Cargo Carrier

Bachi Spiga, DHL’s head of Middle East operations, outlines the 3PL’s expansion plans for the region.

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By  Neil Denslow Published  August 4, 2004

|~|bachi.jpg|~|Bachi Spiga, DHL’s head of operations for the Middle East|~|Since DHL first established a presence in the Middle East, in Sharjah in 1976, it has grown into the largest third party logistics provider (3PL) in the region. It is now the only 3PL to have aircraft operating and based in the Middle East, and its freighter operation, which will soon total 17 aircraft, is one of the largest fleets in the Middle East. Currently, DHL is in the midst of a major overhaul of its Middle East fleet, as it responds to the growing demand for air cargo in the region. As recently as 2002, it had only seven aeroplanes operating out of its network hub at Bahrain International Airport, predominately small Metroliner and Convair turboprops. However, over the last 18 months these aircraft have been augmented by a number of larger aircraft; many of the turboprops will also soon be replaced with Boeing 727-200s from DHL’s European fleet. “The current fleet, the four Metroliners and the two Convairs, have served us well for a number of years; however, freight is now moving towards containerisation, and the overall reliability of those aircraft is starting to be a bit surpassed,” explains Bachi Spiga, DHL’s head of operations for the Middle East. This need for extra capacity is being driven by the growth of air cargo within the Middle East, including the use of the region as a transit point between India, the Far East or Africa and Europe. There is also a growing local redistribution market, which is seeing DHL ferry more goods within the Middle East. Altogether, the company is presently handling more than 12 million kg of cargo per month. The 3PL’s air network plays a key role in its Middle East operations. The company flies over 150 flights a week between its hub in Bahrain and a number of destinations, including Riyadh, Jeddah, Kabul, Kuwait, Doha, Dubai and Baghdad. The Bahrain hub is the 3PL’s largest facility in the region handling both international DHL flights and distribution in the Levant, Saudi Arabia, Kuwait and Iraq. Goods coming into and out of the rest of the Gulf region are handled by a facility at Dubai International Airport, which predominately utilises international airline services. “They are two independent but linked hubs,” says Spiga. “One predominately uses [DHL] network aircraft, and one predominately uses commercial [services], with strong feeds between the two,” he explains. As DHL prepares to introduce the 727s into its regional fleet, the company has boosted its air cargo capacity by wet leasing a number of aircraft, including four Antonov An-12s, a DC-8 and a Tri-Star. “Wet leasing has been common just recently due to the growth we have had,” says Spiga. “However, as we fix the 727s on some of the routes… there will be an opportunity to use and own aircraft more.” The 727s will be phased into the Middle East fleet over the next six months as they return from having C-checks. These tests are being performed in Costa Rica by Coopesa, as no MRO in the region can carry out the tests. Once this process is completed, the majority of DHL’s current turboprop fleet will be retired. “The Metroliners and the Convairs will be phased out, the Convairs rather quickly,” says Spiga. “It’s possible that the first if not the second of the 727s will replace the Convairs… The Metroliners will be gradually phased out, but maybe not entirely. It depends on some of the routings we are working on,” he adds. The Metroliners are considerably smaller than the 727s, carrying up to 1900 kg compared to the Boeings’ 24 tonne payload, which means that they may find a role on some thin short-haul routes, such as Muscat, where commercial services don’t provide enough flexibility. “A couple [of Metroliners] have been rebranded, and on the smaller routings, they might still come into their own,” says Spiga.||**|||~||~||~|The 3PL is also looking at introducing other turboprops into its fleet, possibly to replace the Metroliners, and it is currently assessing a range of aircraft types including Embraer 120FCs, SAAB 340Bs, ATRs and Beechs. This process has been on going since last year — the company announced at Dubai 2003 that would it make an order early this year — but it is unlikely that any new planes will be ordered soon. “It’s a work in progress and we are evaluating all of these aircraft,” says Spiga. In the main, however, the 727s will replace the turboprops, and the greater capacity of the Boeing freighters will enable the 3PL to cut some of its frequencies. For instance, the company currently flies three or four freighters a day between its hubs in Bahrain and Dubai, as well as utilising uplift on one or two commercial services. The 727s however, should allow the 3PL to rationalise this number of flights. “Potentially there will be a decrease in frequency, but an increase in capacity,” notes Spiga. Despite the introduction of the 727s though, DHL will also continue to utilise commercial air services within the region, as well as to and from other parts of the world. It currently makes extensive use of commerical uplift, particularly services from Emirates, Gulf Air, Qatar Airways, Iran Aseman Airways and British Airways, as these services allow it to transport air cargo without having to operate its own flights. This may be more cost effective and it also allows the company to tap into much greater frequencies. “The preference would be for a [DHL] network aircraft in terms of reliability, timings and flexibility… However, if a commercial airline gives us a service that fits our timings, our loadings and our routings, and if the costing is more attractive and the frequency is there, then we will stick with commercial,” says Spiga. The growing number of carriers and flights from and within the region is providing extra air cargo capacity. However, this growing capacity is being matched by a growth in demand, and the rising fuel costs and security requirements mean that air cargo rates are remaining fairly stable in the region. “They haven’t dropped even though there is more capacity out there,” notes Spiga. Commercial air services are also currently DHL Middle East’s main link with the rest of the world. However, the company is considering increasing the number of international services it flies into Bahrain. At present, the hub is served by a six-times-a-week 757 service from DHL’s European hub in Brussels, as well as by a 75 tonne capacity MD-11 flown by Lufthansa Cargo. This service is part of a wider global tie-up between DHL’s parent company Deutsche Post World Net and Lufthansa. The two co-operate on a number of services include a five-times-a-week service between Cologne and Singapore, which stops off in Bahrain. On the way back to Cologne, the freighter flies via Hong Kong and Lufthansa’s regional hub in Sharjah, again serving both companies’ customers. “That [partnership] has worked very well in terms of volume utilisation, densities and service input,” says Spiga. “There is a lot of demand on that freighter, especially on the Europe-Middle East leg and on the Far East-Europe sector. DHL Asia/Pacific has also shaved between half a day and a day off its transit times into the Middle East.” “[DHL] looked at five routings early on and because of the success of [the partnership], other opportunities worldwide are being looked at,” Spiga adds. “However, our growth from here in the Middle East may dictate that we eventually have to have separate routings to either of those points [Singapore and Hong Kong].” The 3PL is also looking at expanding its network of flights within the region, including a possible service to somewhere in the Levant. The company has also previously suggested a Bahrain-Doha-Muscat-Doha-Bahrain flight and Abu Dhabi International, where DHL already has a large trucking operation, is similarly viewed as a possibility. The company is also looking at linking its daily Brussels-Istanbul flight into its Middle East trucking network, as well as establishing a third hub, probably in the Levant region. “The sheer growth over the last year or two has been quite absorbing and it has led us to have a complete re-think,” comments Spiga. “There is probably a need to develop a third point, and one in the Levant would seem to be an obvious choice,” he adds.||**||

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