Europe's giant carriers

The Middle East is still viewed as a strong market for growth, amid uncertain times for the global industry.
ANALYSIS
Cargolux: Constantly looking into further developing its business in the Middle East from its established and attractive hub at Sharjah International
Cargolux: Constantly looking into further developing its business in the Middle East from its established and attractive hub at Sharjah International
ANALYSIS
ANALYSIS

Share

A poll conducted by Air Cargo Middle East & India on European carrier giants has shown that the Middle East is still viewed as a strong market for growth, amid uncertain times for the global industry.

All those polled emphasised that the Middle East would always feature highly on their agendas, with the general theme being one of regional consolidation.

 

"There is exponential growth foreseen in the Middle East region in the next ten years."

Luxembourg-based Cargolux referred to the "exponential growth foreseen in the Middle East for the next ten years," adding that the region's geographical locations would reflect positively on the network, providing the opportunity for adding more frequencies and destinations.

Among the issues highlighted by the carriers was the cost savings made by the use of the burgeoning sea-air freight sector, which generally uses facilities in the United Arab Emirates to transfer shipping freight onto cargo aircrafts for onward despatch onto Western destinations.

While there is a heavy accent on airfreight being shipped through the Gulf Cooperation Council states, it is also clear that other regional countries have seen an upsurge in activity, with no indication from the European giants that this is set to wane in the future.
 

Fears that operational difficulties largely assumed to be preeminent in the Middle East region appear, largely, not to have surfaced.

The concern that heat might be a barrier to efficiency-particularly with regard to take-off and weight restrictions-does not seem to ring true, and it is certainly the case that other locations, such as Africa, some parts of South-East Asia, Latin America and the southern states of the United States, also suffer from this problem.

The heat disadvantage can certainly be outweighed by scheduling take-offs at around midnight, when ground temperatures can be as much as 10 degrees Celsius or more below midday levels.

Setbacks associated with road infrastructure have been negated by the fact that the bigger carriers operate out of a number of airports in the region, thus reducing pressure on the road network.

With some European giants operating out of as many as three airports in the United Arab Emirates alone, the lack of a need to rely on transportation via roads-and the potential headache of cross-border transits and their associated formalities-is generally providing faster solutions for the consumer.

Furthermore, the ability of operators to interline some freight when faced with insufficient road infrastructure has also alleviated this difficulty. Even so, the roads, which are generally viewed as being in good condition, are seen as gradually improving, thus allowing carriers to be confident about the network in the future.

In the middle of the last century, the Middle East was a necessary stopover point for aircraft unable to travel direct to the Far East.

However, the region has since become a crucial hub in its own right, with carriers from Europe now taking the shorter route over Siberia in order to reach those Asian destinations non-stop.
 

Today, some European operators have expanded their footprint of operations from the United Arab Emirates and, to a lesser extent, Saudi Arabia, in the 1970s, into the wider region.

Business has certainly progressed from the halcyon days of the 1950s and 1960s, when some of the still-youthful European giants were finding their feet and operating once or twice weekly flights using four-engine prop-driven aircrafts such as the DC-4 and the Lockheed Constellation from a variety of destinations.

 

"Dubai International Airport is state-of-the-art, in line with international standards, and very professionally managed."

Whereas aircraft in that era could only carry no more than two or three tonnes in weight-and combined this with passenger services at the same time-today's freight carriers in some cases hold more than 20 tonnes of cargo, and fly twice as fast. The last 40 years has also seen the rise of cargo-only flights flying alongside passenger counterparts.

British Airways World Cargo actually launched its regional and passenger services in the region over 75 years ago and now operates through Dubai, Abu Dhabi, Kuwait, Bahrain, Qatar and Oman, with all destinations performing well in terms of import business, although the carrier indicates that its key transhipment hubs are Dubai and Bahrain.
 

In a similar vein to British Airways World Cargo, Lufthansa Cargo has operations in Riyadh, Jeddah, Kuwait and Sharjah. Again, Dubai is the most important hub for Swiss World Cargo, but the operator also enjoys strong flows and high load factors from Abu Dhabi, Oman (Muscat) and Saudi Arabia (Jeddah and Riyadh)-these destinations are being assisted by growth in the South-East Asian cargo market.

Air France/KLM, whose experience in the region almost matches that of British Airways World Cargo, serves 15 destinations in the Middle East and considers Dubai and Cairo to be its biggest destinations, although it cites Abu Dhabi's growth as being particularly impressive and is keen to stress the remarkable development seen in the region as a whole.

As an indication of how much the region has grown in importance, Air France/KLM's 21 weekly flights to Dubai from Paris and Schipol is self-evident. Cargolux has also seen a huge increase in the number of airports served by its network, from a core business centred on Dubai, where the company's East and Southern Africa regional office is now based, and, subsequently, Abu Dhabi.

During the 1990s, the company witnessed rapid growth into Kuwait, Syria and Lebanon, with frequencies to Qatar and Sharjah, Syria, Jordan and Saudi Arabia (Dammam) all being added since 2000.

