Handler dnata weighs up dedicated sea-air facility as demand surge continues
04 / 03 / 2024
Steve Allen. Source: dnata
Dubai-headquartered handler dnata is considering taking up a dedicated sea-air facility as demand continues to surge.
Traditional sea-air hubs have this year experienced a surge in demand as forwarders looked for alternatives to ocean transport due to delays caused by attacks on vessels in the Red Sea and the subsequent diversion of ships around Africa’s Cape of Good Hope.
Dnata was one such company to experience this surge in demand, with the group’s chief executive Steven Allen reporting a 45% year-on-year increase in volumes through Dubai in the opening months of the year, although this also partly reflects a pre-Lunar New Year rush to get cargo to destination ahead of the two-week holiday.
Speaking at an event at the handler’s headquarters, Allen explained that the company has this year taken on extra space to accommodate a surge in sea-air demand.
The lease on a 8,500 sq m Dubai World Central (DWC) facility runs for six months at which point the company will decide whether to extend the lease.
Guillaume Crozier, senior vice president UAE cargo and global cargo strategy, said that if the company decides to extend the lease, the facility could be dedicated to sea-air volumes.
Allen said: “We are doing a business case on it at the moment but my view is that we will need it because Dubai is growing so fast. We had already planned on having more capacity come available in June this year [a 4,000 sq m facility to be vacated by FedEx] and we see this trend continuing.”
Allen said that “March is looking really strong and certainly doesn’t seem to be slowing down”.
“People say it is a one-off but it doesn’t feel like a one-off anymore because every year there is something geopolitically going on around the world.”
Crozier added: “We are leasing the facility for six months until we get the FedEx facility and then we will see how the demand will pan out. Then maybe the [DWC] facility will be repurposed on a mid-/long-term lease around a specific product such as sea-air, which is a growing product and in Dubai we put a lot of energy into developing that.”
It is not just dnata that has noticed ongoing sea-air demand. Analysis from WorldACD published last week shows that Dubai-Europe air cargo traffic in week eight [starting February 19] was at more than double (146%) its level this time last year, with average tonnages for the last two full weeks (weeks seven and eight) up by 140%, year on year.
Allen added that cargo demand for the business overall had remained strong in 2024. He said that the company had noticed rising demand from production centres that can provide an alternative to China, while disruption and rising import demand into Dubai was also fuelling volumes.
“Cargo is a forerunner of recession but is bucking the trend a bit this time round,” he said. “Japan and the UK have gone into recession but cargo into the UK is booming from what we have seen.
“The direction of travel is changing. There is a lot more production coming out of India and in the Far East places like Indonesia and Vietnam and the US is consuming more cargo from South America than it was before.”
Allen added: “I always thought that we would be going down the e-commerce, perishables, fast-moving goods route but general cargo is as strong as it ever was.
“So what I see overall is that despite the doom and gloom of recession, things are actually moving more than expected and will continue to do so.”
Allen said that one of the consequences of the disruption of the last few was a rise in the amount of time cargo is left at handling facilities.
Dnata has been trying to reduce the issue by working with forwarders to move processes – such as build up – downstream to avoid having to do so at the airport.
The company has also been increasing its storage fees, he said.
“It is an ongoing issue but we have seen over the last few years that because of these unusual surges, it is much more unpredictable and therefore even freight forwarders run out of warehouse capacity,” said Allen.
“It is easier for them not to collect because their warehouse is full and therefore they leave it with us and we have seen that happen all over the world.”
He added: “It is only fair if you are going to store things for people that there should be a cost to it and it is going to be expensive at the airport. We don’t want them to pay, we want them to pick because that helps the whole process and we can handle more cargo. We are working very closely with the freight forwarders on changing their processes.”
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