Azul Brazilian Airlines Deploys Powerful EDI-Enabled E-Commerce Solution

Case Study Azul Brazilian Airlines deploys powerful EDI-enabled e-Commerce solution

Azul’s Cargo Express Business Unit Boosts Freight Volumes to an average of ~20,000 Shipments per Day by deploying the SmartKargo e-Commerce integration solution.

DEPLOYMENT: Sao Paulo, Brazil

Overview

Azul Airlines implemented a state-of-the-art EDI-enabled e-Commerce solution that dramatically increases freight volumes and yields by facilitating e-Commerce from the shopping cart to the doorstep. The new system was launched across Azul’s large domestic Brazil and international cargo operations. Azul operates a fleet of 142 aircrafts including brand new A320 Neos, Embraer 195s- 190s, ATR 72s, and 10 wide-body A330s. With 905 daily flights to more than 107 destinations in Brazil, South & Central America and the USA. Azul’s ever-expanding Network also reaches some European destinations through Interline agreements with other Airline partners.

Business Challenge

E-Commerce is growing rapidly the world over and shopping habits have changed permanently. Giant e-Commerce players like Amazon, Alibaba and Mercado Livre have set the tone with express delivery and now all shoppers around the globe have high expectations for fast delivery with services like Amazon Prime, Ali Express and alike.

Every shopping site is searching for a fast, reliable and low-cost delivery solution. On one hand, service providers like FedEx, UPS, DHL and TNT Express are expensive and capacity is constrained. Even so, these integrators have monopolized the lion’s share of e-Commerce shipments by deploying their own assets and solutions, and by consolidating shipments and buying cargo capacity from airlines at a marginal cost (General Cargo prices). Amazon Prime has taken action in its biggest market (the US) to change the game with a massive investment in airplane leases, warehouses, trucks and technology.

On another hand, we have seen an explosion of startups doing first-mile and last-mile with minimal investments, but these newly established service providers only cover the ground side of Cargo operations—which does not require heavy investments in expensive assets, such as airplanes. Other traditional stakeholders in the Cargo value chain (Freight Forwarders and some GSAs) have stepped up their e-Commerce offerings by repeating what integrators have been doing: consolidating e- Commerce shipments in bulk Cargo that they can offer to Airlines under General Cargo prices (typically in the range of ~$1 USD/Kg, and integrating with third-party ground delivery service players like many of the start-ups mentioned earlier.

Airlines across the globe have been leveraging existing assets by carrying commercial cargo, with a direct positive impact on their bottom-line profits. Carrying commercial cargo on a passenger airplane is typically very profitable with margin contributions in the ~50% - 70% range. But despite its attractiveness, Cargo is still a marginal business contributor for airlines in general, with typical revenue contribution from Cargo of less than 5% of total airline revenues.

There are only a few exceptions to this general rule, where airlines are stretching cargo revenue contribution to 10%, by placing higher emphasis on the cargo business. Typically, low revenue contribution (<5%) is mainly due to low cargo load factors on airplanes. Airlines explain this to be a result of several factors, including excess capacity in the market (supply-side), sluggish demand and/or increased competition.

Airlines globally have large amounts of unused capacity and untapped speed—both highly demanded by e-Commerce players. Being able to directly tap into this explosive market demand can dramatically improve an airline’s financial health.

Azul has changed the game by introducing an e-Commerce solution that achieves the following results:

1) Faster growth and optimized utilization of available Cargo capacity 2) Higher Cargo yields by eliminating intermediaries (such as integrators, freight forwarders…) and directly connecting to e-Commerce shippers through real-time EDI integration, delivering fast SLA-driven transportation solutions for less 3) Acceleration (in less than 2 years) from a marginal Cargo player to the dominant market leader in the Brazilian domestic market

Today, Azul has an overall 28% Market share in Air Cargo in Brazil with a dominant 60% market share in Air Cargo E-Commerce distribution, and they are growing at a pace of 8%~10% per month.

