INTERVIEW: dnata's Stewart Angus on keeping calm and carrying cargo

Stewart Angus, divisional senior vice president, international airport operations at dnata, explains how the ground support group is continuing to make long-term investments in cargo facilities despite a slowdown in the air freight market and ongoing airline bankruptcies
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Dnata, Air cargo, Cargo

What would you regard as dnata’s main highlights over the last 12 months?

We’ve continued to expand organically and we’ve opened up cargo facilities in three airports; Brussels, Heathrow and Karachi. These facilities are equipped with the latest technologies and comply with the highest industry standards ensuring efficient and safe handling of all types of cargo. We’ll also open up Charlotte in North Carolina as a new station for ground handling. The other highlight for me is continuing to win contracts. We’ve won 48 new contracts this year with various airlines around the world, which is generating an extra AED 130 million ($35.4 million) revenue per annum. To us, those contract wins are important because they’re a signal of customers’ faith in our business.

How have you been able to absorb all these new contracts?

With every start-up you do, there’s a complex implementation plan. You’ve got to plan recruitment of staff, training, bringing on new equipment and getting all that approved at the airport. And every airport has its own little nuances in terms of training, so there’s always a very detailed plan. That’s 48 implementation plans we’ve had to prepare and execute. That’s a huge part of our work.

You made fewer acquisitions in the last year. Has it been a year of consolidation?

We made five acquisitions between three and five years ago. Our revenue in 2016/17 was up 60% on three years earlier. Since then, it’s been about integrating those businesses, optimising their performance and introducing standardisation of various systems and products across all of those businesses. Having said that, in the two years since then, up to 2018/19, our revenue grew by over 22%. So there’s still quite a bit of organic growth going on; we’re certainly not standing still and those contract wins are an example of that. I quite often use the phrase, ‘don’t bite off more than you can chew’. Acquiring companies is easy and fun. Integrating them and optimising their performance to deliver the business cases is much harder. Having said that, I think over the next year we will look to grow but it will be very discerning, making sure that we buy businesses that add value to our portfolio. I think there will be one or two [acquisitions] over the next year but there won’t be any industry-grabbing headlines. They’re going to be small add-ons.

What does the recent ‘green turnaround’ at Dubai International say about dnata’s environmental strategy?

There is a huge amount of work going on across our global network on [our environmental strategy], whether it’s from trialling vehicles with manufacturers in the UK to using solar power. There’s a lot of work going on and as an organisation we’re very committed to it. Every company says that, but I think as a management team and a group of people we’re all very passionate about enhancing environmental efficiency across our operations.

Naturally, airlines are the focus of most environmental cases in the aviation industry. What kind of responsibility do the support services and organisations like yourself have?

Obviously our carbon footprint is not as big as other organisations. But I think the point about the environment is, if everyone says, ‘I can’t make a difference’, then nothing will change. It’s actually quite rewarding to be in a position where you can make decisions that will make a difference.

You recently underwent a management restructure. How has that impacted on operations?

That move was in response to this business growth that we had over the last three to five years. How do you manage that and maintain the quality and standards across our airports? We introduced a regional structure with four regional CEOs and it’s worked really well. It’s allowed us to get closer to the businesses so you feel much more comfortable about delivering the service.

What are your strategic priorities for 2020 and how do your expect global operations to evolve over the year?

In terms of priorities for this year, there are two, which are the same as last year and will be the same next year. They are customer and staff. We only succeed by being a customer-focused business and listening to our customers and delivering what they want. Whenever I think of strategic priorities, forget all the fancy buzzwords, come back to customer and your people. On top of that, right now, I’d say one of the other key priorities is standardisation. Having effectively invested in around 16 businesses across the world, we need to ensure that we deliver a consistent level of safety, quality and service to every airline customer. We’re introducing mobile technology on the ramp, for example. Once you have that data on that turnaround, you then have so much more data to analyse and understand what went on during that turnaround and analyse trends, things that the industry hasn’t had in the past.

The technological side is interesting. You seem to have invested a lot in technology, for example at Heathrow City East. How central are new technologies to your operations?

From our perspective, technology is one of the areas we try to differentiate ourselves from the competition. Dnata City East is a good example. It’s our eighth cargo facility at Heathrow, which in itself is quite a statement of our commitment to the UK market. We opened dnata City, the first three warehouses in 2011, and at the time they were cutting-edge. Technology improves not only efficiency but is also much better for safety and the environment.

What’s your geographical focus when it comes to new operations and acquisitions?

The reality is that we’re a global business now. Nowhere is off limits. I think most of the growth we’ll have over the next few years will be adjacent growth. We are focusing on markets where we already have a strong presence. And a lot of our recent growth has reflected that, so, for example, we bought a cargo business in Amsterdam in 2015 and two years later we started ground handling in Amsterdam. In 2019 we moved into cargo in Brussels. So they’re natural extensions. Having said that, often the growth strategy tends to be opportunistic and based on where the opportunity happens to arise.

Where does the Middle East sit in terms of your priorities? How do you view the growth potential here?

We would love to grow in the Middle East. Our growth here has been quite limited to date. We are looking at opportunities here, the challenge is consummating them in terms of getting a business case to work.

Dnata has faced a number of challenges over the last 12 months, not least Thomas Cook’s collapse in the UK. What have been the main hurdles from an international perspective?

There are a number of challenges. One is airline bankruptcies. I think at last count there have been 18 airline bankruptcies in the last 12 months, of which seven were our customers. Obviously the biggest one which impacted us was Thomas Cook, which will have a material impact on our results this year. Airline bankruptcies are a real challenge. One of the other big challenges has been the decline in cargo volumes. We’ve seen double digit decline in cargo volumes in certain markets and the challenge is the impact that has on your profitability. I think the third big challenge we’ve had is the tightness of the labour market. I think everyone is finding the labour market very challenging at the moment. If you think of our main markets – Australia, Singapore, UK, US, Switzerland – they’re all experiencing record employment [levels]. So it’s a challenging market to employ people. What’s really surprising about this is the first two challenges are very much about regressive economies. Economic cycles are nothing new, but normally when you have a downturn in the economic cycle, at least the saving grace is that the labour market eases up. And we seem to have this double-whammy at the moment. These challenges are not unique to us.

Do you envisage an improvement in the cargo market?

We opened three cargo sheds in the last year and we’ve got more in the pipeline. We’ve just broken ground on a fantastic facility we’re building in Manchester, at a time when the cargo market is in decline. We’re in a lucky position in that we can take a long-term perspective on this because of our shareholding. Cargo is a cyclical market, even more so than economies. Even in the cargo boom two years ago we weren’t foolish enough to think it would carry on forever. We knew there would be another downturn in the same way that we know it will turn around. Can I predict when that will be? No. Best guess – one to two years. The other thing about cargo sheds is that they are by their very nature long-term investments. You’re typically taking out 15-year leases and you’re investing for the long-term. It’ll bounce back, that’s the view you have to take.

What are the key opportunities you are spying for the next couple of years?

I think it’s about getting even closer to our customers, I think it’s technological developments which allow us standardisation. For example, if you can start getting data on every flight you’re turning around, the opportunity for data analytics is enormous, which we have never had in our industry. The opportunity for data analytics is very powerful and one we’re very excited about.

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