What makes Saudia Cargo so successful?

09 / 02 / 2013

  • Chief executive officer of Saudi Airlines Cargo Fahad Hammad

    Chief executive officer of Saudi Airlines Cargo Fahad Hammad

WHILE the air cargo business remains stuck in its economic winter, in one part of the world it still seems to be blazing summer. IATA figures show that cargo traffic at Middle Eastern airlines was up 14.4 per cent in the 11 months to November, against an industry average fall of 1.6 per cent.

Saudi Airlines Cargo did even better than that, with an 18 per cent rise in volumes to 570,000 tonnes, and 20 per cent higher revenue in 2012. It now boasts the largest freighter fleet in the region, with four MD-11Fs, four B747-400Fs lea-sed from Air Atlanta, four B747-200Fs, of which three are leased from Veteran, and one A310F leased from ULS.

At a time when other major freighter fleets are being cut back, the expanding carrier will even be adding to that in coming months, with two B747-8Fs due to start service in May and August this year. 

Fahad Hammad (pictured), chief executive of Saudi Airlines Cargo, declines to be drawn on the exact provenance of these aircraft, only saying that they are being leased from the Saudia parent company (as indeed are the MD-11Fs and one of the B747-200Fs). They will be deployed on China and USA routes.

How then is the carrier managing to find so much cargo growth when the rest of the air cargo industry is struggling? Part of the answer is that it has become better at exploiting its traditional markets by beefing up its sales team.

As well as appointing Peter Scholten as vice-president commercial in October 2010, the carrier also appointed a director of global sales support and a director of cargo sales in 2011, as well as key accounts directors in Europe, the USA, Africa, the Indian Subcontinent, MENAT (Middle East, North Africa and Turkey) and the Far East, all of which, Hammad says, have contributed positively to the boost in revenues.

In particular, exports from Europe were 34 per cent up in revenue during 2012, while there was a 37 per cent rise out of Africa to Saudi Arabia and Europe.

A major deal with DHL Global Forwarding to transport cargo to the UAE helped here (part of a 62 per cent increase in business with major forwarders for the carrier during the year), but the Arabian carrier has also become much more flexible in its pattern of freighter operations from Europe, generating new business.

Thus while its traditional European hub of Brussels remains important, with 10-11 freighter flights a week, Saudi’s all-cargo aircraft have now also started serving Milan four times a week, Amsterdam five times a week, Frankfurt three times a week, and Vienna twice a week.

“We make our decisions based on the requirements of our clients,” says Hammad. “We started Milan as another gateway after Brussels – and then Amsterdam – to cater to the specific demand of flowers from Nairobi. Frankfurt came afterwards for the demand of our clients in Far East for direct flights into Germany and being the largest export market to Saudi Arabia, followed by Vienna to cater to the business to and from southern and central Europe.”

It has also been a good year for the Saudi economy, and investments by Saudi Airlines Cargo in its terminals, handling equipment and manpower have increased its hub efficiency, making it more attractive for cargo customers.

Perhaps more interesting than all of these, however, has been the growth in traffic on non-traditional trade lanes, particularly from Asia to Africa. Saudi Airlines Cargo flies freighters to Addis Ababa, Johannesburg, Lagos, Nairobi and Ndjamena and, of these, Lagos has been a particular success story in 2012.

Hammad says frequencies have increased from four times a week to daily, with China a key contributor to that. “The majority of the cargo that we carry to Lagos originates from Hong Kong, Guangzhou and the UAE and includes electronics, mobile 'phones, textiles, garments and so on,” he says.

In fact, business growth to Lagos was the key driver in enabling the car-rier to increase frei-ghter capacity to both Hong Kong and Guangzhou during the year, at a time when most carriers were either holding capacity steady or reducing it. Shanghai also got extra frequencies, and in all, the carrier increased its vol-umes out of Greater China by 20 per cent.

Hammad promises further cap-acity growth to Lagos during 2013, and will also be seeking to expand interline operations out of the Nigerian airport, which already includes moving cargo on DHL freighters to various African destinations. Hamm- ad says that negotiations are ongoing with other carriers to expand this network.

Meanwhile Kano, Asmara, Djibouti, Tunis and Eldoret are other African destinati-ons now being considered for direct freighter flights from Saudi Arabia, with the only challenge on these and other African routes being the imbalance between imports and exports. One exception to the African success story, however, has been Accra. Launched in April with one B747F a week, it was a disappointment, and Saudi Cargo has now withdrawn its frei-ghters from that market.

Just to add to the roll-call of success, Hammad also rep-orts a good year out of Dhaka in Bangladesh, where the resolution of some ‘internal issues’ in 2011 caused a 70 per cent rebound in volumes in 2012 and an increase in frei-ghter capacity to three (soon to be four) a week. And the revamped charter department at the carrier, which uses two of the B747-200Fs, saw business rise 48 per cent.

All of this is an excellent performance, but Hammad’s ambitions stretch much fur-ther. “Our basic goal is to bec-ome one of the top 15 global cargo carriers in the near future,” he says.

“For us, air cargo is our core business and we are very serious about it. When other carriers reduce capacity in certain markets, we take the opportunity to improve our market share. This is what we did in China; clients asked for more capacity, and we increased frequencies.”

One feature of Saudi Airlines Cargo’s growth in 2012, which is different from many other carriers, is that it had no belly capacity incre-ase during the year. That will change in 2013, with the deli-very of six B777-300 passenger aircraft that will increase lower deck capacity by seven per cent. The aircraft will be deployed to London, Dubai, Kuala Lumpur, Jakarta, Casablanca and New York.

The enhanced belly capacity to New York, along with extra flights to Washington using existing aircraft, will provide significant extra lift to the USA and, to offset this, freighter calls at New York will be cut from twice to once weekly.

Hammad points out that Saudi Airlines Cargo also offers 150 tonnes of capacity a week to the USA via interline connections through Brussels.

Other developments at the carrier include joining the SkyTeam alliance in May 2012, with membership of the cargo part of it due to start during 2013. Hammad expects this to produce savings in handling costs, and says the carrier is also rev-amping its product range to bring it into line with SkyTeam specifications.

As part of this, new arrangements will be introduced for excess baggage, pharmaceuticals, courier, transit perishables and live animals products. They will join another product introduced in March of last year – named BellyFlex and offering cheap prices in exchange for four-eight-day transit times. 

BellyFlex has performed ahead of specifications and generated US$5m in new revenue last year. 2013 will also be a year of e-freight implementation, with the carrier liaising with IATA, systems provider Champ, Saudi Customs and others on the project.

“We are making tangible progress on several tasks, such as filling the IATA Detailed Level Assessment and implementing the sub-project of CDMP,” says Hammad. “We’re at the final stage of achieving the eAWB and eBooking and are targeting the end of 2013 as a cut-over date for the whole eFreight project.”

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