Solution deployed by Azul/SmartKargo

With support from Senior Management, Azul has combined a skillful & dedicated team in deploying disruptive technology to change the status-quo in the Air Cargo value chain in Brazil and beyond. By integrating Air Assets & Ground partners, by enrolling its own dedicated network of ~200 Franchisees across the country, and by deploying seamless technology from SmartKargo, Azul has disrupted the industry by eliminating all e-Commerce service middle layers, reducing costs and effectively deploying an integrated logistics solution to serve all e-Commerce supply chain business models, whether B2B or B2C. 1) End users create shipment requests when they order online on any of 350 e-Commerce shopping sites (B2C) or when they bring their shipments (C2C) into any Azul Express stores. 2) 200+ locations operated by Franchisees provide retail, warehousing, first & last- mile trucking & delivery services to more than 4000 zip codes nationwide. 3) Azul Airlines provides space on airplanes and manages service between 105 airports (905 flights per day) 4) SmartKargo SaaS connects and operates everything needed for Azul Express end-to-end.

The solution deployed by Azul and SmartKargo includes all of the SmartKargo portfolio items that are now available.

 Front-office capability covering full Air Cargo Sales and Operations management,  Door-to-door logistics operations, fully integrated with shipper and consignee management,  Real-time e-Commerce integration with major e-Commerce players, including real-time pricing and bid management,  Cargo Revenue Management with actionable, real-time capacity forecast and revenue optimization,  Cargo Revenue Accounting, billing and invoicing with back-office integration to Corporate back-office systems (Oracle Financials and SAP),  Smart Warehouse management capability,  Comprehensive real-time tracking and audit trail,  Full-featured Mobility (shipper/forwarder App, first/last-mile driver App, Operations/Warehouse App,  Real-time Business Intelligence with Smart Reporting.

Key Benefits of SmartKargo Solution

Azul sought to deliver the fastest, most reliable and predictable shipments to support their clients domestically and beyond, while also delivering an excellent customer and employee experience.

With the successful implementation, Azul has set a new standard in the industry by becoming the first airline in the world to put a true EDI-enabled e-Commerce offering in play that serves all Cargo and Logistics industry business models, including:

 Traditional B2B Air Cargo operations,  EDI-enabled end-shipper Cargo Hauling and logistics end-to-end services to large shippers in Brazil such as manufacturers, electronics and pharmaceutical producers,  End-to-end B2C offering for Brazil domestic shipping through a network of 200+ franchisees  End-to-end EDI-enabled B2C e-Commerce integration with large e-Commerce players in Brazil such as Mercado Livre and Kabum!.

Azul’s growth in the Air Cargo business has been phenomenal in the past year since the deployment of their e-Commerce solution. At an average of 8~10% growth per month, Azul has significantly improved their Cargo capacity utilization as illustrated by the rapid increase in Cargo load factors, due to the flow of e- Commerce shipments that complemented the traditional, standard Cargo business they used to carry. E-Commerce became a fast feeder for Cargo shipment growth and more importantly, this growth is coming at much higher yields (Cargo revenue per Kg transported).The average yield for a fast SLA- driven e-Commerce shipment is, on average, 5 to 10 times higher than the typical yield from general cargo shipments.

"Our new EDI-enabled e-Commerce system connects shippers to consignees across all air cargo logistics business models and is a notable first in the industry. We highly value information and visibility sharing with our key partners and stakeholders in the extended Azul Cargo value chain and are pleased that SmartKargo has helped us to deliver on our journey of digital transformation and enablement". — Kleber Linhares, Chief Information Officer, Azul Airlines

We applaud the dedication and professionalism of the Azul team in achieving this milestone.

If you have questions, we’d be delighted to answer them and demonstrate how SmartKargo can help drive your business to new heights.

Because SmartKargo is so advanced, it helps to see it in action.

For more information or a demo, please contact [email protected] or visit us at www.smartkargo.com.