How has the opening of the new Istanbul Airport impacted Turkish Cargo's operations, and what is the investment plan for the airport's new cargo hub?
In addition to its own fleet of freighter planes, Turkish Cargo utilizes the belly cargo space on Turkish Airlines' passenger fleet for its operations. On April 5, 2019, Turkish Airlines moved its entire passenger operations to the new airport, which meant our belly-held cargo operations also moved there. Continuing its freighter fleet operations at Atatürk Airport, Turkish Cargo will join its new premises at Istanbul Airport, where the carrier will offer its services in the largest air cargo hub in the world. Turkish Cargo's investment, Smart Istanbul, is set to be one of the most technologically advanced infrastructures in terms of smart operations and AI in the sector. The cargo hub will be operational by late 2020 and will have a capacity of 2 million tons, which is expected to increase to 4 million in 2021.
From a capacity and operational strategy standpoint, can you break down Turkish Cargo's split between belly-held and freighter-held cargo?
We use a little more than 240 aircraft. With 23 freighters, we have one of the largest cargo fleets in the world. Belly cargo provides about half of the capacity. The passenger/freighter decision for each leg is determined according to customer time constraints as well as the size of the shipment.
What impact has the growth of e-commerce and the increasing customer demands had on Turkish cargo?
The e-commerce share in our portfolio is doubling almost every year and currently represents 15% of revenue. The e-commerce boom requires strong physical and technological integration. Air cargo, similar to passenger, is a fragmented industry. In cargo, there is an agent, forwarder, or logistics company for warehousing, as well as customs clearance if it is cross border. There is also the airport authority and final-mile delivery companies, which are both different at every destination. In total, a chain of about six to seven entities make it work. Data integration is critically important—you must provide updates for every movement the package makes, not just for the different entities involved in the transit but also for customers, who increasingly demand their package's movement data and delivery at a specific time. Turkish Cargo is one of the few global air cargo carriers that have taken so much exposure in the global commerce market. There are two reasons for this: we have the largest network, and Turkish Airlines and Turkish Cargo operates with port-to-port business focus. In order to enable our capabilities, in 2018 we initiated a strategic partnership with ZTO—one of the leading Chinese and global parcel companies. We built a strategic facility in Hong Kong with it in 2018 for an e-commerce focused, door-to-door integrated virtual company called We World Express. It can pick up packages anywhere in East Asia from any supplier or producer of components, electronics, or manufacturers from AliExpress, China Post, or other channels. It can deliver those parcels to the nearest airport where Turkish Airlines flies, and Turkish Airlines makes the fastest connection between the origin city and our 260-plus destinations around the world. For the last mile, we have started to form partnerships with delivery companies on the ground. All this shows how dedicated Turkish Airlines is in the e-commerce business. This industry will grow even more and will be the main drivers for cargo operators in the future.