Dnata Cargo, backed by Dubai's economic boom, expects growing faster than the industry average – even as global airfreight services face a sharp drop in demand, said a senior official of the firm.

The company hopes to outgrow the airfreight industry forecasts, even though 2008 is expected to present a slump in the company's cargo volume and revenue growth compared to 2007.

"Increasing oil prices continue to threaten the growth of the global airfreight industry," Jean-Pierre De Pauw, Dnata Cargo's Divisional Senior Vice-President, told Emirates Business.

"While we forecast a drop in our growth, we still consider the figure to be healthy and above that forecast for the entire industry.

He said Dnata Cargo grew by 18 per cent in cargo volumes last year compared to 2006, but company expected growth to drop to five per cent this year.

Dnata's 2006-2007 financial results show its cargo operations contributed 15 per cent to the overall company revenues, with Dh378 million out of Dh2.5 billion.

In 2006, the volume of cargo handled by Dnata was 632,549 tonnes, compared with last year's volume of 535,132 tonnes.

According to last year's International Air Transport Association (Iata) report, the Middle East had one of the fastest growth rates for airfreight demand in the world. While the global growth for airfreight in 2007 was 4.5 per cent, Iata predicts the growth to fall this year to between 3.5 and 4 per cent.

"There were years where we registered 30 per cent growth when airfreight was booming as a mode of transport and oil prices were affordable. This level of growth has been falling over the past few years as airfreight becomes more expensive," said De Pauw.

"But we are comfortable with five per cent at the moment since we also do not want to outgrow our own capacity. We will continue to grow with Dubai since it represents the biggest chunk of our business," he said.

More than 90 per cent of Cargo handled by Dnata is destined for Dubai owing to the high demand for commodities and construction material, De Pauw said adding that the company registers an annual volume growth of 25 per cent in perishables due to their high demand in the region.

"We carry a lot of perishables from India, South America and to some extent Africa. There is a growing demand for perishables in the region and they continue to have a significant impact on the business," said De Pauw.

While it is not clear when oil prices will return to levels where airfreight becomes more affordable, De Pauw said the increasing population growth in Dubai, coupled with the strong infrastructural development and new commercial initiatives, will help the company to return to double digit growth in a few years.

The region's sea-air mode of transport is also witnessing a sharp decline as a result of increasing airfreight rates and instead shippers are opting for either sea or sea-road modes of transport.

"Sea-air represents only five per cent of our business, so its decline does not present a major threat to the business. But the biggest threat is when shippers shift entirely to other modes of transport where we do not have strong representation as a business," said De Pauw.

The introduction of faster ships, low sea freight rates, improved security and services levels, as well as increasing vessel capacity, are helping to lure shippers away from airfreight to sea freight as a mode of transport for goods. However, De Pauw ruled out the possibility of Dnata venturing into sea freight as a means to overcome the current slump in air cargo volumes.

"Airfreight is our core business area and we have no plans of changing that. We are re-investing our profits into the company to improve our services as the best way to sustain the business," said De Pauw.

The company, which has operations in 17 airports around the world, is continuing to look for acquisitions and joint ventures as it attempts to have a wider international reach.

In November last year, Dnata acquired Jet Aviation Handling AG, the airport handling division of Swiss-based Jet Aviation Group, which has been re-branded as Dnata Switzerland.

The company is in the process of launching a portal dedicated to air cargo where clients can transact business online and track movement of their goods.

Dnata currently handles an average of 700,000 tonnes every year through its seven freight gates and is planning to add an estimated 50,000 tonnes next year.

Dnata, which will turn 50 this year, is part of the Emirates Group and is one of the largest travel organisations in the Middle East.