Dubai-based air services provider dnata expects to clock modest growth in cargo volumes this year even as it acknowledges that softening demand and excess capacity in the market is a concern.
For the year to September, dnata’s cargo volumes is up by 4.5 per cent compared with the same period last year, Gary Chapman, dnata’s president, told The National. The company is part of Emirates Group.
“We are still growing, although slowly,” he said. “Globally, cargo is under pressure. In certain parts of the world, we are going to see a weakness, some reduction [such as] in Asia and Australia.”
In August, air cargo demand in the Middle East slowed to its lowest rate in seven years amid increasing capacity, according to the International Air Transport Association (Iata). Demand rose by 1.8 per cent year-on-year for Middle Eastern carriers, while their freight capacity increased by 6.9 per cent year-on-year, the trade association said.
Globally, cargo demand grew by 3.9 per cent year-on-year in August and freight capacity increased by 4.1 per cent.
“In the travel business, given the overcapacity in the airline sector, the yields are under pressure, there is liquidity squeeze in the region, corporate travel is well down as the corporates have cut back, general travel is down, yields are down and that is never good for the travel business,” Mr Chapman said.
In the 2015-16 financial year, dnata handled 700,000 tonnes of cargo in the UAE. It expects to record a 5 per cent growth in volumes in the current financial year, said Bernd Struck, dnata’s senior vice president for the UAE cargo division.
Dnata’s UAE division for the year to date has handled 519,928 tonnes of cargo.
On average about 60 to 70 per cent of the cargo handled by dnata in the UAE is imports with exports accounting for the rest.
Excess freight capacity and tight margins are leading some cargo handlers to consolidate.
Earlier this year, one of the world’s largest cargo handlers, Worldwide Flight Service, based in Paris, acquired the US cargo handling company Consolidated Aviation Services.
“It will take a bit longer in this area to consolidate but there will be some consolidation in the future,” Mr Struck said.
Yesterday, dnata opened an integrated customer service centre for export cargo customers that includes airlines and freight forwarders in Dubai Airport Free Zone.
The centre can handle 25,000 tonnes of export cargo a month. It features a command centre from where cargo movements are monitored, integration with government agencies such as Dubai Customs and Dubai Police and a cargo acceptance area.
In tough times, “you try to improve efficiency [and] adjust your business model”, Mr Chapman said.
In the three years to 2017, dnata has earmarked Dh250 million in investments on new technology and facilities.
“The [export] control centre enables quick turnaround of any critical information in regards to cargo shipments,” Mr Struck said. “Our goal is to make the flow of cargo so transparent that the customers would know where your piece is located.”
A similar centre for import cargo, next to the new export centre, would be ready by the first quarter of next year. By the end of next year, dnata expects to segregate its flow of export and import cargo at its Dubai facility to improve efficiency.
Dnata has acquired land at the Dubai World Central (DWC) to open a new facility by 2019 to handle 250,000 tonnes and increase it to 1 million tonnes capacity in phases in addition to its existing capacity at DWC, Mr Struck said.
Emirates Group’s SkyCargo unit reported a year-on-year fall of 9 per cent in global cargo revenues to Dh11.1 billion in the 2015-16 financial year. It handled 2.5 million tonnes of cargo in its previous financial year, a growth of 5.6 per cent.
Follow The National’s Business section on Twitter