REPORT BY PETER CONWAY IN DUBAI
Despite the downturn, Emirates SkyCargo is still keen to grow, with A380 freighters and new belly capacity on the way
There is a look of eager anticipation on the face of Ram Menen, senior general manager for cargo with Emirates, as he opens a large cardboard box in his office in Dubai. In the box is a model Airbus A380 freighter in Emirates SkyCargo livery. "It is a beautiful aircraft, isn't it?" he beams as he fits the wings and tail on to the model's fuselage. Soon he will have the full-size version to gloat over.
Emirates is the first conventional carrier to buy the freighter variant of the A380. The only other order, for 10 freighters, has come from express parcels operator FedEx.
Menen is going to have lots of bellies to fill on the A380 passenger versions, too. The initial Emirates order for five passenger variants back in 2000 raised enough eyebrows, but was topped at the Dubai air show last November with more firm orders and 10 options. At the same time, Emirates added eight Airbus A340-600s and three A330-200s to its shopping basket, along with 25 Boeing 777s, a package that will triple its fleet size to more than 100 aircraft by 2010.
That will mean a lot of new cargo capacity for Menen to fill - no mean feat for a carrier that lacks a large home market for freight, or even a particularly strong regional one. Menen, however, is bullish, pointing out that Emirates' fleet has gone from two to 37 aircraft in the past 16 years. "Compared with that, getting to 100 will be easy," he says.
Menen is known throughout the air cargo industry as an optimist. It was as shocking as anything else during the slowdown in air cargo in the second quarter of 2001 to see him - temporarily - looking less bouncy than usual.
But it is hard to argue with optimism in a place such as Dubai, where Emirates accounts for half of air cargo volumes. Whereas almost every other major air cargo hub saw falls in traffic in 2001, Dubai clocked up tonnage growth of 8.5% for the full year. Emirates Sky Cargo has struggled recently, with revenue growth considerably below its usual annual rate of 25% - but it has still grown, while few others have.
How do Menen and his team do it? He admits that the core Asia-Europe traffic has suffered in the past year, but imports into the still-booming Gulf region have compensated. Much of that growth has been based on high oil prices stimulating infrastructure growth.
Tourism projects
While the frenetic growth of Dubai - which is embarking on ambitious tourism projects, such as a new marina and an offshore holiday island - continues, Emirates must worry that, with oil prices heading downwards again, the boom will soon come to an end.
While some worry that an end to the oil-price renaissance will hurt Emirates, Menem is not among them. One of his favourite mantras is that downturns lead to shifting patterns of trade, and these create opportunities. He lists some current shifts: increased fruit and vegetable exports from India to Europe; new contracts to fly flowers from Zimbabwe to Amsterdam; and - more to the point - the increased move of manufacturing from the Asian tiger countries into China. Emirates does not yet have traffic rights into China, but Menen has got his eye on Shanghai as a freighter destination once it does so.
Strangely, for an employee of the first conventional carrier to order A380 freighters, Menen is a strong advocate of belly cargo. He describes as "hidden freighters" the A330s and 777s that make up Emirates' fleet. The 777, for example, can carry around 25t of belly cargo, the equivalent of a narrowbody freighter. "I would rather have 30t daily than 200t once a week," he says.
Paradoxically, one problem with the new aircraft is that they might reduce belly capacity on key routes. A passenger A380 with a full load would have room for only 15t of cargo, less than one 777, and certainly less than the two it would replace. The problem is not so much weight as volume. "The rear of the belly tapers upward, which reduces the space for cargo," Menen explains.
The long-range A340-500 being added to the fleet next year, as well as the high capacity -600s to come, will also have minimal effective cargo capacity because of the long routes they will fly. For example, Menen says non-stop services from Dubai to New York, due to start in mid-2003, will have enough cargo space for express cargo only - between 10-13t. "It won't change much for us. We already serve the USA with an interline partner via London, and we will continue to do so," he says.
Thus, the rationale for the A380Fs is to some extent to make up for capacity lost due to the deployment of the new passenger aircraft. Though Menen says it is too early to predict which routes they will serve, they are most likely to be deployed on Asia-Europe and possibly US routings. "If we had them today, I would use them between Hong Kong and Amsterdam," he admits, adding that by 2008 - when the aircraft enter Emirates' fleet - mainland China might be the bigger market.
Hong Kong-Amsterdam is the route currently flown by the 747 freighter that Emirates leases from Atlas. In the slack months of 2001, frequency was cut to three times a week, but in September, defying the general gloom, Menen restored the service to four times a week.
He is also exploring other ways to get main-deck capacity. He is a pioneering customer for "fractional leasing", a new idea that Atlas - with the downturn in its traditional wet-leasing business - is trying to get off the ground. This involves selling block space on freighters out of three proposed hubs: Liège in Belgium, Miami and Anchorage, Alaska.
The first service with the new concept is a 747 leased from Atlas by TNT, which would fly from TNT's European hub at Liège to Johannesburg, Harare and back, with South African Airlines and Emirates taking space. Menen points out that a similar concept is already used in ocean freight. "It could give us main-deck opportunities into markets where we don't have enough volume for a freighter," he says.
While not supervising route expansion at Emirates, Menen, a former chairman of The International Air Cargo Association (TIACA), is also a keen campaigner on wider issues in the air cargo industry. One of his initiatives involves an Organisation for Economic Co-operation and Development proposal to scrap all bilateral restrictions on cargo.
The plan originally covered freighters only, but Menen successfully lobbied for the inclusion of belly cargo. "If there are free rights for freighters, why should there not also be free rights for belly cargo?" he asks. "If one of our passenger routes makes an intermediate stop, why should I not load or unload cargo?"
Menen is also an enthusiastic proponent of the Internet. A supporter of GF-X, the online trading platform for air cargo, he has had much more success with SkyChain, Emirates SkyCargo's own in-house e-commerce platform.
Available through a simple web browser, SkyChain not only offers booking, tracking and the checking of space availability, but incorporates a number of ground-breaking ideas. One is the ability to book up to 250 days in advance, something unheard of in cargo - a booking can normally be taken only a week or two in advance, when it can be assigned an air waybill number. SkyCargo gets round this by giving each transaction a six-figure job reference like those used in passenger bookings.
Being freed from air waybill numbers, it can then offer booking, tracking and other services not just to forwarders, but to the shippers and consignees who are their ultimate customers. "It is available 24 hours a day and is totally transparent," says Menen. "Everything we do is now visible to both the forwarder and the shipper."
SkyChain also gives all participants a free global communications package and incorporates SMS text-messaging for truck drivers delivering cargo. Other firsts for SkyChain, says Menen, are that it was the first airline site to offer global cargo booking for all a carrier's flights and the first to offer an online claims service.
More to the point, the site is being used, and by customers not normally thought of as at the forefront of the Internet revolution. It is particularly popular with small- and medium-sized forwarders. Indeed, the service now accounts for an impressive 7% of all Emirates capacity (in contrast to less than 1% booked on GF-X). Indeed, whole flights have been booked on SkyChain and customers in Casablanca had registered for the service before Emirates even started flights to the city in March.
It will be another four years before Menen sees his first real A380, a passenger variant, and two more years after that, in 2008, before he takes delivery of two A380 freighters. But by that time, the eyes of the whole air cargo industry may well be upon him.
Source: Airline Business
