Dubai Airshow: Gulf airlines go head to head to become global cargo hubs

Dubai and Doha are facing off in the race to become leading global cargo hubs as competition moves from the cabins to the holds of their planes.

Emirates airline and Qatar Airways are ramping up their cargo capacities to attract more goods through their hubs in Dubai and Doha.

The strategy could stoke tension with rivals beyond the region in the same way that their success in growing passenger traffic has angered carriers from Lufthansa in Europe to Delta in the United States. It is also helping to drive profit as their cargo revenues proportionately out-punch global competitors.

Emirates today opens SkyCentral, the vast cargo facility at Al Maktoum Airport which will become the new home to its freight fleet. It comes just a week after Qatar Airways revealed its own plans to develop a massive new cargo facility at Hamad International Airport, with initial capacity to handle 4.4 million tonnes of goods when it opens in 2018.

“Being at the crossroads of the world makes the likes of Dubai and Doha very competitive in consolidating freight traffic from both Europe and Africa on to Asian markets,” said Daniel Tsang, who runs the Hong Kong-based Aspire Aviation consultancy. “As the industry increasingly relies on belly space beneath the floor of passenger aircraft to haul cargo, Emirates, Etihad and Qatar Cargo are increasingly unique and specialised in handling oversized and specialised cargo such as livestock, or Maserati sports cars that passenger aircraft can’t handle.”

Emirates has also been extending its influence over the global air cargo sector through the expansion of its dnata unit, which operates in several areas including cargo and ground handling. It acquired cargo handling operations at Schiphol Airport in Amsterdam in July, one of the latest in a string of acquisitions.

The region’s big three carriers are investing heavily in their cargo operations at a time of slowing growth in global air freight. Global cargo volumes are 1.2 per cent lower than they were at their peak at the end of last year, according to data released last week by the International Air Transport Association (Iata).

While the Middle East remains the bright spot in global air freight, with volumes up by about 7.5 per cent in the year to September, the increase is still about 5.5 percentage points down on the average for the year to date.

The slowdown in China in particular has had an effect on the volumes of cargo arriving in Dubai’s Jebel Ali Port by sea and being transported by air, said Bernd Struck, senior vice president of cargo at dnata.

“We do see currently a reduction of load coming in from China,” he said.

He noted a “single-digit downturn on sea-air business transiting through Dubai” from China and other Asian countries this year.

The growing significance of cargo to the business models of the regional carriers is reflected in its overall contribution to their earnings. While cargo generally contributes between 9 and 10 per cent of most airlines’ revenues, in the case of Emirates it is as high as 15 per cent of its total transport revenues. Qatar also generates a similar proportion of cargo business from its operations. It said last month it had become the world’s third-largest international cargo airline.

“The cargo business is the icing on the cake of an airline, ” said Akbar Al Baker, the chief executive of Qatar Airways in Dubai this week. “Most other airlines just have cargo in the belly, we also have freighters.”

Etihad Airways is also looking to boost its cargo offering which is already a US$1 billion business. It carried 568,000 tonnes of freight last year, up 17 per cent on 2013. This week it revealed it would take delivery of two more Boeing 777 freighters, included as options in the $67bn order for 199 aircraft it agreed in 2013.

While the growing cargo businesses of regional carriers threaten the market share of competing hubs outside the region, it may not pose quite the same threat as their passenger operations, which have become a political football in both the US and Europe.

“The US airlines have quit the dedicated freighter business for a long time and the European operators have shrunk considerably since the global financial crisis,” said Mr Tsang.

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