The region's air cargo sector is one of the main beneficiaries of the shift in global trade patterns

1. bq-magazine.com
22 bq | COVER STORY | GCC TRANSPORT
AIR CARGO
MOVERS & SHAPERSThe region’s air cargo sector is one of the main beneficiaries of the shift in
global trade patterns
By Dada Zecic Pivac
GCC

2. September-October 2016
bq | COVER STORY | GCC TRANSPORT 23
Thanks to the shift of global eco-
nomic power and the favorable geo-
graphical location, the GCC region
has emerged as the new center of
world trade routes, an important
transhipment point for the global
economy. Logistical and transport
infrastructure development like
new regional rail network and ongo-
ing expansion of the region’s sea-
ports and airports are additionally
strengthening the GCC’s role as a
multi-modal logistic world hub.
Air cargo is one of the sectors in
the region, which is benefiting the
most from the shift in global trade
patterns and this is only expected
to increase in the future. It has been
forecast that air cargo traffic in
the GCC will grow at a compound
annual growth rate (CAGR) of 7.2
percent through 2032 in terms of
freight tonne kilometers (FTK - one
metric tonne of revenue load carried
over one kilometer).
New market shapers – cargo
companies from the GCC, Russia
and China have overtaken the
industry which was dominated for
decades by air carriers from the USA
and Europe. Recent data provided
by International Air Transport Asso-
ciation (IATA) for June 2016 serve as
evidence of this situation.
Middle Eastern carriers posted
the largest increase in freight
volume, compared to every other
region, for the 16th consecutive
month - 8 percent year-on-year,
while capacity increased 8.7 per-
cent. Even in the midst of the cur-
rent global slowdown, the biggest
since 2009, the Middle East air cargo
industry’s international freight
growth rate drop to 6.5 percent in
the first six months of 2016 from 14.3
percent average growth witnessed
during the same period in 2015, is
not as drastic as that witnessed in
other regions around the globe.
In those regions, freight demand
decreased or was flat during 2015
and at the beginning of 2016.
Strong customer focus
The Middle Eastern air cargo com-
panies are split among the super-
strong “big three” Gulf-based air-
lines: Emirates, Qatar Airways and
Etihad Airways which are taking
the biggest chunk of the air cargo
revenue pie, and smaller, regionally-
focused companies which are suf-
fering from the impact of global
economic slowdown caused by the
oil price slump and regional political
instability.
According to industry experts
strong customer focus is the secret
of success of the GCC air cargo
industry in general and the “big
three” movers and shapers of the
global aviation world in particular.
Duncan Watson, Emirates Airlines
Vice-President, Cargo Commercial
Operations Americas, Middle East
and the GCC says: “The Middle East
continues to be one of the regions
that is witnessing a growth in the
demand for air freight. According
to the figures released by IATA, the
region experienced a year-on-year
growth of 3.2 percent for the period
ending May 2016. Globally, the air
cargo industry is very competi-
tive and is experiencing an overall
slowdown in demand because of
the complexities facing the global
business environment. In such chal-
lenging circumstances, a strong cus-
tomer focus is essential for sustain-
able growth over the long term.”
Last year, air carriers around
the world transported 52.2 million
tonnes of cargo worth around USD 6
trillion, with the Middle Eastern air
cargo operators share in the overall
global performance standing at
around 14 percent. In their forecasts
for 2016, IATA says that the Middle
Eastern region is expected to earn
a combined net profit of USD 1.7
billion this year, while global cargo
revenues are expected to decline
slightly to USD 50.8 billion from
USD 52.2 billion in 2015.
Middle Eastern carriers
posted the largest
increase in freight
volume, compared to
every other region, for
the 16th consecutive
month - 8 percent year-
on-year, while capacity
increased 8.7 percent
The global airline body forecasts
that in total, the industry will uplift
52.7 million tonnes of cargo in 2016,
but the cost of shipping will con-
tinue to decline with average yields
for cargo falling by 5.5 percent. This
can be attributed to the appreciation
of the US dollar and the impact this
has, when accounting for non-US
dollar revenues.
Industry statistics for 2015 are
showing that Dubai-based Emir-
ates SkyCargo, the freight division
of Emirates, has become the second

