President of UPS Airlines, Brendan Canavan, tells Graham Newton how greater efficiency will allow the airline to respond to continued growth
How is the airline performing?
UPS Airlines, and the company as a whole, are performing well. Peak season, the month leading up to Christmas, is the most critical time of year for us.
We had another successful peak in 2016, delivering a record 712 million packages, a 16% increase from the previous year. The airline is a key part of that success, particularly the final week before Christmas as volume shifts from ground transportation to air shipment.
Our customers enjoyed high service levels last peak.
You have a number of new aircraft on order. What is your growth strategy?
The 747-8s are part of a larger strategic plan at UPS to invest in capital assets that facilitate growth.
The -8s add both capacity for our customers and improve our operational efficiency. They can carry 19% more payload than our current 747s and are 16% more fuel efficient.
In the fourth quarter, UPS’s international segment grew by more than 7%
Adding those 14 aircraft to the network, with options for 14 more, will have a cascading effect on network capacity, reassigning 747-400s and MD-11s displaced by the new 747s to other domestic and international routes.
The demand is definitely there. In the fourth quarter, UPS’s international segment, where the new 747s will be deployed, grew by more than 7%, leading the industry.
Are you concerned that increasing protectionist rhetoric from governments around the world will dampen demand?
UPS has been and continues to be a strong advocate for free trade. Free and open trade drives business and economic prosperity, and connecting global communities improves lives.
While large, multilateral agreements have become politicized recently, UPS will continue to look for opportunities to support lowering barriers to trade. New entrants may also affect the market.
What are your views of Amazon and the like and their impact on customer expectations?
First, it’s important to note that Amazon is a good customer. And it’s not unusual for large customers to handle some of their transportation needs in-house.
UPS is in a very competitive business, and we continue to research, develop, and implement new solutions to make our customers successful. A good example of this is regular Saturday delivery, which UPS is rolling out in many markets across the United States this year.
In some cases, that will shave two days off of time in transit, so that’s good for customers.
A lot of new navigational techniques have been tested at Louisville. What have been the benefits?
UPS has used Louisville, our home base, as a laboratory to validate the benefits of Continuous Descent Operations (CDOs).
The value for UPS, operating primarily at night, is being a good neighbor and reducing airport noise. We have taken those lessons and applied them at several airports, especially in Europe, to reduce the noise impact of our operations.
UPS is one of the lead airlines in developing and implementing Data Comm technology
While UPS supports the privatization of air traffic control, we continue to work with the Federal Aviation Administration (FAA) to modernize the current system.
UPS is one of the lead airlines in developing and implementing Data Comm technology that replaces voice transmissions between the cockpit and air traffic control with text messaging.
Controller Pilot Data Link Communication has been used for oceanic flights, but not in US airspace.
With UPS’s help, the technology has been implemented at 55 airports across the United States for departure clearances, and development is underway for use in en-route communications.
Are you concerned that Lithium-ion batteries are still not being labelled or handled correctly?
UPS works hard to educate customers on properly packing and shipping high-energy items like lithium-ion batteries.
However, we believe in a multi-layered approach to safety. That’s why UPS, in collaboration with our pilots, designed and brought to market fire-resistant containers (FRC) and fire containment covers (FCC).
UPS has committed that all future containers we purchase will be made from fire-resistant materials
Both the FRCs and FCCs can contain a fire of up to 1,200 degrees for up to four hours, giving pilots facing an inflight fire time to safely land the aircraft.
We have several thousand in use today, and are adding more every week. UPS has committed that all future containers we purchase will be made from fire-resistant materials.
Drones are a hot topic. How should they be regulated?
Captain Houston Mills, UPS Airlines’ Director of Safety, is a member of the FAA’s Drone Advisory Committee (DAC), allowing him to offer a unique perspective, both representing a company that sees the commercial potential in drones, and as a licensed commercial pilot who understands the imperative for safe operations.
UPS shares the FAA’s focus on safety and security when it comes to establishing new regulatory environments for commercial drone usage.
As we work on the FAA’s DAC, we will continue to be a strong voice for regulations that put public safety and security first.
UPS successfully tested a drone launched from the top of a UPS package car recently
We agree with the FAA’s belief that commercial drone use has real potential in several business applications, particularly humanitarian aid relief and deliveries to rural areas.
Using a battery-electric vehicle and drone from manufacturer Workhorse, UPS successfully tested a drone launched from the top of a UPS package car recently.
The drone autonomously delivered a package to a home and then returned to the vehicle while the delivery driver continued along the route to make a separate delivery.
In this ground-breaking test, UPS demonstrated the business opportunity for utilizing drones to help reduce miles driven, and create demonstrable operating efficiencies.
What other technologies do you see as vital not only to your future but to the future of the industry?
UPS is making a significant investment in the automation of our facilities, using the lessons learned at Worldport, our main air hub in Louisville, Kentucky, which automated more than 15 years ago.
The company will complete about 70 automated package and hub projects globally over the next five years.
We also see the potential for drone use, integrated with our package cars.
UPS believes there are promising potential uses for drones to create operational efficiencies
Drones are poised to provide real benefits in efficiency and “stop economics”, especially in rural areas, where UPS drivers often have longer distances between delivery stops.
UPS believes there are promising potential uses for drones to create operational efficiencies within the logistics industry.
That said, technology like drones can’t ever replace our uniformed service providers, who offer a level of service and human interaction that our customers tell us they value, respect, and trust. A human touch is a key differentiator in many situations.
Looking at the global picture, what do you see as the main trends and challenges affecting cargo?
The most significant trend we see globally is continued growth. In the fourth quarter, 2016, exports from the Asia region were up almost 20%, intra-Europe shipments increased more than 10%.
With investments like UPS’s new 747-8 freighters, and a $2 billion capital investment underway in Europe, UPS is well-positioned for success in the future.