Air freight industry needs to balance yields with increasing fuel price: Nabil Sultan

The global air cargo industry faced a challenging 2016 due to falling yields and over capacity, even though the sector saw a modest growth in tonnage. According to the International Air Transport Association (IATA), there is some optimism over the prospects for the cargo business in 2017. In an interview with STAT Trade Times, Nabil Sultan, Divisional Senior Vice President- Cargo, Emirates SkyCargo, talks about the trends and challenges to evaluate the current market scenario and predict the upcoming year for the air cargo industry.

How would you evaluate 2016 in terms of air freight business?
2016 has been a challenging year for the entire air freight industry. The overall challenge for the year has not been with tonnage growth- we have witnessed a modest growth in tonnage especially during the last quarter of 2016. However the biggest challenge moving forward for the industry is one to do with falling yields. This is something that all the stakeholders in the airfreight industry need to address together, especially now with increasing fuel costs. The industry will have to find a way of balancing yields with increasing fuel prices to ensure better route economics. This is necessary to sustain our operations- especially freighters- and ensure integrity of our service schedules.

What trends did you observe in the air freight sector and how much potential do you see in them in the coming year?
The major trend that we have observed developing over the year from a customer perspective has been the movement towards specialised capabilities for shipping goods from across different business verticals. This is a shift away from moving general cargo. Given this development, it is necessary for us to have an increasing understanding of business in different verticals and we need to work closely with customers to come up with creative solutions to address business needs.

Emirates SkyCargo has recently launched Emirates SkyPharma which is our specialised offering for the pharmaceutical sector. We have dedicated facilities for handling pharmaceutical shipments at our dual hubs at Dubai International Airport and Dubai World Central. Our facilities and operations in Dubai have been certified under EU Good Distribution Practices certification (GDP) from Bureau Veritas Germany making it the largest GDP certified multi airport hub in the world. Our pharma customers can be confident that their high value and temperature sensitive shipments will be transported in a safe and efficient way through Emirates SkyCargo.

In terms of other specialised offerings, we have also launched Emirates SkyWheels- a specialised transportation offering for premium vehicles across our network.

Which are the emerging markets and regions for the air cargo sector?
Emirates SkyCargo is a customer focused organisation we are constantly scanning global market trends to identify where demand might be emerging. Flow of cargo closely mirrors general economic developments and we see that cargo demands often shift from one continent to another and from one region to another based on different dynamics. Whenever a particular industry or manufacturing base shifts to another region, as we have witnessed in the case of few industries shifting to Vietnam from China or a new production base comes up in other emerging markets we need to evaluate how best we can redeploy capacity. For 2017 South America, Mexico, the United States along with other emerging markets will be areas of interest for us.

How much potential do you see in the e-commerce segment?
The global retail industry is witnessing a significant shift as more and more people globally move away from the traditional retail where they buy merchandise in stores to ecommerce. Business will move away from retailers importing and stocking products to a model where large distribution centres are maintained at various locations across regions ensuring that customers who have ordered online receive their orders in a timely and secure manner. This development will have a significant impact on the air cargo industry which will have to adapt rapidly to ensure that it is able to support the flow of goods from warehouses to customer locations which may be spread across the globe.

What are the challenges in the current regulatory framework? What changes do you think are critical to push for smarter regulations?
As we move into a new era of transporting goods and services, it is essential that the regulations that govern transport of goods facilitate rather than hinder the flow of goods from one location to another and the concept of e-freight is critical in this regard. E-freight will ensure that the transportation of goods becomes seamless as opposed to the current scenario where literally reams of physical documents move with the shipments to satisfy various customs procedures.

Once again the industry has to come to a global understanding and standardisation on some of the legislation around customs procedures so that e-freight becomes part and parcel of the new economy. Governments and stakeholders must realise that cargo is one of the most important drivers of the economy and it will be essential to facilitate movement of cargo with smarter regulations such as e-freight.

Do you think Brexit would have an impact on the air cargo sector in the coming year?
At the moment we have observed limited impact from the developments around Brexit. Demand has so far been good out of the UK and we have seen some growth in exports and imports into the country. It is still very early to be able to judge how things will play out over the course of next year and how demand will be impacted based on this. At the moment it will be business as usual for Emirates SkyCargo.

Photo Caption: Nabil Sultan, Divisional Senior Vice President- Cargo, Emirates SkyCargo