As regards the general standards of airport and ground handling facilities in the region, the operators surveyed expressed the general opinion that these were improving, with the presence of supportive handling agents in the Middle East being cited as a useful asset.

Particularly positive mention was made of the presentations made at the World Air Cargo Event, held in Bahrain in February, where Gulf carriers, including Emirates, Etihad and Qatar Airways, outlined their respective expansion plans and investments in infrastructure.

However, for European operators, the monopolistic nature of some airports has led to higher prices, seen by some as a result of the influence of the state on service providers, and a call for the liberalisation of the ground handling sector was voiced.
 

On the other hand, these concerns are being balanced by exceptionally modern facilities-especially in the Gulf states-and the high level of efficiency.

Air France/KLM referred to airports such as Dubai, Abu Dhabi and Doha as having "outstanding ground facilities that enable the level of quality offered to match very high international standards. Some of these airports are at the same level of technology and equipment efficiency as modern European airports".

 

"Some of the region's airports are at the same level of technology and efficiency as most modern European airports."

Dubai International Airport, in particular, came in for some heavy praise, with Cargolux observing the facility as being "state-of-the-art, in line with international standards and very professionally managed".

British Airways World Cargo is also looking forward to the completion of the US$33-billion Dubai World Central airport, which will be able to handle 12 million tonnes of cargo annually after its launch in 2015.

Swiss World Cargo remarked that the current Dubai terminal was a key element of its network, both from the passenger and cargo angle, and also stated that the economic development of the emirate in general had allowed the company to operate more daily frequencies, in turn allowing its cargo wing to increase cargo capacity.

Lufthansa Cargo lauded the benefits of its facilities at Sharjah International Airport, pointing towards its location, infrastructure and the company's own warehousing, while commenting that the sea-air sector showed very promising potential.

According to the Sharjah facility, Lufthansa Cargo's hub in the emirate, where it transits over 5000 tonnes per month-is its largest outside its home market of Germany.

The rise of sea-air, which involves freight being transported by sea from Asia to the Arabian peninsula-specifically the United Arab Emirates at the moment-where it is then flown to the consumer markets of the West, provides significant cost benefits to European operators, who are able to profit from the low cost of traditional sea freight combined with the speed of airfreight over the course of a single journey.

British Airways has found that the sea-air side has proved particularly helpful: "We predominantly carry garments through the Middle East, which are produced in countries such as India, Pakistan and China, where labour is relatively cheap. This cargo is normally transported by sea freight to the Middle East, where it is consolidated and subsequently uploaded onto the British Airways fleet, ready for onward travel to Europe or the United States".

"The majority of these garments are destined to the United States, where BAWC has a particularly strong network, serving 19 airports and accesses a trucking network to a further 50.

This gives us a strong competitive advantage, because we can offer a speedier service to customers", the operator added.
 

For European operators, the use of aircrafts is varied. While Cargolux uses only the B747-400F on all its Middle Eastern routes, a decision matched by the British Airways World Cargo decision to use 747s and 777s, Swiss World Cargo operates the wide-body A330, and Lufthansa Cargo employs the MD11F.

Air France's fleet uses a range of aircrafts, including A330s and A340s, with these being complemented by 777s and 747s. KLM operates the A330, the 777s and 747, and the MD11F.

 

"Our increasing frequencies prove, if necessary, our will to be a major actor in the development here."

In the current economic climate, it is difficult to predict how any industry will fare in the short term, although the performance of the global airfreight sector in the past year, in the face of continued high fuel prices, will worry some operators.

In the Middle East region, however, it is cheering to note that both British Airways World Cargo and Cargolux have recently added new flights to their portfolios.
 

In July 2006, Cargolux launched a second weekly flight through Doha, a service the operator originally kicked off only just under a year previously, in June 2005.

For British Airways World Cargo, recent additional capacity on flights between Bahrain and Dubai will give the operator greater capacity infeed from its Saudi trucking network.

Furthermore, the launch of a second Boeing 727 freighter route connecting Bahrain to Lahore on 1 April-itself coming on the back of an extra cargo flight into Dubai in December 2007-is testament to the increased customer demand faced by the giant despite the general global market conditions.

So what do the European majors think of their future prospects in the Middle East? Their responses have been roundly optimistic, and their words have been met by actions in the increased frequencies of flights and destinations.

Air France/KLM offered this assessment of its long-term regional ambitions: "we have been in this part of the world for a long time already, and we clearly intend to remain there for a long time. This part of our network represents more than 10% of our global worldwide activity and it is on a growth pattern. Our increasing frequencies and the increasing size of our aircrafts operating there prove-if necessary-our will to be a major actor in the development there".

Indeed, while the United States, Japan and Europe are predicted to undergo a cooling in general economic growth-with the United States forecast to hit an almost-recessional slump, according to IATA's April figures-it is clear that those carriers operating in the most varied regional markets, especially those in the booming Middle East, are the players that will be most able to withstand the economic slowdown.

With the year-on-year double-digit economic growth witnessed in the GCC countries in the last few years showing no sign of letting up into 2009, and as the region develops its ground facilities to an ever higher standard, the symbiosis between the European airfreight giants and the Middle East region has never been more important.

 

Most Popular