3. bq-magazine.com
24 bq | COVER STORY | GCC TRANSPORT
largest global air cargo operator
which saw demand increase by
8.2 percent to 12.2 billion sched-
uled FTK. According to the annual
IATA World Air Transport Statistic
(WATS) report, FedEX is the busi-
ness world cargo airline (15.8 billion
FTK), Emirates is second, and UPS
third with 10.8 billion FTK.
“Emirates SkyCargo is commit-
ted to being a facilitator of global
trade flows. With an unrivalled
route network, we connect cargo
customers to over 150 cities in 81
countries on six continents and
operate in many of the world’s fast-
est developing markets, including 27
gateways in Africa, 18 in South Asia,
16 in the Middle East, 23 in the Far
East, 42 in Europe and 20 in North
and South America. We offer cargo
hold capacity on our fleet of more
than 250 aircraft, including 15 dedi-
cated freighters – 13 Boeing 777-Fs
and two B747-400ERFs. Emirates
SkyCargo operates state-of-the-art
cargo facilities at its dual hub loca-
tions in Dubai International Airport
and Dubai World Central (DWC) at
Al Maktoum International Airport.
Together the two cargo terminals
offer a combined cargo handling
capacity of nearly 2 million tonnes a
year,” Watson told BQ.
The rise of Qatar Airways Cargo
The second-largest Middle Eastern
air cargo operator is Qatar Airways,
ranked 6th on WATS global list
with traffic up for 27.7 percent in
2015 to 7.6 billion FTK, compared to
5.9 billion FTK in 2014. According
to the official company data, Qatar
Airways Cargo increased its dedi-
cated freighter destinations to 54,
adding Dallas, Budapest, Prague,
Ho Chi Minh City, and New York to
the network.
For the first time ever QA pub-
lished a consolidated financial
statement for the fiscal year ending
March 31, 2016. It revealed that
Qatar’s national carrier had made
a net profit of QR1.6 billion (USD
439) million, which is, thanks to the
falling oil prices, more than four
times higher than its 2014-15 profit
of QR374 million (USD 103 million).
The group’s income from its cargo
operations went up by 11 percent,
from QR5.1 billion (USD 1.40 bil-
lion) in 2014-15 to QR5.6 billion
(USD 1.53 billion) last year. Cargo
accounts for 16 percent of Qatar
Airways total revenue, with the
ultimate goal to get 25 to 30 percent
revenues from cargo.
Qatar Airways Cargo
flies to 52 dedicated
cargo destinations,
with additional belly
hold cargo (around
49 percent of whole
cargo) on passenger
aircraft to more than 150
destinations around the
world
Also, the cargo fleet is sched-
uled to grow by 22 aircraft by 2017.
Qatar Airways Cargo flies to 52
dedicated cargo destinations, with
additional belly hold cargo (around
49 percent of whole cargo) on pas-
senger aircraft to more than 150
destinations around the world. QA
cargo fleet includes nine Boeing
777F, eight Airbus 3330F and two
Boeing 747F aircraft.
In June, Ulrich Ogiermann,
Chief Officer Cargo, Qatar Airways,
announced at the opening day of
Air Cargo China 2016 in Shanghai
that Qatar Airways Cargo plans to
2nd
6th
14th
Global Ranking
8.2%
27.7%
5.8%
Demand Growth
Emirates SkyCargo
Mideast Air Cargo Operator
Qatar Airways
Etihad Airways
Source: IATA World Air Transport Statistic (WATS) report, 2015
Big Three Airlines’ Performance (2014-15)
Freight Tonne Kilometers
12.2bn
7.6bn
4.1bn
Duncan Watson, Emirates Airlines Vice-
President, Cargo Commercial Operations
Americas, Middle East and the GCC

4. September-October 2016
bq | COVER STORY | GCC TRANSPORT 25
expand into three key new markets
and is launching a new portfolio
of air freight solutions, the first
of which will be QR Live, for the
transportation of animals – horses,
pets, exotic animals and livestock.
Qatar Airways Cargo is the world’s
third largest cargo carrier by inter-
national flights, and it plans to enter
the Transpacific, Australian and
South American air freight markets
in the near future. According to the
official statement from March, QA
increased cargo volumes for 37.5
percent, from 1,104,000 tonnes in
2014 to 1,520,000 tonnes in 2015. In
the same time, import cargo into
Doha increased by 29 percent, while
exports increased by 10 percent and
transit cargo increased by 39 per-
cent in 2015. Qatar Airways plans
also include a new, larger cargo
terminal at Hamad International
Airport, which will allow QA Cargo
to handle 4.4 million tonnes of cargo
a year. New terminal is scheduled
for opening in 2018, but the heads
of the company already announced
that further capacity will be built,
allowing handling of up to 7 million
tonnes of cargo.
Qatar Airways Cargo peer,
Emirates SkyCargo did not have
such profitable fiscal 2015: official
company data are showing while
Emirates Group made a profit of
USD 2.2 billion, air cargo made
up only 14 percent of transport -
derived revenue (USD 3 billion),
which is a drop of 9 percent year-
on-year, partly thanks to weaken-
ing of major currencies. But Watson
is optimistic about the future:
“Emirates SkyCargo owes its ongo-
ing success to the continuous moni-
toring and redefining of existing
facilities and the introduction of
innovative products and services,
all of which are done keeping our
customers’ needs in mind.
“SkyCargo’s efforts to add value
to our customers through our high-
quality service and product innova-
tions have been recognized through
a number of awards including most
recently the ‘Best Air Cargo Carrier -
Middle East’ award at the 2016 Asian
Freight, Logistics and Supply Chain
(AFLAS) Awards held in Shanghai
in June 2016,” he said.
Qatar Airways Cargo
is the world’s third
largest cargo carrier by
international flights,
and it plans to enter the
Transpacific, Australian
and South American air
freight markets in the
near future
Also, airports in Dubai, Emir-
ates’s base, holds firmly the first
position as the business airport of
the region, in terms of cargo move-
ment. During the first five months
of 2016 cargo volumes handled
at Dubai International totaled
Ulrich Ogiermann, Chief Officer Cargo,
Qatar Airways

