Pass the parcel

Air cargo is booming in the Middle East, particularly in the UAE, where a combination of open skies, excellent facilities and good connections continues to draw freighters to Dubai and Sharjah.

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By  Neil Denslow Published  May 25, 2003

I|~||~||~|Air cargo is booming in the Middle East, particularly in the UAE, where a combination of open skies, excellent facilities and good connections continues to draw freighters to the region’s main cargo hubs, Dubai and Sharjah.

The growth in the region’s air cargo market can be seen in recent results from both Sharjah International and Emirates SkyCargo. In Q1 2003, SHJ saw a 25% increase in cargo imports and 18% rise in exports, contributing to a 22% net increase in cargo movements. Emirates SkyCargo, meanwhile, shipped 525 188 tonnes of freight last year, up 31.1% on 2001.

The majority of cargo passing through the Middle East is transit loads travelling between Europe, the Far East and Africa. “It is more economical for an airline from the lower part of Asia… to fly into the UAE, discharge cargo and uplift cargo here from Europe,” says Dr. Ghanem Al Hajri, director general, Department of Civil Aviation & Sharjah Airport Authority.

“If they go directly from Asia to Europe, they might reach there almost two hours quicker, but their payload will be much less. If they come into the UAE, their payload will be 100%,” he adds.

Lufthansa Cargo provides an excellent demonstration of the advantages of using the Middle East as a transit hub, as six times a week it performs plane-to-plane reloading at its terminal in Sharjah. A Lufthansa Cargo plane is unloaded in Sharjah and its load is placed on either a Singapore Airlines or EVA Air freighter. At the same time, the Lufthansa Cargo plane is loaded up with the cargo that came in on the other plane, along with any other cargo at the airport going to Europe. This is all done in less than 75 minutes after which the planes head back to their points of origin carrying their new loads.

The advantages of such an arrangement are numerous. The most obvious is the fact that the two carriers don’t duplicate the same route, which would create an excess of capacity. “We would both be compelled to fill up the capacity, and more capacity on the market is usually not effective in pricing,” says John Koopman, regional director logistics, Middle East, Pakistan & Iran, Global Cargo Handling Services, Lufthansa Cargo.

Lufthansa is also able to boost its fleet rotation, as a freighter can travel from Frankfurt to Sharjah and back in a day. As such, it can then be off elsewhere the next day, instead of needing to spend two days travelling back and forth to Asia. “The cost of landing and parking is [also] cheaper for each carrier at its home base,” adds Koopman. “Lufthansa having the volume of flights in Frankfurt has a better rate than SQ would,” he explains.

This is the only example in the world of plane-to-plane reloading between two national carriers in a third country. Why it is only done in Sharjah reflects the advantages of using the Middle East as a transit hub. “We have a unique situation in that we are smack dead in the middle between Europe and Asia,” says Koopman.

||**||II|~||~||~|Because of this geographical good fortune, the region has benefited from the growth in air cargo around the world driven by trends such as ‘just in time’ inventory, falling costs and airlines’ greater focus on cargo. “At the beginning of the 1980s, most airlines looked at cargo as an ‘extra’… [and] they didn’t really look at it as a serious business. But today, most of the airlines see that cargo is very important,” says Ali Al Jallaf, director, Dubai Cargo Village.

While this has enabled a number of airports in the region to see rising cargo levels, Sharjah and Dubai have particularly benefited from this growth through a strategic focus on cargo and their open skies policies. The UAE’s liberal air transportation climate enables any airline to fly in any plane as often as it wants. “Dubai has established itself as a logistics base for most international organisations… Part of the reason for this environment is because Dubai is a free skies and free seas environment,” says Ram Menen, director, Emirates SkyCargo.

Because of the open skies policies carriers from around the world fly cargo into and out of DXB and SHJ. This range of airlines greatly extends the number of connections for cargo, which thereby increases the speed of transit. “We can take advantage of the growth of the home carrier [Emirates] — which is adding destinations and improvements to its schedule — but, equally, a lot of the other carriers are coming into here,” says Bachi Spiga, Middle East regional services manager, DHL Express. “[It’s] not just the destinations, but also the frequency,” he adds.

The liberalisation also allows carriers to choose whether to use their own handling staff or the services offered by the airport themselves. Lufthansa Cargo, for instance, uses staff and equipment from Sharjah International to handle all its loading and unloading. A couple of months ago, DHL similarly started subcontracting 20 staff from Dnata to handle its cargo at DXB. The staff are employed by Dnata, but they were trained by DHL and wear uniforms from the carrier. “Everything that goes on or off the aircraft is handled by Dnata,” explains Spiga.

Alongside the open skies policies, Sharjah and Dubai have also heavily invested in cargo handling infrastructure. Sharjah completed the construction of two cargo terminals two years ago, which offer a range of facilities including livestock handling, refrigerators and a dangerous fuel area. “Every requirement for cargo movements is already in those buildings,” says Al Hajri.

