Emirates SkyCargo to maintain 19% growth



Emirates SkyCargo is aiming to maintain the high level of growth it achieved in 2007 by targeting a 19 per cent increase in both tonnage and revenues this year.

The freight division of Emirates hopes to escape the effects of the economic slowdown in the US by reaping the benefits of the economic boom in East Asia-Australasia, its major market.

It is launching a number of new direct routes to facilitate further growth, and is conducting feasibility studies on many others it believes could be lucrative.

Emirates SkyCargo achieved 19 per cent growth last year with revenues of Dh5.4 billion compared to Dh4.5bn in 2006 and cargo throughput of 1.2 million tonnes compared to one million in 2006.

“There are indications that the level of growth achieved last year will be sustained throughout this year,” Peter Sedgley, senior vice-president of Cargo Commercial Operations, told Emirates Business.

“We have enough support to withstand the current global slowdown that is affecting major airlines. In its quest for continued growth Emirates as a group has invested in new aircraft and infrastructure to expand its outreach. Emirates is an integral part of Dubai’s growth, so as Dubai grows to cater for a neighbouring market of 1.4 billion people, Emirates too gets a stronger base for further growth.”

The East Asia-Australasia market contributed the highest percentage to the overall revenues and tonnage in 2007, with 41 per cent of revenues and 30 per cent of total tonnage. The demand for cargo in this market, fuelled by economic expansion, is set  to maintain the growth of Emirates SkyCargo throughout 2008 and the coming few years.

“China and Hong Kong make up a very significant part of our cargo business,” said Sedgley. “This entire region is set to continue growing and we hope to ride on that growth.”

Emirates SkyCargo operates 10 weekly flights to China and 14 per week to Hong Kong. It is ranked ninth in the world in terms of volume of international freight and transports 64 per cent of all the air cargo that arrives in Dubai.

The carrier has 11 freighters – three A310-300Fs, five Boeing 747-400Fs, one 747-200F and two 747-400ERFs – and is looking to expand its fleet by acquiring two more this year.

Emirates will take delivery of 13 new planes this year, which will boost the freight operation, as some cargo is carried in the holds of passenger jets. Emirates will have a total of 190 aircraft by 2012. Last week Emirates SkyCargo launched a Kolkata service and it will start operating on the Dubai-Cape Town route from March 13, a move that will strengthen its hold on the African market.

“We are exploring a number of economically viable routes in South America, Asia and Africa,” added Sedgley. “Some routes are under evaluation and still subject  to political confirmation, while we are continuing to assess the likely impact of higher fuel prices on the longer haul routes.”

He said the new Dubai-Sao Paulo service was performing well – six tonnes of freight had been carried from Dubai and 12 tonnes flown in since its launch last October. Emirates Skycargo has not fixed a date when it will start using the cargo terminal at the new Al Maktoum International Airport, which will become partially operational this year.
The terminal will have an annual capacity of 12 million tonnes, when it is complete. Late last month it began operating from its newly-finished 1.2-million-tonne mega-terminal at Dubai International.

However, with Emirates Skycargo’s throughput already at 1.2 million tonnes, questions have been asked about whether the new facility will be large enough to sustain current and near future capacity.

“I can assure any pessimist that our growth will never be constrained by capacity problems both in terms of fleet and infrastructure. We will always find ways of creating facilities and using existing ones to accommodate growth,” said Sedgley.

He said the true capacity of the new mega-terminal was more than 1.2 million tonnes – enough to cater for near-future capacity – and that the existing cargo facility would continue to absorb any surge in cargo volumes.

“We will also leverage latest technology in terms of the aircraft we fly, IT,  communications and available infrastructure to get maximum returns.”

The cargo operation’s revenue growth will not be affected by Emirate’s decision to relinquish the management contract for Sri Lankan Airlines, he added.

Sedgley said that since Emirates still held a 43 per cent stake and was represented on the board its commercial interests would not be affected.

Last year Emirates SkyCargo contributed 20 per cent to the airlines transport revenues – about seven per cent more than the average contributed by the cargo divisions of other international airlines worldwide.

However, increasing fuel prices are likely to increase operational costs of services by about 30 per cent, according to Sedgley.

“We have seen over the last two to three years a tendency for some segments of air freight shifting back to sea-freight due to increasing fuel costs and a slowdown in the US economy.”

He said the cost of sea-freight had fallen to such an extent that some major international airlines were considering cutting their rates.

Boeing originally forecast that global air freight would grow by 6.8 per cent this year, but this has since been readjusted to 5.8 per cent due to increasing fuel prices and a slowdown in the United States economy.