Emirates SkyCargo’s bumper year last year with tonnage up 14 per cent and nearly a 5.0 per cent growth in revenue year-on-year is a result of both product mix and performance, something the carrier says will see an even sharper focus in this year’s tough environment. By Donald Urquhart from Air Cargo Europe 2019.
“A big part of it has got to do with the diversification we have in our product portfolio,” Nabil Sultan, divisional senior vice president of Emirates Skycargo says of the healthy 2018 performance. “Over the last 3 – 4 years we’ve invested quite substantially in ensuring we have the right products.” But its more than that he says, saying the cargo division has “gone and done a deep dive into all our operational aspects to ensure our delivery on time is absolutely there.” Part of this is driven by the Cargo iQ quality initiative.
Sultan says the carrier’s performance in terms of flown-as-booked, is about 97 per cent. “We don’t see any other carriers getting close to that kind of performance so it just shows that our operational capability we are leading in delivering the cargo as promised and of course we don’t stop.”
By way of example, Ravishankar Mirle, vice president Cargo Commercial – Far East and Australasia at Emirates, illustrates this mix of product and performance by pointing to the pharmaceutical vertical which saw tremendous growth in volumes for SkyCargo in 2018 year-on-year.
In fact, Mirle says discussions are already taking place over the possibility of expanding the cool chain facility to the next phase. “There’s so much requirement,” he says. “Last year we moved 75,000 tonnes of pharma which is roughly a 14 per cent growth over the previous year.
“With the GDP compliance we are maintaining the integrity of the cool chain and we are now trying to take it to the next level where we are saying, let’s not only do it in DWC, in the road feeder services between the two airports which are all GDP certified, but we are also identifying ground handling agents at origin and destination to be GDP certified.”
At this point SkyCargo has already established nearly 20 GDP corridors, ensuring as Mirle says, “that we are protecting the product integrity not only in Dubai, but from the beginning to the end of the chain.” And the carrier is also looking at the capability for tracking the shipments – not just where the shipment is, but ensuring that the temperature is also tracked the whole entire journey.
A key factor alongside all this is Cargo iQ, he adds, saying it is a very useful quality management framework which helps strengthen service standards. “So when you combine cargo IQ, along with the cool chain facilities, along with GDP certification, along with Emirates’ network – these are all ingredients that are coming together and it makes a good pharma product. And that’s why we are seeing such a surge on the ground,” he adds.
But he also highlights it’s more than just infrastructure and processes. “We’ve got people on the ground who are extremely committed and that makes one heck of a difference. You can always build a building and have all the processes on PowerPoint, but if you don’t have people following it, it’s not going to work. I think we are blessed with that and we’ve built a strong team on the field, as well as in the hub, which is helping us achieve what we have accomplished so far,” Mirle adds.
Certainly the gains made so far should help the carrier weather the current market conditions which don’t look particularly bright at this point. Speaking of the industry downturn, Sultan says: “Again, we have a different set of challenges and it’s probably unlike anything we’ve ever seen in the past.” Noting it’s been a case of, “one thing after another” on the trade front, he says that there had been some earlier hope that April would do a little better than the first three months of the year, but these numbers came in even lower.
“So you can see that the impact on the volume is starting to take a bite gradually and therefore like any other business we need to be vigilant we need to reassess and re-evaluate our capacity,” he adds.
The carrier has already reduced its capacity over the last couple of years from 15 freighters to the current 12 in its fleet. “And we probably need to re-evaluate some of the capacity once again with all the changes that have taken place. I think it’s wise for us and we need to be vigilant to ensure that capacity reduction is taking place if that is required,” he says.
Having said that of course, Emirates is continuing to expand its passenger fleet – with new orders just this past February for 40 A330-900s and 30 A350-900s the first of which will start joining the fleet from 2021 – which of course puts added pressure on the cargo side.
View from Asia
From the perspective of SkyCargo’s Asia network, Mirle agrees ‘uncertainty’ is the rule of the day. “Markets are becoming very unpredictable and against this sense of uncertainty I think the only thing that you can do is you need to have your ear to the ground. It’s extremely important to stay close to the customer and see how their air transportation needs are changing, how the supply chain networks are changing and realign our capacity and operations accordingly,” he says.
With no direct impact from transpacific trade feud, this is a small blessing, but there is the potential for a knock-on effect, resulting from carriers pulling freighters from the transpacific and putting them on other trade lanes like Europe, for instance, which could then cause European rates to crash, he highlights.
A key ace in SkyCargo’s sleeve is the strength of Emirate’s network in the Asia and Australasian region, Mirle notes. “If at all the supply chain changes with the looming trade wars, we have to be prepared to shift capacity across to a different market. Fortunately for us because we already have operations across the region we only have to ramp up the operation and we’re there. So, to that extent, I think we’re very well covered.”
