower to deal with it. So yes, we have two at the moment and I think we will go, if it's viable and good for United, we will go to a third one. But let's first focus on the two that we have to see how we can bring that to the next level.
[00:31:19] Speaker C: Right.
[00:31:20] Speaker B: Thank you, Jan. In terms of investments, you guys opened 165,000 square foot facility at Newark Liberty International Airport last April. How's that helping your network and services? But more importantly, what other investments do you have in the pipeline that we haven't already discussed?
[00:31:37] Speaker A: So first of all, new work at a certain state. We found out that at the airport in Newark, Amazon would come in and would take away most of the capacity warehouses and whatever. And that would really hurt us tremendously. Now we said, okay, then we have to find something, to find something different. We looked at many opportunities. On airport was tough and off airport we found somewhere location, but it was too far away. And then we found this opportunity that's only three minutes away. But we have all up to date technology, state of the art technology. An amazing warehouse, 60% by the way of our international business is coming through Newark. And so we open up this one and I'm very, very much more happy than I even thought I would be if you see that really it is only three to five minutes to get from the airport to the warehouse or the other way around. So no, it's very good. So we work in Newark. But also what I said, also if you look at the facilities for temp control in Newark, that's amazing how we deal with that. Cooling facilities, freezing facilities, everything. That is. That is what I said, state of the art. We will do the same in San Francisco where we look at. Because that's also very important. How do we tackle Chicago? How do we tackle L. A? Those are the four at the moment we work very hard on. The rest is still very much, pretty much under control. But those are the ones, especially on the west coast, where we really have to see how we can get it also to the next level because that's very important. And especially with the growth of flights in and out of the US To Asia, we really need to make sure we are up to date there as well.
[00:33:15] Speaker C: Moving on to more sort of personal insights. You've said before that the joy of winning motivates you more than the fear of losing. So as someone who's had a very long and glittering career in air cargo, what advice do you have for the next generation of leaders?
[00:33:32] Speaker A: That's a difficult question.
What I learned is be yourself. I mean, don't try to be different than you are. Be yourself. Be open, be positive. Make sure you give credit to others. I think that's very important. Don't take the credit, but make sure you give credit to others. I learned one thing from a previous boss who said, find your edge. Find where you're really good at and where you're really good at, even if it's very small. Make sure that you're unbeatable there, that you're the best in there. And then make sure that all the other things around you where you half good in or whatever, that you find the right players who are much better than you in those. And then together you will build and find the right team. And then make sure that whatever people are doing to give them the credit, to make sure that they feel. Yeah. That they feel motivated and happy. And I think that's. That's very important. What I think is also very important is have fun. Really, really make sure that you work together and do a lot of things that are funny and make sure people have fun. That's important, but really important is listen to customers. I found out that listening to a customer and be close to a customer, try to avoid saying no, but really try to come up with solutions really helped us a lot or helped me a lot in the way of working, especially in the last 11 years with United. And what I said also before is it's quality. Quality. Quality is the base of everything. If your quality is okay, you can do whatever you want to make it better.
[00:35:07] Speaker C: I've just got one follow up to that, which is. I'm just curious. Do you believe that there are other airlines that will have the same influence on the industry that KLM has had in the past? When I look around, there's so many Dutch air cargo leaders. Do you think other airlines are good enough to be able to do the same thing and create that pool of talent in the way that KLM did?
[00:35:30] Speaker A: I think it's a very good question. I just made a list for myself at a certain stage who came from the KLM school at a certain stage and where are these people? And then, yes, a lot of them are. And it's also some of them from the Air France school. So the klm, Air France school, you also see a lot of people who came from the Air France ranks and are very high up in different positions. I still think that KLM was the best cargo carrier in the world for a long time. I think others got there also. I mean, Lufthansa is a very good organization made different state, different people, but also very, very good the way it's organized. You have a couple in the Middle East. I mean, if I talk to Emirates today, I mean, fantastic company to deal with, with the people there. Clever also, by the way, there are also some Dutch people there who came from the KLM or the Martinez School. Yeah, I think it's the way of. Maybe it's also the mentality, the way of. It's customer driven, it's their openness. Maybe it's sometimes even more the Dutch mentality than the KLM mentality that let people easy to work with. Customers love to work with and easy to deal with, I think. But it's very, maybe it's very tough to say what is the real reason. It is strange to see but many, many out of the Dutch or out of the KLM school ended up in pretty high positions in the airline industry.
