Indian Boom

Cargo consolidators in the UAE are benefiting from a surge in traffic from India on the back of the subcontinent’s telecommunications boom.

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By  Mark Foxwell Published  September 9, 2006

|~|cargo_freighter2.jpg|~||~|Leslie Farnworth, air freight manager at Al-Futtaim, says volumes to India have gone up by 80% in the last two years because of a huge rise in the country’s telecommunications industry. Finnish telecom equipment manufacturer, Nokia, has been using Dubai as a hub for transporting equipment to India, providing a boom to the emirate’s consolidators. “Dubai’s geographical location is a great asset,” says Farnworth, who estimates that 70% of Indian air freight handled by Al-Futtaim is telecoms equipment, with garments and footwear making up the bulk of the remaining volumes. Nokia tends to offer contracts of either six months or a year to consolidators. While volumes are up, shippers have a lot of options, with both shipping and air freighter traffic also seeing significant increases. And this trade pattern is likely to see further increases. Mobile phone subscriptions are projected to hit 100 million in India by 2007, rising from about 47.3 million from the beginning of 2005. According to trade body, India Taipei Association, Nokia, for instance, has a market share of just under 60%. While telecoms may be a particular growth area, the increase in trade volumes is pretty much across the board. However, consultant Mergeglobal predicts that while the Middle East will experience strong growth, it will also see significant added air freight capacity, which could temper any upside in rates. “Shippers will generally experience rising air freight rates, especially in Asian markets, even if fuel prices remain at current levels. Clearly, aggressive capacity additions in some trade lanes, such as those served by certain fast-growing Middle Eastern carriers, will keep the lid on rates during the next few years,” says the consultant, adding: “There will be impressive percentages, but not absolute growth in some of the north/south lanes linking the Middle East with the developed economies.” Indeed, Danver Murali Tharan, regional manager for consolidator Charles Kendall’s Middle East operations, says some carriers are occasionally offering better rates than ocean shippers, although he predicts that rising fuel prices may put an end to that. Gulf carriers are adding capacity to a number of trade routes, including Africa. Abu Dhabi-based Etihad Airways’ freight division, Crystal Cargo, has recently added the Ethiopian capital of Addis Ababa into one of its existing freighter rotations to Khartoum in Sudan. The weekly service, operated with an Airbus A300-600 offering 44 tonne payload, departs from Abu Dhabi and then flies onto Khartoum and Addis Ababa before returning to base. Ingo Roessler, vice president for cargo at Etihad Airways, says: “Ethiopia is one of Africa’s fastest growing economies, which is very much based on its blooming floriculture market. By adding Addis Ababa to our Khartoum rotation, we will be expanding our customers’ opportunities across the region, and also further developing our perishable services." Crystal Cargo is looking at additional interline services throughout Africa, which could feed into the Khartoum and Addis Ababa service. Ethiopia’s floricultural market generated more than US$21 million in 2005 and a new cargo terminal has been opened at Addis Ababa Bole International Airport to cater for the sector and general cargo growth. Dubai has benefited from its advantageous position on the trade routes between Africa and China. Last year, DAS Air Cargo launched a twice-weekly DC10 freighter flight from Zhenghou to Africa and the Middle East. Flights operate on Sundays via Dubai to Lagos and on Thursdays via Dubai to Entebbe; with connections from both Entebbe and Lagos to over 40 destinations in Africa, as well as destinations in the Middle East, served via Dubai. This is also adding links from the Middle East and Africa to the rest of China. Zhenghou is centrally located in the industrial province of Henan with good surface links from Beijing, Xian and Shanghai, and has one of the largest export processing zones in central China. The DAS flights are the first regular air cargo services from this airport. Linkglobal, DAS’s general sales agent in China, has established cargo handling facilities at the airport and is planning to build an Airlines Logistics Park capable of providing airlines with self-service at the airport. The customs, quarantine and other governmental offices have promised 24-hour service daily, seven days a week and 365 days a year. The airport will focus on cargo aircraft operations. It will be possible to distribute cargo within China next day, and to collect export cargo from this hub to major destinations worldwide. The new services will operate in addition to DAS Air Cargo’s four times weekly flights from Shanghai-Pudong. The Far East is, of course, a key market. In response to a strong surge in demand from a buoyant Indian economy, Emirates SkyCargo struck an agreement last year with Korean Air Cargo, allowing it to take 20 tonnes of capacity on Boeing 747-400F services from Delhi on Fridays and from Mumbai on Wednesdays. “This landmark agreement with Korean Air Cargo represents the critical commercial partnerships we forge to provide our customers with additional capacity and premium service on demand,” says Peter Sedgley, Emirates’ vice president of cargo commercial operations. “In the last financial year, India contributed more than 7% to