Freight frontiers

It represents a formidable airfreight union that, when fully consummated, will be the first of its kind for either carrier and one of the most significant globally.

Ram Menen has headed Emirates SkyCargo since its inception in 1985. On the point of retiring from his position as senior vice president of Emirates’ successful airfreight business, he spoke to Australian Aviation about the potential the newly-formed alliance holds for SkyCargo.

“We are very excited about our new relationship. Our teams are working extremely well together,” Menen said, adding that the same chemistry that has been evident in establishing the passenger alliance is equally prevalent in the development of the airfreight alliance.”

Working well

“We are now 23 days into the operation and it’s been working extremely well,” he added.

Already Emirates and Qantas are exercising their partnership on services approved by the regulatory authorities. SkyCargo clients initially have access to 28 destinations on Qantas Freight’s network including 10 ports in Australia and eight destinations in Asia.

Exemplifying the value of the alliance in Europe, Emirates is providing airfreight capacity into and out of Frankfurt on behalf of Qantas following the Australian carrier’s withdrawal from the market to help stem its losses in the non-UK market.

“We are already feeding onto Qantas services through Dubai and in Australian ports through Qantas and Jetstar,” Menen said.

This is the first such broad-ranging alliance for Emirates. Those that already exist – with long-time partners American Airlines, Continental and United – are based solely on interlining.

“We are optimising our distribution capability with those airlines.”

Optimisation of distribution synergies is the number one strategy for SkyCargo and it plays the fundamental role in the Qantas relationship.

“It strengthens our distribution network. Our core competency is distribution. The more capacity we create the more distribution we make. That adds strength to us.
“The increase in network is very important. What we bring to the customer is our ability to provide service on a wide network. It gives Australian customers more reach around the world than what they had before, both inbound and outbound. It brings a lot more new markets for Australian customers.”

On the passenger alliance, some observers have questioned the benefit of the partnership for Emirates, but its access to the Australian and domestic markets make it a wholly viable proposition for the Dubai carrier.

“More than access to the domestic market, we get access to the Pacific rim,” Menen said matter-of-factly, expressing the value of the Qantas network to Emirates’ airfreight network.

“More than access to the domestic market, we get access to the Pacific rim.”
Ram Menen

“There are a lot of areas we are exploring. It’s early days and there are a number of regulatory approvals needed in certain areas,” Menen explained, adding the trans-Tasman and Singapore markets remain of great interest but thus far are outside the current round of approvals.

Unable to elaborate further as negotiations continue around potential market opportunities, with the passenger and airfreight businesses of both carriers completely separate, there is scope to develop airfreight synergies away from the current passenger services, including on trans-Pacific services where Emirates is known to be looking to expand under the umbrella of the alliance with Qantas.

While Menen said: “We are not looking at this stage to trans-Pacific though it is subject to regulatory approvals”, a trans-Pacific product would provide the airline an around-the-world product that would be invaluable in terms of connectivity with its own-branded services and with Qantas.

Regardless of whether airfreight opportunities migrate separately from the passenger network, the synergies arising from the complementary development of passenger services are intrinsically better, where belly-freight capacity can be shared in the same manner passenger seats are shared between them under codeshare distributions.

Integration

The integration for airfreight services between the two airlines, Menen said, is a relatively simple proposition.

“The systems operated by each (airline) are open systems and are non-legacy based. This makes it easy to create an interface between us. From where I stand we are already very well aligned.”

Qantas Freight is looking ambitiously to the possibilities coming from the alliance and integration of freight systems with Emirates. While subject to regulatory approvals, through the over-arching agreement between the two carriers Qantas has said its freight network, initially using belly-freight capacity in passenger services, will expand to include 65 Emirates destinations in Europe, the Middle East, North Africa and Asia, connecting with Qantas’s network of 80 destinations in Australia through interline arrangements.

The Australian carrier sees the introduction of seamless service between domestic and international networks being unmatched in its benefits for Australian exporters and importers wishing to reach markets in Australia.

Qantas Freight’s international reach will be improved later this year with the delivery of a 747-400ERF, which it said will greatly improve the economics of pure-freight services. Qantas Freight already has a five per cent share of the growing China-US market from its hubs in Shanghai and Chongqing, strong presence on the trans-Tasman market and a dominant presence domestically, largely thanks to its take-over of Australian air Express last year.

Integrating airfreight operations is a far easier proposition than for passenger services, where manifold products from lounge access to frequent flyer status tiers present complex challenges for airlines when aligning their services.

Geocentricity

The strengths of Emirates’ proposition have become evidently clear during the sustained downturn the airfreight industry has suffered in recent years.

Bucking the stubborn negative trend in airfreight demand in recent years, SkyCargo carried 1.8 million tonnes of freight in 2011/12, representing an 11.8 percent improvement over the previous year’s 1.7 million tonnes. Cargo revenue, valued at US$ 2.4 billion, contributed 17.4 per cent to the airline’s total revenue.

“One of the advantages we have is the geocentricity we enjoy. We were more insulated than some of our colleagues in the industry. Our dependence on China was a lot less than Cathay or Korean, and Africa has been steady for us,” Menen said.

Emirates boasts that from its strategic location at the crossroads of Europe, Africa and Asia – more than one and a half billion customers can be reached in less than eight hours, hubbed through its Cargo Mega Terminal, which can handle more than 1.2 million tonnes of cargo a year.

The success of its global airfreight business has seen it continue to expand in the Australian market, Emirates now offering 14 flights a day between Dubai and Australia, in addition to four dedicated 777 freighters operated each week.

“As we put more capacity (into Australia) it is taken up very quickly.”

Menen said inbound to Australia Emirates is carrying strong volumes of industrial equipment, machinery and hi-tech shipments, while outbound is predominantly perishables.

“The market continues to grow for us.”

And, when approved, the market will grow further through uplift opportunities on Qantas-operated codeshare services in Australia and the Pacific.

SkyCargo’s current fleet of eight 777 freighters (with another five on order for delivery in ……..) and two 747-400ERFs, which together serve 43 destinations as pure-freight operations, is unlikely to change in the foreseeable future. Menen believes the capacity is right for the current global market, as is the mix of aircraft: “The fleet composition will stay the same.”

“Our dedicated freighters are more supplemental to the passenger fleet; feeding into and out of the belly-freight capability of the passenger fleet.”

Emirates’ dedicated freighters uplift around 30 per cent of all airfreight, while the majority of volume is carried aboard passenger aircraft on scheduled services.

Innovation

Innovation has always been an important aspect of SkyCargo’s customer proposition. In April this year the company became the first carrier to implement Electronic-Air Waybill (e-AWB) shipments under the industry’s recently-ratified multilateral e-AWB standard.

Emirates SkyCargo has worked towards the adoption of e-freight with its customers and also collaborated with industry to expand the adoption of electronic waybilling across the industry as a whole.

Since 2011 the carrier has put in place more than 120 bilateral e-AWB agreements with its customers to ensure a smooth transition from paper Air Waybills to electronic record formats.

“We have observed heightened interest in e-freight implementation industry-wide – we are at an important junction for the cargo industry, with the future looking bright for e-freight adoption,” Menen said.

“With increased flexibility in the e-AWB process as a result of the multilateral e-AWB agreement, industry players are finding it easier to enter into the e-AWB environment and manage processes electronically with their customers. Emirates SkyCargo will continue to remain at the forefront of these developments,” he added.

In addition to working with airline staff and customers to support the industry reaching its target of 100 per cent e-freight penetration by 2015, Emirates SkyCargo has involved industry stakeholders in the e-AWB adoption process, including customs, handling agents, freight forwarders and relevant government entities.