[00:36:52] Speaker B: We're on the Dutch side of things. All my Dutch friends, I think the words that would come to my mind when I think of them is straight talking. Is that. Is that a quality that thrives in air cargo?
[00:37:02] Speaker A: Yes, but you also have to be careful sometimes because if you only have Dutch everywhere, that's also not good. It's also not good to have always Americans everywhere. And I think that's the strength. What we try to do, what I said before also with United, is to have that mix of nationalities, to have that mix of cultures, to have that mix of people, ladies, men, women, girl, whatever.
A mix of everything. And I think that makes an international company strong. And yes, it is sometimes. And I think that's what we see also in United. It's the straight talking, I think the honesty that helps. But you have to be careful. You need sometimes people next to you who stop you and say, hey, I mean it's open and honest, but you also have. You can go too far. So yes, it helps, but also you need some people next to you to, to stop you sometimes.
[00:37:56] Speaker B: Success through diversity. Almost an unfashionable brand of politics at the moment. But I see you, I see your point. If I can ask you to put a look into your, your crystal ball. Can you give us some thoughts on what you see for the future of yourself, for the business or maybe your vision for the future of air cargo?
[00:38:14] Speaker A: Now if I look, let me think on that one. But I think the future of air cargo, what I think is expected to be marked by significant growth. I really see that. Driven by technological advancements. I really see that. And increased demand. I really see the growth, what is happening there. And if it's AI that can increase efficiency or it is a digital transformation that will help and get, let's say the connectivity stronger or look at tracking and tracing and connectivity there. What will sustainability bring?
It's tough, but I'm very positive about the future and the positive if it would be for United Cargo, I'm very positive. I really believe in added value. I really believe in high end quality, added value products. As I said before, I really think that is something that makes sure that you are there in the future. That people cannot walk away for those 5 cents because you really make sure you have grip on your customers. So I'm positive about that. If you ask me for my future, I would love to make wine in Spain, although.
[00:39:23] Speaker D: Me too.
[00:39:23] Speaker B: Can I come and join you?
[00:39:25] Speaker A: You're very welcome. Although the wine that I make today is very much undrinkable. So I would love to work with my sons in the future because they are in different trades. Although one now suddenly wants to go into the logistics. So I'm very interested there. And I would love to start a dog rescue center. That's what I wanted to do already for a long time. But for the rest I'm still in air cargo and I'm not gone yet. So they still have to deal with me.
[00:39:57] Speaker B: Thanks Jan. That's a great way to finish. I'll be back shortly for some takeaways with Alex before I speak to Tom Bradley, director and GM at Alex Amazon Air Cargo. But for now, Jan Krems, President of United Cargo, thanks for joining us today on the Lodestar Air Cargo podcast.
[00:40:12] Speaker A: Alex, Mike, thanks for dealing with me. I hope we see each other soon face to face somewhere. But thanks and till we meet again soon.
[00:40:22] Speaker C: Thanks so much, Jan. It's been great. I'll see you in a pub somewhere soon, I hope.
[00:40:27] Speaker A: For sure, for sure.
[00:40:28] Speaker B: Okay, let's take a short break there while we hear a little bit about our sponsor.
This episode of the Lodestar Air Cargo podcast is sponsored by Air Charter Service. With a network of 34 offices worldwide and 650 aviation specialists, Air Charter Service can always deal in your preferred language, time zone and currency no matter where you are located. Air Charter Service teams are available 24, 7 to help you with your charter requests so they can find the perfect solution for you you quickly and efficiently.
So Alex, I thought that was really interesting and I do hope it comes across on audio that we were we're all enjoying ourselves as we were doing that interview. Obviously we could see each other. So that doesn't always translate into audio. If only smiles made a bit of noise. But Jan's really very good company and what a career he's had. Still at the cutting edge after all this time. Well, well, having one eye on his vineyard, which I do hope I can go and visit at some point. It's really good life lesson that he's thoroughly enjoying what he does. Aside from that, my major takeaway from the interview was probably one of optimism about 2025 particularly, although he didn't expect as much strength or returns as United managed to achieve in 24:23. But there was certainly a big degree of optimism there. I wonder how much of that was relative optimism down to United Cargo being less exposed to E Commerce as other players who benefited so much last year.
