Emirates SkyCargo looks to diversification and digitisation

Product diversification, digitisation of the air cargo supply chain and an ambition to build an e-commerce hub in the Middle East are just three of the projects under way at Emirates SkyCargo.

The Dubai-based airfreight giant will also monitor demand for its freighter capacity in these turbulent times for the world economy, but the carrier has already shown its resolve in fleet discipline after downsizing its dry-lease freighter fleet from 15 to 12 aircraft over the past two years.

Nabil Sultan, divisional senior vice president at Emirates SkyCargo, says that “every year has its own challenges”, with 2018 blighted by higher fuel prices and the impact of the dollar currency exchange in Europe, China and the Indian sub-continent customer base.

“Despite all of that we are seeing a solid performance from the Emirates perspective and last year we managed to generate almost 2.7m tonnes and nearly $3.6bn, which is a quite stunning result. It is a near 1.4% improvement in tonnage and a 5% improvement in revenue,” he says.

Diversification
That increase, says Sultan, has a lot to do with the carrier’s diversification of its product portfolio over the past three to four years: “We have invested quite substantially, ensuring that we have the right products, not only from a marketing point of view, but we also made a deep dive into our operational aspects to ensure that on-time delivery is achieved.

“Our flown-as-booked performance was almost 97% and I’ve yet to see any other type of carrier get close to that kind of performance. It shows that, with our operational capability, we are really able to deliver the cargo as promised.”

And while Emirates has invested heavily in digital systems, for example it launched a platform for shipment quotations, there is still a practical hands-on approach, evidenced by the use of easily identifiable red bags for Aircraft on Ground (AOG) spare parts, making these urgent shipments clearly visible in a packed hold.

The AOG product is one of a number of verticals, including ones for charters, pets, equines and high-value goods which, says Sultan, make Emirates the “airline known for carrying specialised cargo”.

The airline also has a dedicated team at its operations control centre which monitors every shipment and will intervene if the delivered-as-promised booking has a problem, with between 200 and 300 consignments ‘rescued’ every week and put back on track.

That intervention is made possible by the continuous exchange of data on journey milestones based on IATA’s Cargo IQ methodology.

Henrik Ambak, senior vice president of cargo operations worldwide at Emirates SkyCargo, has been appointed chair of Cargo iQ’s board, an indication of the carrier’s commitment to measurable quality in the supply chain.

In the pharmaceutical sector, Emirates made a “substantial investment” in the temperature-controlled life sciences market by becoming compliant to European Union Good Distribution Practices (GDP) guidelines at both its Dubai International (DXB) and Dubai World Central hubs.

One immediate result was a 14% surge in pharma goods to 75,000 tonnes last year, a welcome increase at a time of economic uncertainty.

The US-China trade tariff tussle made for bleak industry-wide volumes and yields in the first quarter of 2019, followed by an even deeper dive in April. Although industry pundits argue as to the cause and effect of such declines on full-year results, freighter operators have to be careful.

Says Sultan: “So far, utilisation has been good and we continue to operate decent load factors. However, looking at the economy, over the coming year we might have to re-evaluate what will happen to production and if you have to reduce some of the capacity, then we will definitely do that.

“It is important to know that we are fully utilising the freighters, and as the operator of a large freighter network, we always monitor the trade situation very closely.”

At the Air Cargo Europe event in Munich in June a number of freighter operators reported a noticeable shift of airfreight volumes from China to other regional markets, probably in response to the US threat of additional tariffs on Chinese goods.

Has Emirates noticed that shift? “The answer is yes, we have seen some of the key production move out of China into markets like Cambodia, Taiwan, India, Vietnam and Bangladesh,” Sultan says.

“There is a lot of movement and it has been happening for quite some time and as part of our constant evaluation we may be looking at moving some of our freighter capacity into these markets.”

Sultan makes the point that Emirates continues to increase its passenger bellyhold capacity, with substantial investment as it grows its passenger fleet across the network Airbus A330neos are expected to join the fleet from 2021, which means that the carrier “might have to rationalise some of our capacity on the freighters”.

Aircraft order
In February this year, Emirates ordered 40 A330-900 aircraft and 30 A350-900 aircraft in a deal worth $21.4bn. They will have big bellies for cargo, as do some other aircraft of the current Emirates passenger fleet.

“A Boeing 777 aircraft can carry 25 tonnes per flight and if you’re operating four flights per day into a city then that is a freighter-load. If you look at most of the big cities today, we operate three to four frequencies anyway, so that is the difference.”

