Are Golden Cargo Days Over for Gulf Carriers?

Massive fleet expansion, dense route coverage and increased air cargo capacity volume offerings. These have been the visiting cards of some of the Middle East carriers for the past decade, or even longer. The once almost unnoticed area has in the meantime become one of the world’s major players in the aviation business. The old saying says that “too many cooks spoil the broth.” Can it be that on the air cargo side at least, that these carriers are getting in each other’s way?

 

Profits start to slide and investments are not paying off
Figures released in August by Dubai and Abu Dhabi Airports distinctly show that these two airports and mainly their home-base carriers, Emirates and Etihad, are facing pretty strong headwinds as far as cargo volumes and revenues are concerned. This, by the way, also applies to the passenger results in the region.
It is interesting to note in the figures that cargo volumes slowed considerably in the first quarter of this year and more-or-less stalled during the second quarter. Very disturbing for both airports considering that it is not long ago that they were seen as the rising stars for both passenger and cargo in the region and around the world.
Dubai fared better than Abu Dhabi, by not actually dropping into minus figures, but showing flat results. Both Dubai airports (DXB/DWC) produced almost negligible cargo growth for the first six months and handled just under 900,000 tons. This was on par with the same period during 2016. Initial figures for July in Dubai show a slightly better picture with a 5% increase in tonnages, bringing the January to July average over 2016 up to just over 2%.
The colleagues in Abu Dhabi, more or less 100 km’s down the road from Dubai had a tougher time. The first six months show a more than 5% reduction in cargo handled and the second quarter was especially disappointing with an almost 10% drop.

Other regions are reporting higher tonnages
The above figures must be pretty disturbing for the UAE cargo managers when they look at global cargo handling results so far this year. The general figures second quarter of this year show that the air cargo demand grew globally by more than 10%. So how come that Dubai and Abu Dhabi are lagging behind?
It cannot be a capacity problem as both Emirates and Etihad still offer more than enough belly capacity on their global routes. Freighter space does not seem to be the problem either. Both carriers run quite large fleets of modern B777F and A330F aircraft and Emirates have even joined forces with Cargolux, utilizing main-deck capacity on their B747F fleet.
Emirates SkyCargo still holds its head above water, but Etihad Cargo seems to have suffered most, especially in fiscal 2016. Last year showed a 10% drop in cargo revenues to US$900 million. Volumes for 2016 however rose by just about 1% to just under 596,000 tons.
Is it then a yield problem which both are facing? Hard to determine when there is no real way of looking into their figures.
Or, is it that overheads have got out of control and need to be put back in line?

Qatar and Turkish seem to be having a better time
Qatar Airways Cargo seems on the face of it to be having a better time so far. This can all change of course if the overflight restriction imposed by their Saudi Arabian neighbours (and supported by the UAE and Bahrain) take hold. Qatar has gradually increased its all-cargo fleet of B777Fs and has a long standing cooperation with IAG Cargo which it seems has paid off, Emirates’ J/V with Cargolux is still in its infancy stages and has to prove itself.
And - then there’s Turkish Cargo who claim that their cargo tonnages, revenues and yields are growing. Hard to determine at the moment and whether they will suffer long-term if the political isolation of Turkey continues.
All-in-all, interesting figures out of the Gulf region and worth keeping an eye on.

John Mc Donagh

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