[00:42:00] Speaker E: Yeah, that's true. But then everyone benefited from E Commerce whether they carried it or not. Really. Demand was so high it didn't really matter. If you're an E Commerce player, you still benefited from high yields because of the capacity. I think the thing that I wanted to jump in on most, but I didn't think he'd let me, was his opinion on KLM's merger with Air France. Every now and again you do hear from the Dutch air cargo community and from within KLM itself that relations with Air France can be a bit tricky. Klm, possibly the Dutch in general, have very strong opinions on cargo and quite a confidence in the way they navigate the market. The French or Air France people say, have slightly different priorities. And so those combined airlines, it's one of those really difficult ones to understand. But one day, off the record, I will definitely ask for his true opinion of Air France.
[00:42:48] Speaker A: I'd love to hear it.
[00:42:50] Speaker B: Yeah, me too. Another revealing point for me was just how important access to airspace is for these carriers in terms of payload and routing and competitiveness. If you can't fly over Russia, a lot of markets are tough to compete in, and I'm sure that's just as true or even truer for European carriers. But as that opens up, which hopefully it will, Jan sees these big opportunities into Israel and into India in particular.
[00:43:14] Speaker E: Yeah, I think it'll be interesting to see how United negotiates India and how much cargo it will get. Competition's growing in India quite a lot. There's a lot of carriers knocking around there now, so it'd be quite a good one to watch.
[00:43:26] Speaker B: I was also pretty interested to hear about the role cargo plays in starting up new routes. That foundational revenue it can provide for combination carriers in particular, as they're getting their passenger route up and running. We didn't really have time to get into too much about how the US relationship with the rest of the world will impact those opportunities. Trade wars and threats might not be a great handmaiden for market access, I suppose.
[00:43:52] Speaker E: No, perhaps not. I mean, it's kind of difficult to comment on that for him. The other point I think I want to make is that Jan noted that United takes cargo very seriously, and he mentioned this massive revenue figure of $1.74 billion for United Cargo last year. But if you look into it, it's only 3% of the total revenues of the airline. Other operating revenues outside of passengers, I'm not quite sure that includes, accounted for 6% of the airline's business. So cargo is actually quite small PHI. But then when you compare with the other two big US carriers, Delta Cargo accounted for 1.3% of overall revenues. American Airlines Cargo contributed to 1.5% of revenues. So in comparison, United cargo is doing pretty well. And it's impressive that cargo continues to have this quite strong voice at the airline, as it actually has always done since I've been doing this.
I think that's shown in the fact they employed Jan to begin with. American Airlines tends to hire internally. Delta start to play around with hiring cargo people, and they've got Peter pencil in currently, but it's quite a recent thing United has been much more dedicated to cargo, I think, in a way that the others haven't. It's got something of an independent spirit compared with the others. When you think about AA and Delta, you tend to think of BA and Virgin and the big alliances, but you don't naturally necessarily think of a partner with United.
But as he made clear, and I thought this was really interesting, he'll happily interline and has been very successful in doing so indeed.
[00:45:25] Speaker B: Okay, thanks, Alex. Hopefully we can get Jan on at the end of the year or this time next year and hear how United Cargo's been getting on. Next up, it's Amazon Air Cargo.
Okay, welcome back one and all. I'm delighted to say that coming up is Tom Bradley, who joined Amazon in 2011 and currently serves Director and GM for Amazon Air Cargo. Prior to leading Amazon Air Cargo, Tom led businesses across Amazon's logistics and pickup division. Tom has also worked in the retail industry, focusing on home cell phones and mobile electronics. Tom, welcome to the Lodestar Air Cargo podcast.
[00:46:04] Speaker D: Thanks, Mike. Pleasure to be here.
[00:46:06] Speaker B: I guess why don't we start at the start? Tom, what prompted Amazon to enter the air cargo market in terms of offering capacity to third parties?
