Gulf competition heats up

posted on 7th June 2018
The construction frenzy continues at the region’s airports as they try to keep pace with their ultra-ambitious home carriers, which continue to expand despite flat-lining worldwide cargo volumes.

With air cargo rates and volumes in most parts of the world still little better than those experienced in the 2009 global recession, one region continues to buck the trend. Worldwide air freight traffic was flat at best in most regions in the first six months of the year, as it was last year, but Middle East airports followed up a strong 2012 with expansion of 6.1% year-on-year in the first half of 2013, according to Airports Council International.

As freight moving through the Middle East spirals upwards, almost in defiance of the global economy, the region’s main air cargo hubs have continued to be hives of facility construction activity, spurred on and underpinned by the rapid state-boosted expansion of the region’s flag carriers and their access to relatively cheap aviation fuel, land and labour.

Doha International Airport has rapidly become a major global hub in much the same way as Dubai did before it, also propelled by the soaring success of a home carrier – Qatar Airways. The airport’s cargo throughput grew 14% last year to 845,000 tonnes and the same rate of growth has continued in the first half of 2013, with around 1 million tonnes of cargo expected to be handled this year.

The migration of cargo operations to Doha’s new Hamad International Airport (HIA) is forecast to further spur growth as Qatar attempts to reach its objective of becoming one of the world’s top five global commercial cargo hubs. The airport’s opening has been delayed several times and is curr ently scheduled for the end of this year, although it may roll over into 2014. The Cargo Complex at HIA will consist of several cargo terminals when complete. The first of these, CT1, is finished already and has a capacity of 1.4 million tonnes a year, a 75% increase from the current airport’s capacity. Spanning 55,000 sqm with 42 airside loading docks and 32 landside truck docks, it has an air cargo handling system capable of accommodating more than 1,000 ULDs and 5,000 consignment cages. With Doha expected to see double-digit growth continuing, areas have also been planned to accommodate the expected volumes and milestone dates for the future, the airport stresses

In neighbouring Saudi Arabia, Saudia Cargo plans to construct a new pharmaceutical facility at Riyadh airport and expand its ground facilities at Jeddah and Dammam airports to help meet surging domestic and international demand, much of it generated by the fast-growing network and fleet operated by Saudia’s parent, Saudi Arabian Airlines. Riyadh’s volumes increased last year by 15.9% to 305,000 tonnes, following 15% growth in 2011.

Attention is also focused on Abu Dhabi International Airport (AUH), the hub for another fast-growing belly and freighter carrier in the shape of Etihad Airways. Tony Douglas, a former CEO of London Heathrow and famed in the Middle East for opening Khalifa seaport on time and on budget last December – a rarity for major infrastructure projects in the region – is now at the helm of Abu Dhabi Airports Company (ADAC), which runs AUH.

The appointment of Douglas has created quite a stir, not least because Khalifa seaport and the adjacent, integrated Kizad trade zone – one of the world’s biggest – increasingly look like they are being developed to rival Dubai’s Jebel Ali port and logistics complex. As a result, Middle East watchers are keeping a close eye on whether a similarly ambitious freight hub might arise from the desert around AUH, and whether it will be linked to Khalifa/Kizad in a way that challenges DP World and Dubai Airports for sea-air cargo.

A change in focus at ADAC is already apparent – in May it bundled off a number of its ground handling subsidiaries to Etihad Airways (see box). Etihad’s expansion contributed to 17.6% cargo growth at AUH last year, increasing its volumes to 574,000 tonnes. ADAC spokesman Elham Bourani says freight volumes at AUH rose 21.5% year-on-year in the first six months of 2013 to 325,000 tonnes, thanks largely to Etihad’s volumes increasing by 23% to 215,000 tonnes. But Bourani was unable to provide any information on ADAC’s forward freight plans and how the airport will be expanded as throughput grows. So exactly what sort of cargo facilities will emerge at the planned Dh10bn-plus extension of ADIA’s Midfield Terminal Site, due for completion in 2017, remains the source of much conjecture.

Meanwhile in neighbouring Dubai, home carrier Emirates SkyCargo finally confirmed in July that it would move its freighter operations from Dubai International Airport (DXB) to a new state-of-the-art cargo terminal at Dubai World Central Al Maktoum International Airport (DWC) next May. Featuring 46 truck docks, 80 truck parking spaces and 12 aircraft stands, the new terminal will have an initial capacity to manage 700,000 tonnes of cargo per annum, extra room for perishables and cool-chain handling, and space for future expansion.

DXB saw total freight reach 2.279 million tonnes in 2012, up 3.9% year-on-year. Dubai Airports also managed to expand its business at DWC, where a total of 219,000 tonnes of freight – growth of 144% – was handled during 2012, only its second full calendar year of operations. Growth has continued this year at DXB, with volumes increasing an impressive 10.2% during the first half of 2013 to 1.196 million tonnes, although volumes through DWC declined in the first six months of 2013 due to fluctuations in charter traffic.

Ali Angizeh, VP cargo and logistics at Dubai Airports, says: “We are expecting cargo volumes at both our airports combined to rise by 8.7% in 2013 to 2.7 million tonnes, and by 7.4% to 2.9 million tonnes in 2014.”

Angizeh claims the hub connectivity of the Emirate is proving a key advantage. “We have recently seen increased commitment from our existing customers, particularly at DWC, which has already established itself as a major cargo hub,” he says. “Air France-KLM will also relocate its regional hub to the airport from August 2013.”

Another attraction of Dubai, says Angizeh, is that both its airports can facilitate the rapid transit of sea to airport freight, with transfers for full container loads between the quayside at Port Rashid or Jebel Ali and the apron at DXB taking just six hours. “At DWC, a major attraction for sea to air freight is the dedicated bonded road link to Jebel Ali Port which facilitates rapid transit from sea to air or vice versa,” he adds.