Emirates SkyCargo’s overall revenue and had a growth rate of over 40%,” he adds. Emirates SkyCargo is active in the key markets of Mumbai and Delhi, transporting cargo to and from its hub in Dubai, from where the majority of these shipments are transported to the consumer markets of the Middle East, Europe and Africa, using a combination of belly hold and dedicated freighter services. Korean Air Cargo’s general manager, Jinho Yun, comments that the partnership provides flexibility and better fleet and capacity utilisation on the critical Delhi and Mumbai sectors. Emirates’ cargo division has strengthened its road feeder services and bonded trucking on several routes in India, including Coimbatore and Tirupur to Bangalore, Chennai, Hyderabad and Cochin in South India, and from Ahmedabad to Mumbai. Capacity to Russia is also on the increase. Emirates SkyCargo has agreed a link-up with Volga-Dnepr’s scheduled subsidiary AirBridge Cargo. The deal will see the two outfits feeding transit traffic on their routes to and from Moscow. AirBridge Cargo is developing inter-continental regular transport services on trunk routes linking Europe with China and Japan, with parent Volga-Dnepr Group feeding them from within Russia. The agreement with Emirates is expected to provide shippers with access to Middle East, African and Indian routes. SkyCargo has also entered into an agreement with Nairobi-based cargo operator Astral Aviation, which adds four more destinations to thirteen that it serves currently in Africa. The growth of passenger traffic may provide added belly cargo options in the future. For instance, a Dubai-based Indian businessman, with links to the Dubai cargo community, is in the process of establishing a passenger airline in southern India called City Air and is seeking partners. Aniyan Kutty owns a diverse range of businesses in the Middle East and India, including a Dubai-based freight forwarding company, Clarion Shipping. Chennai-based City Air aims to start with three Airbus A320s or Boeing 737-400s on lease and will be operating to India’s largest cities, as well as secondary cities. After three years of domestic operations it hopes to launch international services to places such as the Middle East. It is unclear how quickly the carrier will grow, because management has indicated concerns about whether India has the infrastructure needed to cope with a large increase in traffic. Meanwhile, belly cargo opportunities to India’s secondary cities are on the increase. Pune airport, based in western India, is to become an international facility in the near future, when Air India launches passenger services connecting it with Dubai in the UAE. Air India says in a statement that Pune-Dubai services will be operated from 12 December on a thrice-weekly basis. Airbus A310s will be used on the new route every Monday, Thursday and Friday. Despite the increase in Indian traffic and the boom in telecoms equipment, Europe remains the Middle East’s largest air freight trading partner, according to consultant Mergeglobal, accounting for more than 54% of total inbound air cargo into Middle East. Last year saw strong growth in exports from Europe to Middle East, as high oil prices increased revenues for oil producing countries in the region. “The MiddleEast lacks a significant manufacturing base, as reflected in the commodity mix of exports from Europe, which are dominated by capital equipment and intermediate materials,” says a Mergeglobal spokesperson. “The United Arab Emirates has a 32% share of total traffic as its economic diversification efforts create demand for capital equipment and intermediate materials from Europe. Other Middle East countries, flush with increased oil revenues, are hoping to follow the UAE economic model in diversifying their economies away from oil-based to become more service-oriented.” The consultant adds that with new infrastructure projects underway in the Middle East, capital equipment and intermediate materials are expected to be the fastest growing commodity sectors over the next five years. “With the diversification of Middle East economies, income levels will rise and populations will grow, creating a sustained demand for consumer products, capital equipment and food products. Consequently we expect the eastbound trade flows to grow at an average of 4.9% from 2006 to 2010.” The Middle East’s main non-oil exports to Europe are perishable goods, capital equipment and intermediate goods. “Exports to Europe are expected to increase at 6% per year from 2005 to 2010, thanks to sustained growth in the major European economies, coupled with a strong euro that makes Middle Eastern products more attractive to European consumers,” says Mergeglobal. Refrigerated goods, intermediate materials and minerals will be the fastest growing commodity sectors from 2006 to 2010, Mergeglobal forecasts, adding that the economic diversification efforts undertaken by Middle East countries are clearly visible in the fastest growing country markets. Italy, the United Kingdom, France, Netherlands and Germany account for almost 60% of the total inbound flows from Middle East, but their percentage share is expected to decrease as Eastern European countries import larger quantities of products from the region. In the meantime, cargo consolidators were recently dealing with more immediate concerns. Farnworth reports that the war in Lebanon has seen a dramatic tail off in volumes both to that country and Jordan. And, he says, dealing with slack periods, such as the Chinese new year, is still a major headache. ||**||

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