[00:46:15] Speaker D: Yeah, well, at Amazon generally we kind of evaluate new businesses on three different criteria. One, do we think that customers are going to love it? Two, do we think it can be a differentiated product and have its own value proposition? And three, does it have high growth potential? Can it be big? And so from a customer obsession standpoint, the Amazon air Cargo business has been around for a few years actually, and we've had a couple of customers in the background that been ticking along and they told us that the service was great. And in addition to that, we went out and spoke to quite a few different customers on the value proposition and they gave us positive feedback. And so we had a high degree of confidence that customers were going to love the value proposition. And really the value proposition itself is the air network that we created for Amazon customers. It's a very dense, reliable, technology driven network and we have a high degree of confidence that the customers love that. And since kind of launching the business, customers have reaffirmed that they like the value proposition, they like the level of service, and all of that combines for high growth potential. And so we believe that Amazon Air Cargo will be a big business. And that's really why we decided now was the right time.
[00:47:27] Speaker B: So what do you think you're bringing to the market that maybe wasn't there before? And who do you see is that market what constitutes that market, who you're aiming your services at?
[00:47:36] Speaker D: Yeah, so I, from a unique value proposition standpoint, there are a few things that we bring to the market segment. So, so one is the network itself. The network is a very dense point to point and also hub and spoke network that gives a very, very wide variety of origin and destination pairs and you know, amongst the widest variety of kind of medium widebody origin and destination pairs in the market segment. So the network itself is, is a key part of the value proposition. I'll also add the cutting edge technology that we offer. So our network is run by a wide variety of machine learning models. We have a network control center that runs on proprietary software and everything that you would expect from Amazon from a technology standpoint runs our network. So real time decision making, advanced tracking and visibility. In addition to that, I would call out we have an incredibly flexible network and I'm sure we'll talk about this more. But we have a flexible network both from an air perspective and a ground perspective. So we can route Amazon packages in a number of different ways and that gives us the flexibility to move inventory from one airline to another airline or from an airline to a ground lane. And that means that we never have to bump third party cargo and all of that kind of combines to create a very reliable air service. And so that's really what we think we're bringing to the market. Like the network itself, high technology flexibility that all drive reliability.
[00:49:08] Speaker B: Just going back to one of your points there about this anticipation of this being a good growth market for you. Was it always the plan to offer third party services? I'll say that. I was, I was talking to a shipping line the other day and they were saying, oh well, you know, if the Suez Canal opens up, yeah, there might be a bit of excess capacity. We've got these various strategies. I was like, well, obviously the simplest strategy wouldn't been to maybe not buy so many ships. Does that apply to Amazon? Did you overexpand your network and now third parties are being brought in to help fill out that excess?
[00:49:40] Speaker D: No, I think, you know, there's always going to be opportunity to utilize assets more if you have additional demand sources. Like it's just kind of a math problem. Right. And so Amazon is one demand source, but we have lots of different demand sources that enable us to, you know, both offer this network and set of capabilities, but also utilize our assets more. So I think it's a real combination of yes, we have a network that can take different demand sources, but you know, Amazon has a long track record of building third party businesses. You know one of the best examples or I'll give you a couple of examples, right? AWS is a great example. Like we build out technology for our retail business and then we realize that that has commercial potential and we go out and sell that to third parties and even the marketplace. The Amazon Marketplace itself started off as a retail business only where we purchased products ourselves and sold it on our retail website and then we opened that up to third parties. And we're taking similar approaches with our supply chain across a number of different areas and Amazon Air Cargo is one of them.
[00:50:49] Speaker B: Is this open to everyone or are you looking for major partners maybe like Kuna and Nagalu? I know you set up a Chinese e commerce service within the final quarter of 2024. Is that the way forward or is it a different proposition?
[00:51:03] Speaker D: Yeah, the short answer is that we can service any type of customer. We already serve a diverse set of customers. So we have large and small freight forwarders. We also have major postal integrators and we also have direct shippers as well. And so our aim really is to target customers who value speed, reliability, flexibility, regardless of the size. And so if any customer falls into that bucket of wanting speed, reliability, flexibility, they're a good customer to use. Amazon Air Cargo, I'm sure, I'm sure.
[00:51:33] Speaker B: There'S quite a few that like those sort of things.
In terms of assets, you have over 100 freighters. But you touched on your network before and I was looking at this. Can you explain how it works? It seems to me that you have a series of intra continental networks. I was wondering how do they interact with each other? How do they talk to each other? Say if I'm a European or a US importer and I'm buying stuff in Asia, how does your network help me?
