How to SkyChain unlocked the e-freight market

As the high point of a good year so far, the team at Mercator won the world’s best cargo IT solution award at the 2011 Air Cargo Week World Air Cargo Awards.

The prize is the latest in a number of accolades for the in-house-developed cargo solution SkyChain.

“SkyChain is a huge industry success story,” said Duncan Alexander, vice president Mercator.

Alexander feels that the cargo industry had long been neglected in terms of IT, as systems were developed for passenger handling and passenger sales. Driven by new laws regarding the global distribution system (GDS) and the financial possibilities offered by internet sales, airlines have poured huge amounts of time and money into IT development, but cargo systems continued to flounder in a sea of paper and manual processes, despite IATA’s push for e-freight development.

“Cargo had been neglected, woefully bound in paper and lack of investment. That can now change,” said Alexander. “SkyChain is completely e-freight enabled. It has been a massive success, not just because of the lack of paper but also because of the process efficiency. It drives out telecoms costs through the use of a more efficient system and platform.”

SkyChain manages every aspect of an air cargo business, from sales and reservations, pricing, capacity management and cargo operations, through to shipment handling, tracking and tracing, and supply chain management. The change from manual tasks to efficient automated processes promises lowered costs and heightened productivity.

It seems to be working as, last year, Mercator expanded from eight to 17 customers using the system and is experiencing growing demand.

“We do have competition,” said Alexander, “but SkyChain is different because it was created by an airline for airlines. From the beginning we worked very closely with Emirates SkyCargo to develop the product. Now we also incorporate the feedback from other clients, including Swiss World Cargo and Grupo TACA in South America. We systematically incorporate the customer’s voice into product development. Each new customer augments and adds to the product.”

One of the recent customers is Continental/United, which sees Mercator moving into the North American e-freight and customs field.

“What we learn from this will benefit any of our customers who fly into the United States, including Virgin Atlantic and Emirates,” said Alexander.

Another reason for corporate glee is the successful launch of Avantik, a low-cost distribution and reservation system designed to serve hybrid, regional and low-cost airlines.

Avantik can be used by low-cost point-to-point airlines wishing to operate in a ticketless environment, or by regional feeder carriers joining IATA and electing for travel agency and GDS distribution.

The system allows a wide range of alternative ticket distribution options such as vouchers, ATM issuance and travel agency credit banks, and can be adapted to enable the creation of additional revenue streams, such as seat assignments, excess baggage and other branding options of fares.

Alexander said: “It all started when we were asked to be IT advisor to flydubai. We evaluated a number of suppliers for commercial and ticket sales systems and came across tikAERO in Bangkok. The company had an excellent product but it was a small business without much financial backing, so not able to promote itself to a bigger market.

“We looked at the market and the product and realised that this could be an excellent acquisition. There is a very large market of small, community airlines – somewhere between 400-500 – which fly fewer than three million passengers per year. We decided that with our brand and investment behind it, tikAERO could really do well.”

In June 2010 the first international office of Mercator – Mercator Asia – opened in Bangkok, with Roland Heller, the founder of TikSystems, as the CEO. The renamed product Avantik was launched at the low-cost airline conference.

Alexander said: “We have had five new customers since and seven implementations, including a start-up in Japan. We have had lots of interest. We found that other potential customers had appreciated the product but were nervous that Roland did not have enough financial support or reference customers. It has now gained credibility.”

It was an ‘arms-length’ integration that saw Emirates take on all 40 tikAERO staff, as well as the head. Alexander said: “We did not want to change the entrepreneurial and innovative spirit of the team but we gave them the sales and marketing reach, which has been very effective.”

The benefits go both ways, as Avantik’s clientele have expanded Mercator’s global footprint, with the company’s first agreement in Japan – A&F Aviation, Japan’s first dedicated low-cost carrier.

Alexander is also excited about a major distributor in Russia, handling around 30 airlines, who is about to sign with the group. 

Mercator Asia has now added to the base product offering a frequent flier programme and the possibility to integrate other systems as the airlines grow. Through the headquarters, Mercator can also offer to host the operations packages of community airlines that have the bandwidth for IT support, enabling them to use the technology they need to run the airline.

While Mercator has an eye open for potential acquisitions, the company is only interested in products that have a serious impact on the industry.

“We may open up other lines of business but we are looking for areas where we can make and shake a market. We do not want to buy into something that just sees us fighting for market share; we want to invest in something that changes what is in the market, the way SkyChain is transforming the industry,” explained Alexander.

The next area Mercator is looking to shake up is safety and work is already afoot on reengineering the safety applications available.

“There is more and more focus on safety from governments and regulators, not just on aircraft but across the board in the workplace. We aim to develop the ability for anyone, anywhere to create a safety hazard statement, which will go into a database and can be audited and assessed, enabling the companies to study the cause and effect of all incidents or near misses,” said Alexander.

“We have kicked off a group-wide project, as well as working with our 40 safety customers worldwide. We want to take the industry to another level in safety and are aiming for a fantastic common standard. Once we get the fleet managers involved then the manufacturers become interested, and we are able to spread throughout the industry.

“There are suppliers who provide safety systems but we feel we have the complete industry insight and input and can create something very special for the community,” he added. “We want to make and shake in this market too.”