It is e-commerce, in all its forms, that will be a major focal point for Emirates SkyCargo, which in June 2018 signed a memorandum of understanding (MoU) with Cainiao Smart Logistics Network, the logistics arm of China-based Alibaba’s e-commerce platform, to “jointly facilitate the delivery of cross-border parcels as Cainiao looks to expand its global logistics infrastructure with Dubai as a hub”.

Says Sultan: “We see a trend in terms of the market changing from the traditional business-to-business (B2B) mould as the e-commerce space is opening up and I think as an airline we have an opportunity to play in that space as well. But let me be completely clear, B2B will not go away and we still see B2B being the bulk of our volume.”

He adds: “After listening to customers we see a huge shift in the trend of e-commerce. As a carrier based in the Middle East with a vast route network, we have a responsibility to ensure that all of these e-commerce emerging companies are taking advantage of those markets. They may not be mature markets but there is a huge demand for goods that needs to be delivered at the shipment level.”

In assessing what type of platform Emirates needs to create to attract Dubai-based e-commerce entrepreneurs, the cargo division is looking at an infrastructure where the new arrivals “find it much easier to do business”.

The cargo boss continues: “It is probably difficult for a small e-commerce company, a start-up that wants to base itself in Dubai, to be able to build a massive infrastructure for sorting capabilities and other requirements.

“But we are able to facilitate the back-end office for some of these companies and help them start their business.

“That is the domain we are talking about and that is the sort of discussion taking place with Alibaba, to ensure that they bring their expertise and we bring our network and reach across regions.”

Emirates is looking at a specific catchment area for e-commerce: “I believe that with the emirates network, its reach and number of frequencies and destinations we have all the way into Africa, the Indian subcontinent, the

Middle East or even Eastern Europe, then we can probably deliver some of the shipments within 24 hours to 72 hours, maximum.”

He adds: “We are not talking about e-commerce, like Amazon and Alibaba do today. On the contrary we are looking at creating certain products to help the second-tier e-commerce company to base themselves in Dubai by adding the right technology, the right IT platform, the selling and marketing capabilities, and to create the back-end fulfilment for them in terms of the sorting capability.

“It becomes a much cheaper proposition for them, and once in Dubai they have access to the world in terms of the numbers of frequencies, capacity and fights that we operate.”

Sultan says that the right platform and investment will entice e-commerce businesses to choose Dubai as a base rather than Europe, other Middle Eastern countries, India or Africa which, he observes, “are all competitive but which probably don’t have the Emirates network, the frequency and the reach”.

He continues: “When you look at the small packages, what Alibaba is bringing to the table with its DNA or business model, is that they have a platform for a lot of these small and medium enterprises (SMEs) to come and plug into and be able to sell their products.

“And if they can do that while basing themselves in Dubai, then they have one extra added value which is the emirates network, something they probably don’t have today when they are sitting in China or Hong Kong or wherever they operate.”

But Emirates plans to expand the business-to-consumer (B2C) concept by offering ‘concierge services’, building on the 1,000 luxury cars a year and 450 pets per month that are handled by the carrier.

One of Sultan’s colleagues, Dennis Lister, vice president cargo commercial development, states that the “landscape is changing” and that people want to go on vacation with a reminder of home: “For example, we had somebody who flew from France to the Maldives and they wanted their cat and the dog to go with them.”

Pets to supercars
But it does not stop with household pets, says Lister: “We have seen this expand across multiple dimensions, beyond pets, beyond retailer to consumer. We have transported supercars from a Bulgari Hotel in Dubai to the Bulgari hotel in London, and we will provide a service from door to door.

“We are seeing the trend of how people are wanting to connect vacations, so it is about connecting culture, people and cargo.”

At a time when most air cargo pundits are in doomsday mode, it is worth reflecting on the resilience, creativity and the ability of the airfreight industry to absorb pressure and then bounce back.

Says Sultan: “I have been in this airline for 30 years and we have seen worse days, during the Gulf War, 9/11, SARS, the global financial crisis and I could name a few more.

“The Emirates DNA is quite competitive, and we have grown through a lot of peaks and troughs, highs and lows, and we have managed to manoeuvre out of them. We managed to find our way through even though there was a lot of doom and gloom.

“There’s a great deal of belief in the industry about Emirates in terms of what we offer in reliability and safety, and to be honest those are the sort of things that come back to give us a huge return, even through the downside.

“It is a resilient airline, both from a cost and a revenue perspective, and we managed to deliver by the end of the day, which is amazing DNA.”

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