[00:52:00] Speaker D: Yeah, so our regularly scheduled network is primarily intracontinental, as we kind of touched on before. That creates very dense networks with lots of different origin and destination pairs. And then the combination of the hub and spoke and point to point also increases that connectivity within the intra continental networks. We also are particularly strong in some of the more remote areas. So we have very regular service to places like Hawaii, Alaska, Puerto Rico, Cyprus, Malta. And so yeah, while it is intracontinental, the schedule service goes to far flung destinations that actually Greenland, that came up earlier with United. I bet it did, yeah, not Greenland today, but never rule it out. If the population of Greenland keeps expanding, then there might be opportunity. So yeah, those destinations actually can link to International legs as well. And you kind of mentioned Koonanagle earlier in the call. They partnered with us via Apex to set up an international product where they own the first leg into Alaska or Hawaii and we own the second leg, thus creating kind of an international product. But I will say we also do operate internationally. For the most part, that's been ad hoc charters, but kind of watch this space for additional opportunities coming up. But you know, we've flown to South America, Africa, China, and you know, most recently we were participating in the cherry season in Chile. And what we talked about previously in terms of the flexibility of our network allows us to do that. We can reroute Amazon packages, which frees up the capacity. So when customers need ad hoc charters and when the market conditions make sense, we can easily divert capacity to those locations.
[00:53:45] Speaker B: So the. The scheduled network essentially is Intra Continental and then the international arm at the moment at least, is chartered. Is that right? Or are you looking at scheduling services on the international routes because they're the big key drivers of the air freight market?
[00:54:00] Speaker D: Yeah, I mean, the international market segment is an important market segment for us. As you rightly point out, it's the majority of the market segment and we see international as a key strategic growth area for us. So I can't go into specific details, but like I say, watch this space for some exciting stuff coming up.
[00:54:18] Speaker B: Okay, so you definitely didn't tell me that you might be doing international scheduled services in the near future. I'll stick to the chartering then.
I was quite surprised you've done it. You did a thousand charters last year. And in 2023 was a lot of that. Did that number get so high because it was short all intra Continental or was some of this. How many of those were international? Can you give me a feel for that?
[00:54:40] Speaker D: I don't have the specific numbers in front of us, but a lot of those were intracontinental charters, you know, so from a pure percentage point of view, that would be the majority of them. But you know, really our strategy or our target from a customer perspective is both scheduled service and charters. Like the flexibility that we've talked about. Both allows us to maximize customers who like our O and D pairs for scheduled service and take capacity out of the network when it makes sense for our customers. And the flexibility of the network allows us to reroute Amazon packages to free up that flexibility. So really we're focused on both that scheduled service and building our charge business.
[00:55:24] Speaker B: Okey dokey. Amazon Global logistics and Amazon B2C. How do those two things work for your air cargo customers or is that all separate?
[00:55:33] Speaker D: Yeah, well, I mean, on the Amazon B2C side, like really the heart of our network is the network that's been built for Amazon B2C. Customers can put their ULDs, their inventory on the same planes that Amazon customers will have their inventory on. And we leverage all of the same technology best practices that we've created for Amazon.com for third party customers. You know, Amazon really is a customer obsessed company and we've built out an air network that prioritizes speed and reliability above all things. And so third party customers can gain access, easy access to that network and benefit from all of that technology that we've been built to serve Amazon.com customers.
[00:56:16] Speaker B: It sounds sort of similar to when I think of an integrator. It sounds sort of similar to that. How do you view yourselves today?
[00:56:23] Speaker D: We view ourselves as primarily an air service provider. And that's the business that we have been focusing on. Ultimately the air service that we provide needs to stand on its own. And so the majority of our customers use us solely as an air service provider and then link to whatever transportation either the side that they need, either through third parties. We can facilitate trucking if customers need it. But yeah, we don't really kind of bucketize ourselves into being an integrator or anything. But our focus right now is building an air service that customers love and that's what we think we've got.
[00:56:57] Speaker B: Yeah, you guys are obviously really renowned for handling E commerce. What if I've got some more complex cargo? Maybe it's heavy, maybe it's perishable, maybe it's dangerous. Can you help me with that?