“Today we have 26 freighters out of Hong Kong and four passenger flights daily which is roughly about 3,000 tonnes of capacity per week. Out of mainland China we have 10 freighters a week.
“If there’s going to be a shift, we would have to shift between Hong Kong/China, and Taiwan, Vietnam, Indonesia and Malaysia. These are the places where there is a likelihood of production shifting and in all these places we have one or two freighters a week – the Hanoi’s, the Ho Chi Minh’s – so we would have to possibly redeploy freighters there,” he says.
But optimism remains, with Sultan adding: “We hope these trade war issues will settle down for the start of the peak season in October, and then we’ll be back in business again.”
Products and performance
Meanwhile, the carrier continues its push on products and performance. “The key thing for us as we continue to develop products is not to rest easy,” says Dennis Lister, vice president of Cargo Commercial Development, Emirates SkyCargo.
“We continue to revisit every single product that we launch and I think the key factor connected to our performance being a very good one last year, is primarily driven by a strong performance across all our products. We are becoming known as an airline that carries specialised cargo,” he adds.
Sultan also notes that, “one of the key elements that has been taking top priority for us, is we’re looking at our whole entire customer journey.” Crucial to this, is offering digital products to enhance customer experience, he adds.
The idea is to improve digital capability in terms of giving access and mobility to its customers so that they’re able to access Emirates capacity, easily and crucially, enabling them to book almost seamlessly. Sultan notes a number of initiatives have been launched so far, including a new quotation system, Emirates Connect, which features almost instant approval on quotations, he says.
In terms of products, Sultan says the carrier is very interested in e-commerce as this is a growing vertical where they are seeing huge demand. One of the initiatives started six months ago was an agreement with Alibaba to work together to create a platform in Dubai.
“This is an initiative that we continue to pursue with Alibaba and things are progressing nicely,” he says, adding that the UAE government is very supportive of creating a platform that supports e-commerce for the Middle East, Africa and Indian Subcontinent. This is based on leveraging favourable geographic location and of course Emirates’ substantial network.
As Mirle notes, Emirates’ airport capabilities are already there, it’s the first and final mile that is in question. “What is being discussed at this point in time is, do we want to be a first mile partner, or a last mile partner, or offer a comprehensive product? That is being discussed right now,” he says.
A huge chunk of the investment already exists by simply adding Emirates and the Emirates network, so the key issue is what kind of platform would be needed to facilitate that, “that is something we are looking at very closely,” Sultan adds.
One thing the carrier is seeing is that the traditional B2B flows are now moving to B2C. “We’ll be launching something in the near future that will directly connect retailer to consumer – that is coming this year. But we do see a trend in terms of the market changing from a traditional B2B. To be clear, it will not go away and we still see B2B as the bulk of our volumes, but definitely the e-commerce space is opening up and I think as an airline we have an opportunity play in that space,” Lister says.
Another trend identified by Emirates is the desire of some people to be able to take their pets or luxury car, etc. on holidays with them. The carrier is now looking to roll out a sort of concierge service that would handle all the logistics of moving a pet, or a car for instance along with the, presumably well-off, holiday maker. And similarly, should they make a purchase like a large piece of furniture while on holiday, this too could be handled by the concierge service.
In other words, rather than dealing with perhaps dozens of people around the world to coordinate, the well-heeled traveller can simply call one person who will handle everything end-to-end.
“So for us the hard core infrastructure and the movement already exist, the real investment already exists in the connectivity of the hub – all of that is there already, it’s just getting to processes around how to actually make it happen and that’s what we’re exploring right now,” Sultan says.
Going forward there are also a number of other developments that will offer up opportunities for SkyCargo. China’s Belt and Road initiative in particular, is one that Mirle is quite confident will have some spin-off opportunities for SkyCargo, despite the fact much of the initiative focuses on large infrastructure projects.
He cites the case of Africa which falls under China’s vision of the Belt and Road. “There’s 56 countries in Africa and we fly to 27 of them, so we are very well covered there,” and quite a number are land-locked he notes. Similarly with central Asia.
In April this year the UAE signed two agreements focusing precisely on the Belt and Road initiative. The first – a 5.6 million sqm ‘Traders Market’ – focuses on making Dubai an ‘international station’ in the Belt and Road initiative, but that concentrates on ocean shipping. The second agreement creates the USD 1.0 billion ‘Vegetable Basket’ project in Dubai to import, process, pack and export agricultural, marine and animal products along the new Silk Road. Here there is potential for SkyCargo.
And a little bit further off, but not much, is the upcoming Expo 2020. To be held from October 2020 to March 2021, the project site is next to DWC and will feature 190 countries showcasing their countries and their products. While much of the infrastructure-related cargo would come by sea freight, there are other opportunities Mirle notes.
“We’re expecting there to be a lot of perishable traffic,” for instance, he says, citing the example of a country like New Zealand which would want to showcase their food products. And of course general demand from the millions of visitors expected.