If airlines in the world’s more mature markets are concerned about the recent growth of new competitors in the Middle East, they haven’t seen anything yet. Boeing forecast in November 2013 that airlines in the region will require no fewer than 2,610 new airplanes over the next two decades, one-third of which to replace existing equipment, but the rest to fuel fleet expansion.
“The Gulf region benefits from a unique geographic position that enables one-stop connectivity between Europe, Africa, Asia and Australasia,” comments Randy Tinseth, VP of marketing at Boeing Commercial Airplanes, at the launch of the manufacturer’s latest 20-year forecast.
That connectivity is allowing the region’s airlines to grab an increasing share of worldwide passenger traffic, and generating cargo growth far ahead of the pace of global economic recovery.
International Air Transport Association figures for 2013 showed a 12.8 percent increase in freight tonne-kilometers for Middle Eastern carriers, compared with growth of 1.4 percent worldwide.
Growth in the Gulf economies was one factor, but the clear inference is that stronger demand for Asian-manufactured consumer goods in North America and Europe is benefiting Middle Eastern carriers more than those in Europe, where FTK growth was just 1.8 percent in 2013; the Asia-Pacific region, where there was a 1 percent decline; or North America, where carriers saw a 0.5 percent full-year decrease.
The growth of the Middle Eastern carriers is not justified by the numbers of people living there, according to Andreas Otto, responsible for product and sales at Lufthansa Cargo.
Emirates and Qatar Airways both increased capacity into Europe “dramatically” last year and Turkish Airlines by 22 percent, leaving legacy carriers in their wake. Otto believes Middle Eastern governments have created an unequal market through manipulation of airport slots, charges and fuel prices.
Lufthansa in recent years has viewed the Gulf carriers as the biggest competitive threat, but is now more concerned about Turkish Airlines, positioned closer to its home market, which today serves more airports in Germany than any other foreign carrier. Its global cargo tonnage for the first nine months of 2013 was up 17.7 percent at 407,000 tonnes.
Fearful of the deeper cooperation it was previously seeking with Turkish, Lufthansa is ending a codeshare with its fellow Star Alliance member on March 31.
Abu Dhabi-based Etihad Airways carried 486,700 tonnes of cargo last year, up 32 percent, with China, India, the Netherlands and the U.S. seeing especially strong growth.
“We’ll see double-digit cargo capacity growth continue in 2014. Slight improvements in demand from key consumer markets in Europe, North America and the Middle East should drive exports from Asia to those markets,” says Kevin Knight, Etihad’s chief strategy and planning officer. “Our plans for 2014 are to continue to grow our business faster than the market. This will be achieved by additional capacity offered on new routes, frequency increases, the delivery of our fourth Airbus freighter – approximately half of all our cargo business touches a freighter operation at some point in its journey – and the arrival of 17 more passenger aircraft.”
Knight says Etihad plans to introduce further new, non-traditional markets, complementing its services on more established trade lanes. No new freighter destinations have yet been announced for 2014, but eight new passenger destinations are already slated: Rome; Zurich; Yerevan, Armenia; Medina, Saudi Arabia; Jaipur, India; Perth, Australia; Los Angeles and Dallas.
Growth is equally startling at Qatar Airways, which according to analysts’ estimates increased its cargo tonnage by more than 20 percent in 2013. More than 40 percent of cargo is carried on its freighter fleet. In November 2013, the carrier announced orders for five more A330-200Fs, two of them to be delivered this year.
Freighter services from Doha to Liege, Madrid and Paris were launched in 2013. Qatar Airways also used fifth-freedom rights in Italy to launch a twice-weekly service to and from Chicago, calling at Milan in both directions.
“We feel the Italian market is under-served, and we are looking at other opportunities out of Milan,” Ulrich Ogiermann, Qatar chief officer cargo, says.
Qatar Airways will launch passenger services to three new U.S. destinations this year, Philadelphia, Miami and Dallas-Fort Worth, together with Rio de Janeiro, Prague, Amsterdam, Edinburgh, Istanbul and Larnaca, Cyprus.
Air imports into some parts of Europe are improving as the economies of many countries improve, Ogiermann says.
“Exports to the U.S. are good, but the large belly capacity available impacts on ex-U.S. rates,” he says
Doha’s new Hamad International Airport, originally planned to open in 2009, handled its first cargo in December 2013, and Qatar Airways is gradually handling more of its freighter volume through the new 1.4-million-tonne cargo terminal, which has a dedicated apron with 11 wide-body aircraft stands.
