Emirates' top cargo specialist is watching global shipments, from semiconductors to garments, for early signs of recovery.
Air cargo volumes bottom out
Air cargo shipments, a key barometer of global economic growth, have levelled off but the sector faces more pain before it recovers, a senior official at Emirates Airline said yesterday. Ram Menen, the senior vice president of cargo at the Dubai carrier, is watching global shipments for signs of recovery, but the 33-year veteran in the industry does not expect an upturn in shipments until at least the end of the third quarter. "It's still very, very slow but we are rather cautiously optimistic that the process of recovery will start towards the end of the third quarter or the beginning of the fourth quarter," Mr Menen said. "Our optimism comes from the fact that the financial industry has stabilised." Air cargo is often used to predict swings in economic growth because the market moves ahead of sea trade or passenger demand, he said. "With anything that happens, we see it two to three months ahead of time." The growth in global air cargo shipments has been declining since 2007 and finally hit negative territory after the financial services meltdown last October. Since then, shipments have been down 20 per cent from a year ago. "Usually what happens is if the air cargo market slows down ? passenger traffic generally slackens in the next four to five months," Mr Menen said. "But the reason we could not interpret this downturn was because passenger traffic was going way up and its highest growth was in premium traffic. We were looking at that but what was happening was the bottom [of the economy] was rotting." Emirates Airline is an important supply line for the global economy, carrying 1.4 million tonnes of goods in the 12 months that ended in March. Up to 90 per cent of its cargo shipments are transcontinental, from flying garments from the factories of southern China to New York, or carrying Ethiopian flowers to Amsterdam. Another key indicator for the recovery of the global economy would be a resurgence in the car industry, including transporting parts by air, which makes up roughly 20 per cent of Emirate's freight business, Mr Menen said. The company's air cargo wing has introduced a hiring freeze and is waiting to see signs of recovery before launching new freighter services to South America to cater for the cut-flower trade in Colombia, Brazil and Ecuador. "Flowers are a very high growth market," Mr Menen said. "Right now we are watching closely to see which way things are heading." Despite the slowdown, the airline's cargo results for the year increased 9.8 per cent over the previous year, boosted by bigger aircraft and additional routes. The result helped increase revenue by 14.8 per cent to Dh7.7 billion (US$2.09bn). Mr Menen said the results were well below early expectations but pleasing, given the steep drop in world trade late last year. The airline does not expect a full recovery in air cargo for another three to five years. "We're watching the consumer indices, housing indices and business confidence surveys," Mr Menen said. Emirates, the largest carrier in the Arab world, operates a fleet of nine dedicated freighters and more than 120 wide-bodied passenger aircraft that also carry freight. Included in the fleet are seven Boeing 747s leased from TNT and Atlas Air, and two new 777 freighters. It plans to receive the first of five of Boeing's new stretch variant of the 747, the 747-8, within two years, and another two 777Fs are due to arrive in 2013. Emirates also has options for an additional five 747-8Fs and four 777Fs, and recently sold three smaller Airbus A310 freighters to Kuzu, a Turkish cargo carrier. email@example.com