In the market for the long haul
In conversation with Or Zak, chief commercial officer of the Challenge Group. The fact that the aviation industry is a rather tough proposition is a truism. New freight airlines are always attempting to cut themselves a piece of the cake. Many a start-up soon disappears from the scene again as quickly as it may have appeared. Only a few manage to assert themselves in the market in the long term. One of these is Challenge Airlines.
“With a focus on special freight services we’ve been successful so far and have established the group well in the market,” Or Zak, the Challenge Group’s chief commercial officer, told the ITJ in a remote interview recently. “The basis of our strategy is vertical cargo as well as ‘end-to-end everything’, combined with the necessary adjustments based on prevailing market conditions,” he added.
This two pillar strategy leaves the enterprise rather well-positioned to offer its customers what they need – supply chain security. The group is now ready to build further on its successful business model, whilst keeping an open mind on how to make the most of any opportunities the future may bring.
Substantial investments
Offering vertical cargo solutions – such as options for live animals, including occasionally wild animals that are being transferred to new sanctuaries; aircraft engines; and other out-of-gauge cargo – makes up 60% of the group’s workload. “70% of these jobs also benefit from different versions of our end-to-end services,” Zak elaborated.
The Challenge Group is making substantial investments at the moment, especially in services for the e-commerce sector, which continues to go strong worldwide. The funds are earmarked for infrastructure and IT, amongst other diverse capabilities, Zak pointed out.
The group’s commitment to growth will see it invest in new technology too, including acquiring tools from Project44, an online platform for supply chain visibility. Challenge Technic will establish a new hangar and maintenance station.
Challenge Handling, from Liège (Belgium), in turn, is ready to welcome electric cars on the ramps, electric tractors and ground power units (GPUs). The group will also join the circle of carriers with official Iata CEIV lithium battery accreditation later this year.
Tripling, diversification
The biggest chunk of the group’s investment, however, is in its fleet expansion. It is planning to no less than triple the overall size of its fleet. Unlike the approach taken by many of its competitors, it won’t be aiming to buy new aeroplanes, but rather only used ones.
“Our business model isn’t to go for new factory-made freighters,” Zak explained. “We’re always on the lookout for midlife aircraft that we can buy for a decent price and operate for ten or twenty years at least, to make sure we’re utilising them best.” None of these planes are new, second-hand is the way, and they are or will be purchased outright. Challenge’s strategy as an enterprise is about buying, not leasing. And contrary to the trend of its competitors to unify their fleets, Challenge has now started to diversify its own.
The group is set to move away a bit more from what it has been by tradition, namely a pure Boeing B747 operator, towards a more mixed fleet. It has already taken delivery of its first two B767-300ER (BDSF) units, and will take on two more in the near future. It has deployed them on a new route to and from Mumbai. Its fifth B747 enabled it to increase flights to Hong Kong, as well as to destinations in mainland China.
Further expansion possible
By the end of 2026, four more B777-300ERSFs will be added to the fleet. “B767s are great aircraft, especially when considering the e-commerce segment. In the medium term we plan to have a fleet of five seven-fours, four 767s and four triple sevens,” Zak said.
There could be more too, “as the general rule of thumb is to buy when the opportunity arises and to put planes to work quickly.” Opportunity in this context doesn’t mean a plane being available at the right price, but rather when customer demand arises. “If the business case makes sense, then there’s nothing to stop us getting another aeroplane in,” Zak closed.