Dubai, meanwhile, has built the Cargo Village, which currently has two terminals, one with 350 000 tonnes capacity for Emirates SkyCargo, and another one with 400 000 tonnes capacity. The Cargo Village expects to handle 800 000 tonnes this year, so it is planning to greatly expand its handling facilities, firstly by building the mega terminal, which SkyCargo plans to move into over the next three to four year. The two-floor facility will have a capacity of 1.2 million tonnes, “we think will be getting to that mass by 2008,” predicts Menen.

Once SkyCargo’s mega terminal is complete, the Cargo Village intends to build another facility with the same capacity and then a third as well. “In the year 2020, we know we have to build the capacity to 4.4 million tonnes,” says Al Jallaf.

||**||III|~||~||~|Dubai’s growth as a regional cargo hub is based on a number of factor, but the biggest advantage, more so even than it’s infrastructure, is the fact that it is the home airport for Emirates. Emirates SkyCargo handled by far the largest amount of cargo at Dubai last year — a total volume of 424 297 tonnes compared to second placed Cathay Pacific’s 31 324 tonnes — and it provides a solid foundation on which the airport can grow its cargo business.

Emirates’ huge size generates transit traffic within the SkyCargo network, as well as offering the all important connections needed to entice other airlines into Dubai. “Emirates Airline is part of our success in the Cargo Village because the increase in their fleet and the growth of their destinations has given [us] a lot of potential,” says Al Jallaf.
Sharjah has recognised the importance of having a home airline with the launch of Air Arabia. “If you look around the world, you can always say that airports where major airlines have emerged… have developed a lot of traffic to that airport and for their own airline as well,” notes Al Hajri.

Details about the new airline are limited thus far, but it is clear that it will be a strictly regional player. “We will definitely not look to compete with Gulf Air and Emirates,” says Al Hajri. “We will [instead] look to develop our own niche market concentrated in the Gulf area.” As such, Air Arabia should help boost Sharjah’s regional cargo traffic, but it won’t generate a range of global destinations or volume of cargo comparable to those of SkyCargo in Dubai.

The volume of cargo handled by Dubai is a further boost to attracting trade into the airport. Competition within the Emirate drives down prices and attracts yet more buyers to source goods from there. “Because of the competition, the prices are in check and they [buyers] are able to leverage the economies of scale,” says Menen.

“For an African buyer, it is probably cheaper to buy a small volume out of Dubai than the point of origin. The landed cargo they get in their destination is [then] a lot cheaper. That in itself gives it a very nice environment — because it’s very competitive,
the traders need volume because profits are all volume based,” he adds.

However, DXB’s volume threatens to work against it, as the infrastructure now needs to be expanded in order to handle the growing traffic. As noted earlier, Cargo Village expects to handle 800 000 tonnes this year, but its two main terminals have a combined capacity of just 750 000 tonnes. The recently opened 50 000 tonnes capacity express delivery terminal makes up the difference, but it’s clear that DXB needs to expand its capacity still further before it can handle more business.

Dubai’s expansion plans will offer the extra capacity it needs in the future, but in the meantime SHJ maybe able to attract customers with its existing excess capacity. “We are not congested… [as] we have a long term strategy to keep up excess capacity in order to generate additional business. It is expensive, but we have to do it in order to cope with the increasing business, otherwise no one will come,” says Al Hajri.

“Sharjah is not congested at the moment and there’s room for expansion,” agrees Koopman. “[By contrast] Dubai is very busy at the moment, and that can sometimes work against you. If you have not got enough capacity and an overload in terms of warehousing or flights, there tends to be a bit of delay,” he adds.

Indeed, Sharjah touts its smaller size in comparison to Dubai as being positively advantageous. “Not being as big Dubai, we are able to be more flexible and tailor our services to the customer’s needs,” says Koopman. “We have that flexibility here. If you need it quick, then Sharjah’s your best option,” he adds.

Koopman highlights other advantages offered by Sharjah including the landing and handling cost, which are 40-50% lower than those in Dubai. The short takeoff and taxiways also cut fuel costs and speed turnarounds. “It’s direct in and direct out,” he says. “You have a taxi time of roughly six minutes after landing.”

However, despite the competition between Sharjah and Dubai, as well as other airports in the region, it is likely that the continued rise of air cargo around the world will ensure that both airports carry on growing, The Middle East will particularly benefit as, aside from the general global trend, it will also soon benefit from a flood of cargo into Iraq, following a similar surge in traffic last year into Afghanistan.

“Even with the large number of airports [in the UAE] and the short distance between them, all the airports are growing,” says Al Hajri. “We are competing, but we are all growing.”||**||

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