[00:57:08] Speaker D: So if I scroll back to two years or so, really, our network was designed for E commerce. Amazon packages neat little boxes that were reliable and clean. And obviously the air cargo industry isn't neat little boxes that are reliable and clean. So really 2023 and 2024, we've been investing in building out just a really wide set of operational capabilities. And at this point we can handle almost all types of cargo. And so, you know, different ULD types, build and break capabilities, different types of specialized cargo, dangerous goods across like multiple classifications, heavy and bulky cargo, all of the kind of add on auxiliary service that you'd expect with screening active pharma. We can handle all of those kind of things. So we should be able to handle 90% of what customers need.
[00:57:58] Speaker B: Okay, I'll come on to your view of the market in a second, I promise. But one of the big fears expressed by many in the industry to Lodestar and I know this also came up when you spoke at a conference in the US is how can forwarders be sure that their booking with you won't be gazumped if you need the capacity for Amazon shipments?
[00:58:15] Speaker D: I'll be super clear on this one and we've kind of touched on it a little bit. But we do not bump third party cargo in favor of Amazon shipments.
I think something that sets us apart is that we have that flexibility that we've talked about. We can reroute Amazon shipments to different airlines and different ground networks. And in addition to that, the fairly unique thing is the timeframe that we can do that. We can make those decisions really up until about 24 hours before the flight leaves. So we've essentially got a reroute valve that we can kind of turn on at any point. And that gives us the flexibility that we need to be able to make statements like we will not bump your cargo. And, you know, that was one of the key bits of feedback that led us to enter the market segment is customers telling us that they were actually fed up of being bumped. And, you know, we have developed a solution that means that we can confidently say that we will not bump your cargo in favor of Amazon.
[00:59:14] Speaker B: How does that work?
[00:59:16] Speaker D: Yeah, I mean it's. We have again, going back to technology, we have a whole heap of proprietary systems that deliver customer promises on the Amazon website and we can change those promises up to 24 hours in advance and reroute. More often than not, the promise doesn't change to a customer. We can still deliver in exactly the same time that we would of by changing routes and lanes. And so it's kind of the best of both worlds. Like we'll put an Amazon package on a different route that gets there at a very similar time and that frees up capacity on a particular lane if cargo customers need it.
[00:59:52] Speaker B: How are you seeing the market in 2025? Have you got specific targets for volumes or other KPIs you're looking to reach this year across your network? How are you looking at it internally?
[01:00:04] Speaker D: Yeah, I think one of the benefits of being in our position is we're a relatively new entrant to the market segment and so we're going to be in a high growth mode. So those kind of the trends that will impact more mature businesses won't necessarily impact us to the same extent. Our focus is on continuing to build out new capabilities, serving customers and really educating customers on our value proposition. That said, we see 2025 as a huge growth year for us. We're going to look to kind of double the business and 10x the number of customers that we serve. And really it kind of links to the value proposition that we've talked about. And so 2025, regardless of what we see in the market segment, is going to be a strong year for Amazon Air Cargo.
[01:00:46] Speaker B: Do you see that growth coming primarily from the US or is that a global target?
[01:00:50] Speaker D: Samson Air Cargo operates across North America, EU and India. And so the doubling is a worldwide doubling.
[01:01:00] Speaker B: You mentioned Amazon's rather famed ability to harness technology earlier and commercialize it. What are you bringing to our industry, say, in terms of generative AI from other parts of the AM Amazon business?
[01:01:13] Speaker D: First off, in general, like, I think generative AI is super exciting technology. You know, I do believe it's a generational technology like, like the Internet was. And you know, Amazon grew, grew up initially in the Internet, the dawn of the Internet age. And I'm kind of excited to be at Amazon now through the generative AI age. And Jesse said something, one of his shareholder letters, I think it was on AI not being a trend for us. It's kind of foundational in how we operate our business. And that's true. Generative AI is, you know, there's a new tool launched in Amazon internally, you know, every week from, you know, reporting, analytics, network planning, all of these kind of things. And so it's an exciting time to be in the industry. And then for kind of the air freight, air cargo market segment, it's an interesting one in that it really hasn't been dramatically disrupted by technology historically. Like, we're still passing bits of paper between humans to move inventory around.
[01:02:13] Speaker B: We've had an awful lot of people who say they're just about to change all that.
