Desert carrier keeps piling on the pressure

At the half-way point of the year, it is clear that overall cargo demand is much stronger in 2014 than in 2013 and there will be a recovery in the air cargo business this year – but not by a wide margin, according to the IATA (International Air Transport Association).  However, one batch of airlines that should be doing better than the rest are the desert carriers – and not only in cargo. IATA expects the Gulf carriers, particularly Dubai-based Emirates, will outpace the market by a growth of 13% in passenger traffic. In June, Middle East carriers continued to expand strongly in air cargo with growth of seven percent, up 10% for the year-to-date. Airlines in the region were capitalizing on growth opportunities by expanding services to fast-growing emerging markets, such as Uganda and Mexico. In just over a decade, the share of global passenger traffic accounted for by Middle East carriers has grown from four percent to nine percent.  The remarkable growth by the Gulf carriers, and particularly in Europe, has aroused the ire of European carriers such as Lufthansa and Air France-KLM.  The growth of Emirates, Qatar, and Etihad appear to be coming at the expense of European airlines battling for many of the same passengers—and the Gulf upstarts could soon pose a threat to US airlines as well, according to a Lufthansa statement. Lufthansa warned that its profits this year and next would be lower than expected, and it blamed this on the capacity expansion by Gulf carriers. “The trio are trying to lure travellers with premium cabin services and hubs in the United Arab Emirates. The business travelers bound for, say, India who once connected in London, Frankfurt, or Paris can now find connections in Dubai, Doha, or Abu Dhabi,’’ the statement said. Lufthansa also complained of losing more cargo to the Gulf carriers.

Emirates cargo chief shrugged off these complaints by saying Emirates has some benefits that are of interest to the consumers. Nabil Sultan, divisional senior vice-president, cargo, said: “The reason why consumers want to put their cargo on Emirates rather that on other European carriers is because they see some form of benefit. And this is not purely related to cost. We are not the cheapest freight forwarding company in the world. But we are able to offer value, we are able to offer reliability, and safety of cargo.  “All of that comes because Emirates has invested heavily in its product offering and created a network, hub and spoke concept, that gives us reach not only into all the metropolis cities but also secondary cities, with multiple frequencies, and equipment that is able to carry sufficient volume of cargo.’’ Emirates flies to 140 destinations. Besides flying to major cities around the world, it also covers many secondary airports. For example, in Asia-Pacific, it flies to places such as Kozhikode, Kochi and Trivandrum in India; Sialkot and Peshawar in Pakistan; and Launceston, Learmonth, Mackay, Geralton, Dubbo and Gladstone in Australia. The large number of Emirates destinations in Australia is because of an alliance agreement with Qantas last year. Emirates has 226 aircraft in its fleet with an average age of 6.3 years. Emirates SkyCargo, the freight arm has 12 freighters with orders for three more. “The reach we have today is unmatched and is simply because we made a very bold decision to go into secondary cities and the small towns in various countries,’’ said Sultan.  “Adding to that we are lucky to be located in the epicenter of the world. That gives us a huge advantage and leverage as we move cargo in and out to various parts of the world.’’ Tim Clark, president of Emirates Airline, said earlier being located between the East and West, means “over a third of the world’s population lies within only a few hours’ flying time from Dubai’’. One other thing about Emirates is that it has always been on the lookout for opportunities in new markets, said Clark. “We have always had our eyes wide open to the way the world is changing,’’ he said. “Many of our competitors have missed out on opportunities, as they were too slow to react. Take Africa, for example, a huge, prosperous continent that many carriers were reluctant to capitalize on for various social reasons. We went in, have been successful and now they are all following suit.’’ Clark also brushed off Lufthansa complaints that Emirates was receiving oil subsidies as a myth. We buy fuel from BP, Shell and Chevron in Dubai and worldwide at market rates, he said. With Gulf carriers showing high growth rates for air travel, the debate over subsidies has shifted to the Middle East. As the region has injected new competition into the global aviation landscape, this has induced a cacophony of criticisms, complaints and distortions regarding the issue of subsidy – with the aim of protecting the status quo of some non-Middle Eastern incumbents, said Clark. Emirates acknowledges that some airlines in the Middle East are indeed government subsidized, but said the criticisms incorrectly paint all carriers in the region with the same brush. “With Emirates being the largest and most visible airline in the region, the criticisms are often leveled at us, even though self-sufficiency and profitability has been in Emirates’ DNA since 1985. All of our achievements are well-earned, transparently documented and borne out of our efforts to sustainably build our company,’’ said Clark. The Emirates Group achieved its 26th consecutive year of profit in the 2013-2014 fiscal year but it was only up 1.2 percent to $225.7 million on the previous year. The profit was impacted because of higher costs on core investments and the global economic malaise. Sultan attributed the main success of Emirates to Dubai, the most populous city in the UAE. “We are proud to say we have an open policy in Dubai. We invite anybody to come and operate as many frequencies as they want without any restrictions. Emirates  has managed to grow in a very competitive business environment without any protection from the government. Compared to the other hubs today, Dubai has been very successful in attracting commerce, business and tourism and to build a solid infrastructure to accommodate all of that.’’ We just built a brand new airport, noted Sultan. “How many cities do you see doing that. We have built a terminal that can accommodate 160 million passengers and 12 million tonnes of freight annually.’’ The new airport, called Dubai World Central – Al Maktoum International Airport – is the new home of Emirates SkyCargo. “It gives us more breathing space,’’ said Sultan by providing us more space to grow.