5. bq-magazine.com
26 bq | COVER STORY | GCC TRANSPORT
1,055,850 tonnes, up 3.9 percent com-
pared to 1,015,482 tonnes handled
during the same period last year. In
IATA’s industry forecast spanning
until 2018, it is stated that the UAE
will have third largest international
air cargo in the world, handling
nearly 5 million tonnes. Only US and
China, says the report, will see more
air freight than the (tiny) UAE.
Investing in state-of-
the-art freighter fleets,
new ultramodern high-
tech hubs, catering to
customers by offering
various perks and
benefits, has obviously
paid off for the biggest
GCC air cargo carriers
Key to success
Successful air cargo industry goes
hand in hand with quick implemen-
tation of new technologies. Emirates
VP Duncan Watson is saying that
SkyCargo has been at the forefront
of innovations in the air cargo
industry and this is something that
sets them apart from competitors.
“For example we offer a range of
advanced protective techniques and
solutions in transporting tempera-
ture sensitive goods such as per-
ishables (fruits, vegetables, flowers
etc) and pharma products. Earlier
this year we launched White Cover
Advanced, a next-generation version
of our innovative protection product
for valuable temperature sensi-
tive cargo. White Cover Advanced
utilises DuPont’s patented Tyvek®
material made of high-density poly-
ethylene to form a tough protective
barrier against varying external
temperatures and direct sunlight.
The special material is water resis-
tant to prevent moisture damage
while at the same time breathable,
thereby reducing condensation and
dryness. Our product development
team also invented a new tempera-
ture controlled container which we
named “White Container”. It is
coated on the inside with thermal
insulators to counteract high tem-
peratures in Dubai and help pre-
serve temperature-sensitive cargo,
including fruits and vegetables as
well as pharmaceuticals. We also
have the Emirates SkyCargo Cool
Dolly, a special piece of equipment
that transports cargo from the air-
craft to cool storage areas, while
maintaining temperatures of as a
low as -20°C. Constant innovation
is at the core of the value we offer
to our customers and it reflects our
ability to adapt and respond to their
needs,” explained Watson.
Etihad Airways, another
member of the “big three” group
of Gulf carriers, ranked 14th on the
annual IATA World Air Transport
Statistic Report, with 4.4 billion FTK
in 2015, and increase of 5.8 percent
from 4.1 billion FTK in 2014. Etihad
announced that its cargo division
generates over USD 1 billion in
annual revenues and it accounted
for 88 percent of cargo imports,
exports and transfers at its hub,
Abu Dhabi International Airport
in 2015. In 2016 freight volumes
out of Europe have been strong for
the carrier during the first quarter,
with 11 percent growth. Last year,
Etihad Cargo carried 592,090 tonnes
of freight, up four per cent on 2014.
In March new Boeing 777F, the 11th
fighter in Edihad Cargo Fleet enters
service, so the company now oper-
ates with the fleet made up of a mix-
ture of Boeing 777F and 747F along
with Airbuses A330-200F.
Etihad Airways, another
member of the “big
three” group of Gulf
carriers, ranked 14th on
the annual IATA World
Air Transport Statistic
Report, with 4.4 billion
FTK in 2015, and
increase of 5.8 percent
from 4.1 billion FTK in
2014
Investing in state-of-the-art
freighter fleets, new ultramodern
high-tech hubs, catering to custom-
ers by offering various perks and
benefits, has obviously paid off for
the biggest GCC air cargo carriers.
They are ready to strengthen their
world dominance in the industry,
leaving the competition complain-
ing about “unfair practices” and
wondering what exactly went wrong
in their approach to the business.