But the opening of DWC has had a negative effect on some of the region’s smaller airports. Charles Hadju, acting general manager at Fujairah International Airport, says the addition of so much new capacity at Dubai is one of the reasons why the airport’s cargo traffic slumped from 17,158 tonnes in 2011 to 11,788 tonnes last year.

“The cargo market is improving in line with the world economy, but local factors such as the opening of Al Maktoum Airport makes the dedicated freighter market more challenging,” he says. Hadju expects a traffic recovery to 12,000 tonnes this year, rising to 14,000 tonnes in 2014 as the airport attracts “a small number of niche and low-volume operators” to its facilities by boosting competitiveness.

“We are already very competitive on price and service provision, so we are exploring means to improve facilitation, to increase co-ordination and efficiency with customs and security, and also the creation of a new landside cargo facility with a dedicated link direct to airside,” adds Hadju. “The Middle East is an important crossroads and I believe growth will continue in line with local and international economic and business development.’

Sharjah (-9.1% to 314,000 tonnes), Kuwait (-5.6% to 184,000 tonnes) and Bahrain (-6.1% to 262,000 tonnes CHECKING) also all saw volume declines again in 2012 – as they did in 2011.

Bahrain International Airport has been a mainstay of Middle East cargo handling for decades, with DHL now in its 35th year using BIA as its regional hub, although the airport’s volumes have been affected in the last few years by a combination of the global economic instability and damage to the local economy resulting from high-profile political unrest in Bahrain. However, Robert Mills, cargo manager at Bahrain Airport Company (BAC), expects expansion in the years ahead even though volumes have been flat so far this year.

“Further ahead into 2014, I envisage that business confidence within the global market will remain under pressure,” he says. “However, there will be opportunities within the Middle East market, which has shown continued cargo growth whilst other regions are in decline.”

Looking forward, Mills says BAC will focus on developing more multi-modal services and cold-chain options to supplement what he believes is BIA’s strong market proposition: its strategic location as a gateway to the northern Gulf, with “the shortest travel time between its seaport, airport and the logistics processing zone of anywhere in the Gulf”. He claims BIA also offers airlines and forwarders strong airside infrastructure and a smooth operating capability, something not always found in larger regional airports. “And with Saudi Arabia only 45 minutes from BIA, we are still closer to one of the biggest global markets than our competition,” he observes.

Unsurprisingly, further expansion is also planned at Dubai, where Dubai Airports’ $7.8 billion SP2020 master plan envisages freight volumes rising by an average of 6.7% per year to reach 4.1 million tonnes by 2020 at DXB and DWC together – double the 2.2 million tonnes handled in 2010. “To meet that demand, we are expanding our facilities at both airports,” says Angizeh.

Construction has already begun on a 30,000 sqm addition to Dubai International’s 1.2 million tonne Cargo Mega Terminal (CMT), increasing capacity by 25% to 1.5 million tonnes a year. Dubai International’s original cargo facilities, Hall A and Freight Gate 1, located adjacent to the CMT, will also undergo complete refurbishment. “Together these facilities will be dedicated for the sole use of Emirates SkyCargo,” confirms Angizeh.

A new transhipment facility with capacity for 400,000 tonnes of freight per annum is also under construction at DXB. Once complete, it will handle about 60% of cargo transferred between Dubai International and DWC. Cargo facilities will also be expanded at DWC to 600,000 tonnes over the next seven years from the current capacity of 250,000 tonnes, a total that excludes the new Emirates SkyCargo facility.

The outlook for Middle East airports seems, almost uniquely when compared to other regions, exceedingly optimistic looking forward. Angizeh cites the UAE’s commitment to liberalised air transport and the fact that the country, like many of its regional rivals, is located within eight hours flying time of two-thirds of the global population. He forecasts air freight growth will occur across the region due to its “geocentric location at the crossroads between East and West”.

Mills points to the strong cargo carriers using the region as a hub, which benefit because most Middle East countries import almost everything except oil. He also believes a strong commitment to investment in infrastructure and the ability to innovate in adversity will continue to see freight drawn to the Middle East. He observes: “The recent unrest in the region, whilst transforming the political landscape, has not hurt the cargo business as much as expected and in some cases has opened up new opportunities.”

Etihad expects ADAC deal to enable growth

Etihad Airways will use its acquisition of three airport ground handling service companies at Abu Dhabi International Airport to further bolster its status as a global cargo airline, according to David Kerr, vice president of cargo.

The deal struck with Abu Dhabi Airports Company earlier this year saw Etihad take over Abu Dhabi Airport Services, Abu Dhabi In-Flight Catering and Abu Dhabi Cargo Company. Once regulatory green lights have been secured, the three firms will be managed under the banner of Etihad Airport Services, a wholly owned subsidiary of the airline.

Kerr says the extra ground handling influence the purchase will provide will be a cornerstone of the airline’s expansion and help drive volumes and service standards, both for Etihad and other stakeholders and partners. “We were in discussions with ADAC for quite some time over this,” he explains. “We saw this as an opportunity to generate synergies between Etihad Cargo and our partners. We are a large and growing business and hub capability is fundamental to our long-term development.

“This investment will helps us match up our capabilities and products so we can keep progressing on a global level and bring more services into the hub. We want to keep existing customers satisfied, and want to bring in new business as we continue to grow.”

He insists the new organisation will not be a subsidised cost centre used to attract new business through low rates. “It is a capacity growth enabler, but it’s an investment, and any investment needs a return,” he says. “We’ll look for that in time.”