With no date yet announced for the opening of the passenger terminal, Qatar Airways Cargo is in the tricky position of working across two adjoining airports.
“We’re at saturation point in the existing airport, so Hamad International will take the pressure off us,” Ogiermann says.
Qatar Airways Cargo has leveraged the opening of the new facility to launch two new premium services, Q Fresh for perishables and Q Pharma.
“We’ve always offered a temperature-controlled product, enabling us to fly flowers from Africa, for example. But with the new cargo terminal operational, including a three-zone chilled storage facility, we have a complete cool chain in place,” Ogiermann says. “We’re the only carrier in the Middle East operating reefer trucks direct into the warehouse.”
Saudi Airlines Cargo is estimated to have achieved more than 12 percent growth last year and, like Qatar Airways, is targeting Europe for new freighter services in expectation of further recovery in the region’s economy.
The carrier is upping freighter frequency from Guangzhou to Brussels to three per week. Dhaka, Bangladesh, to Brussels increases to five per week, and two additional flights per week from Nairobi to Amsterdam take this service to daily.
Saudia has introduced its first scheduled freighter services to the UK with two flights per week to Manston Airport, making a total of 22 freighters per week into five European airports.
With 15 freighters, the largest fleet in the Middle East, a spokesman says Saudia Airlines Cargo offers “some unique connections” from the Far East and Middle East to Europe and Africa. The carrier operates only passenger services to North America on a scheduled basis, but says freighter services to South America are “of high interest.”
Emirates’ freighter total is 12 after adding three new B777Fs last year. However, in a new partnership that began in March 2013, Emirates SkyCargo and Qantas Freight offer cargo capacity on each other’s passenger services to a combined total of more than 200 airports.
The key challenge for the region’s carriers is how runway capacity can be added fast enough, and restrictions on airspace eased, to cope with this rapid expansion.
Speaking to the Arab Air Carriers Organization in November 2013, Tony Tyler, IATA director general and CEO, said: “With some US$40 billion being invested in airport infrastructure in the Gulf alone, it may come as a surprise that we face a capacity shortfall. But even when the new airport in Doha opens, runway capacity is not expected to meet demand during all parts of the day.”
Tyler added that military airspace is hindering commercial aircraft movements.
“Only about half the airspace across the region is open to civil aviation,” he said. “We are seeing delays becoming commonplace.”
The United Arab Emirates is looking at ways of improving local airspace efficiency through regulatory amendments, new infrastructure and increased use of technology, but Etihad appears confident in its situation at Abu Dhabi.
“We have the capability to expand without too many constraints,” Knight says. “Compared to other airports in the region, having two relatively uncongested runways at our hub is an advantage, as is our ability to expand our cargo handling facilities. Even with the increase in traffic, we do not foresee any difficulties in continuing to operate the cargo side of the business in a manner which continues to meet customers’ expectations.”
Neighboring Dubai is suffering serious congestion issues, however. Handler dnata’s sudden decision in January to turn away freighters and trucked cargo from Dubai International Airport (DXB) owing to a severe space shortage, and force carriers to migrate to Dubai World Central (DWC), jammed up cargo at both airports.
Belly-hold freight is still going into DXB, Dubai’s established passenger hub, and airlines are understandably reluctant to split their freight operations. dnata says it has invested heavily to maximize the handling capacity and efficiency of DXB’s cargo facilities for the benefit of those customers intending to remain there, but adds there is a limit to how far it can expand there and has urged them to “consider the DWC alternative.”
Emirates SkyCargo is set to move its freighter operations to DWC in April, and Dubai Airports, which operates both Dubai International and Dubai World Central, expects all freighter operators flying into DXB to relocate by the same time.
Some airlines, however, complain that DWC is in the middle of nowhere, and forwarders and integrators that have invested in facilities in DXB claim that trucking between UAE airports is slow and expensive. Dubai Airports is braced for a doubling of cargo volumes to 4.4 million tonnes at DXB by 2020.
Saudia Cargo is pulling freighters out of Dubai altogether and consolidating its operations in Sharjah. The company told Air Cargo World that this was “to offer more convenient connections and more same-aircraft operations into Africa. The freighter operation to SHJ complements existing passenger flights to Dubai International and Abu Dhabi.”
FedEx will have to shift its flights to DWC for almost three months from May 1 because of runway repairs at Dubai International.
However, FedEx heavily relies on Emirates’ global passenger network, so split operations will be problematic and the company is unlikely to relocate permanently until Emirates moves over to the new airport. This is considered unlikely until at least 2020.