Since its establishment in the mid-1980s, Emirates Air (based in the United Arab Emirates country of Dubai) and its SkyCargo freight division have grown in countries served, services offered and cargo carried. Last year SkyCargo boosted its contribution to Emirates' total income from 20% to 21% of the total, with a new record of 925,941 tons of freight carried.
Logistics Today talked to Peter Sedgley, Emirates' vice president, cargo commercial operations, to learn more about how the carrier is positioning its freight division to accommodate the growth of global supply chains.
LT: Emirates SkyCargo carried 27% more cargo last year than the year before. How do you account for that growth?
Sedgley: We started serving six new destinations last year, and increased frequency to a number of existing destinations, as well as capacity, with bigger aircraft.
LT: How are you dealing with rising fuel costs? Sedgley: We implement our fuel surcharge in accordance with a formula benchmarked against several factors. Our fuel index is easily accessible on our website — www.sky-cargo.com. The fuel surcharge we have levied, however, only recovers a percentage of the additional costs we are incurring due to higher fuel prices.
As our operating costs are in U.S. dollars, Emirates SkyCargo continues to maintain yield, due in great part to the strong Euro currency against the weak U.S. dollar. The greater concern for airlines and air cargo carriers is that the continuing instability in fuel prices will lead to an economic downturn.
LT: What world regions have been most active for you? Sedgley: The Far East has been extremely active for us, primarily due to the tremendous economic growth of both China and India. China in particular is of growing importance due to the market's contribution to our cargo volumes and revenue. Cargo from China consists mainly of high-tech goods and consumer products, while into the mainland we carry machinery, equipment and spare parts for the booming manufacturing industries.
The UAE has had historically strong trading ties with India — we import textiles, consumer electronics and fresh produce from the Indian subcontinent, for consumption in the UAE, the Middle East and Europe. Emirates SkyCargo also carries perishables from various regions around the world, depending on the season, to support the burgeoning economies of Dubai and the Middle East.
LT: How important has carrying cargo in the belly of your passenger planes been to your success?
Sedgley: Belly-hold cargo capacity accounts for roughly twothirds of our business revenues, with our freighters bringing in about 34% of cargo revenues in the last financial year. We are in the process of converting three Airbus A310 -300s into freighters, the first will join our freighter fleet in July and the other two by January 2006. Two Airbus A380Fs are scheduled to enter service in 2008.
LT: What impediments exist for international air freight? Sedgley: One of the major impediments to the growth of the industry undoubtedly is the adoption of protectionist policies by governments and airlines. Although trade and manufacturing operate in a globalized marketplace, aero-political considerations contrived in the past century continue to constrict growth and development.
LT: You have three dedicated cargo flights to New York each week. How successful have they been?
Sedgley: Our New York cargo service — using both our Boeing 747 freighters and our passenger Airbus A340-500 bellies — has been extremely successful. In fact, we started the second freighter operation within weeks of launching our service into New York. We have good demand from shippers in both directions.
LT: What's next? How will you sustain your growth? Sedgley: Our business plans are very much on target and we intend to cross the one million tonnage mark in this financial year. The Mega Terminal at the Dubai International Airport, with its capacity of 1.2 million tonnes, is on schedule for a 2006 opening and will increase and optimize Emirates SkyCargo's hub capacity.
We continue to develop our multi-million dollar new-generation cargo system, which we'll roll out in 2006. It will be the new core of our existing SkyChain system.