[01:02:17] Speaker D: Yeah, I'm sure. And, but there's been good reason in the past why the industry hasn't really had that watershed moment from a technology standpoint. And it's because we are very highly regulated industry for a good reason. You know, safety is paramount. Fidelity in that inventory is paramount. And really I don't think technology has been good enough historically to deal with that complexity and that risk. But I truly believe that generative AI will change that. And so like gen AI is very good at taking those very complex data sets and creating reliable solutions off the back of it. And so we're really excited on a few different areas. I'll give a couple of examples, like safety. Safety for Amazon is the primary focus across our operations and Using Genai to proactively detect safety anomalies and present the kind of operator with correction mechanisms is going to be huge. And you know, we're also really excited about the potential for disruption management. You know, getting ahead of weather events and dynamic rerouting of inventory, like in real time, where it may have taken a team of people a morning to come up with a recommendation. Gen AI can create that recommendation and actually deliver the updates to whatever systems you need in real time. So, you know, we're really excited about the potential for Gen AI. Part of our aim as Amazon Air Cargo is to be at the forefront of that and, you know, really embrace that technology and utilize it for customer benefit, essentially.
[01:03:47] Speaker B: Is that where you see the differential on service provision and your ability to offer transparency and use this technology from other parts of the business? Is that the key for you?
[01:03:56] Speaker D: Yeah, absolutely. I mean, Even without generative AI, you know, we offer a suite of APIs that customers can integrate with for complete transparency on tracking. I mentioned our network control center that is a 24 hour major operation in the background that has kind of machine learning models and is starting to use generative AI and disruptive management and all of those types of things. So today I think that technology is already driving real customer benefit. And you know, Amazon being at the forefront of Gen AI is only going to improve that. So I do think technology will translate into real customer benefit. Really focused around that kind of disruption management that drives reliability and then focused around complete transparency of the network, real time inventory locations and removing the need for kind of manual reporting in terms of that disruption.
[01:04:52] Speaker B: We've got a bunch of possible changes or disruptions to trade flows. I'll throw a few out there. Tariffs de minimis rules, trade wars. We were going to have a port strike at the start of the year that didn't happen. The airspace could open up at any moment if we have P say in Ukraine. We discussed that early with Jan. Some of these are positives if you're in the business of trade, but they'll also be disruptive in many ways. So how are you geared up to handle these changes and how will you be communicating this to customers? So this is all transparent to them and they know where their shipments are?
[01:05:25] Speaker D: Yeah, I think. Well, I'll just say, you know, the air freight industry is volatile in its nature. You know the one normally how it makes a profit. Yeah. The one constant is change. Right. Like I said, the potential wave of change that's coming in 2025 and beyond is just another example of that. And so what me and my team obsess about is how can we be the most flexible air service provider in the market segment? Like, if we can be the most flexible, that allows us to adapt very quickly to these changes. And we talked about how we're building a flexible network on some of the other questions. But that basically allows us to move capacity around very easily. You know, if there's a need for international flying or charters, we can move capacity out without impacting Amazon customers. If there isn't that need, we can move it back into a domestic service. And so our aim is to create that flexibility. That means that we can move very quickly regardless of the changes in trends or market segment types. And so, you know, that's what we obsess about, building that flexibility. That means that we can serve customers where they want serving and then to the prior conversation. For sure. Transparency is super important. So real time tracking across, you know, lots of different milestones. We have eight milestones in our API tracking that customers can integrate and see where their inventory is in real time. So, yeah, that transparency and flexibility is going to be the key to adapting to whatever goes on politically or within the market segment.
[01:06:56] Speaker B: Tom Bradley, Director and GM for Amazon Air Cargo. Thanks for joining me on this inaugural episode of the Lodestar Air Cargo podcast.
[01:07:04] Speaker D: Thanks, Mike.
[01:07:08] Speaker B: And thank you all for listening. Charlotte will be back next week with her News in Brief podcast, so please do catch that I'm back second week of February with more on container shipping markets when I'm talking to two people with a lot of shipper side knowledge. And towards the end of February, the Lodestar Air Cargo podcast will return with a Tiaka no Holds Barred special where me and Alex will be speaking to Tiaka Chairman Stephen Polmans and Director General Glyn Hughes. Thanks to Air Charter Service for sponsoring this podcast, Karen Ball and Ton Matthews for doing all the heavy lifting on production, and you all for listening. Bye for now.
