A look back at ACU's Q&A with Ram Menen

Twenty years ago, Air Cargo Update took a bold step to enter this niche industry publication. It was a remarkable journey of ups and downs as air cargo and its supply chain swung back and forth to the demands of the day punctuated by today’s unforeseen impact of the Coronavirus pandemic. To mark our historic journey, we’ll bring you some of our best features from the past two decades, the movers and shakers with their insights and decisions that helped shape today’s air cargo industry.

In this edition, let’s look back at our Q&A with Ram Menen, the Indian air cargo expert who helped establish Emirates SkyCargo from the ground up to a global powerhouse in the air cargo industry.

Emirates SKYCARGO aims for greater global market share

Ram Menen, Divisional Senior Vice President of Emirates’ Cargo Division, shares his views on the remarkable growth in air freight business over the decades and how quickly the company has adapted to the needs of an evolving market to stay ahead of the game.

It takes more than just a brand name to flourish in today’s highly competitive global market place. Innovation and proper strategies lead the road to success.

Take Emirates SkyCargo, for instance. Unlike many airlines where cargo is seen as just supplement to commercial aviation business, for Emirates it is a well-run revenue spinner with promises for more growth.

And with an industry heavy-weight like Ram Menen at the helm, Emirates SkyCargo has been quick to adapt to the needs of the market and has differentiated itself from competition. Menen who has been with the company since the airline’s inception in October 1985 is currently the Divisional Senior Vice President of Emirates Cargo Division.

Described by his colleagues and friends as dynamic and open hearted, he is a man of many abilities. A face easily recognizable in the local media, thanks to his outgoing nature and capacity to grow beyond his professional duties, Menen is a public man and calls interpersonal skills his forte.

However, taking Emirates SkyCargo to where it is today has not been easy according to Menen who worked so hard to lead the company to greater heights with his deft management and interpersonal skills. And this is indeed proven by the company’s impressive growth figures.

This year, Emirates Group, mainly comprising Emirates Airline, Emirates SkyCargo and Dnata along with subsidiaries, announced a net profit of AED 5.9 billion (US$ 1.6 billion) – a 43 percent increase on last financial year’s figures, despite a challenging business climate.

Cargo revenue contributed 17.4 percent to the airline’s total transport, up by an impressive 27.6 percent compared to last year to a record AED 8.8 billion ($US2.4 billion). Cargo tonnage increased by 11.8 percent over the previous year to 1,767 thousand tons.

Keeping pace with evolution

The old saying ‘evolve or face extinction’ has never been truer.

Menen reminisced witnessing a complete transformation in the way the industry functions since his kick-off days. He believes that the revolutionary changes in the cargo industry began in the 1980s.

Since then, globalization, outsourcing and information technology have enabled many organizations to successfully operate solid collaborative supply networks. “The change really started in people’s mind set. They now have a better understanding of what the industry is all about. Earlier airlines and freight forwarders were two different entities. The Nineties has to its credit the awareness and realization of supply chain integration and that we are all partners in the same industry,” he explained.

Thirty years later, the processes and technologies are still evolving. “Today, it is all about how quick and cost efficient a supply chain is. And technology to a great extent has driven this at an astounding pace,” he stated.

Truly, the ability to capture, migrate, integrate and facilitate the intelligent analysis of data is akin to the invention of fire. This is what will separate the companies who can walk upright from the ones that will be stuck in the tar pits of slow response. “The advent of the internet has made life more real-time and the interaction between various elements in the Supply Chain itself has become more integrated,” added the tech savvy Menen.

According to Menen, globalization and the proliferation of multi-national companies have also contributed to the development of supply chain networks.

Menen explained, “Globalization offers tremendous opportunities to companies of any size that can successfully provide or source products and services in dynamic markets. Today, whether or not a company produces or sources outside its home country, it is often competing against global organizations. And, to survive and thrive under these conditions, they need to develop efficient and effective global supply chains that can ensure a smooth supply of goods anywhere in the world.”

In addition, various aspects of the supply chain process such as procurement, production, manufacturing, inventory management, transportation, etc., have undergone a total concept change. For example, the manufacturing industries have now become ‘demand driven’.

Growth factors

Basically, a lot of things worked in synergy to pick up cargo volumes. According to Menen, Emirates SkyCargo has achieved its success by a careful combination of latest technology, fleet composition and a global network covering over 113 destinations across 66 countries with multiple daily flights via Dubai to most destinations.

Technology such as end-to-end IT cargo management system Sky Chain, which gives customers a range of business logistics technology solutions, including up-to-the-second status reports on consignments, from booking through to final delivery is a key factor adding to its success.

Customer focus has also been a major factor. Menen believes it is important to get new customers each day. However, the majority of a company’s success is due to repeat business.

Undoubtedly, a company captures a larger market share by understanding its customers and providing them with a consistent positive experience. He endorsed this saying, “On-time and efficient dealing with customers is the mainstay of our business and we are only building on that.”

Plus, last year saw the airline increase its overall capacity available on its fleet in addition to continued route expansion and that has naturally drawn more business through us. In addition to serving all points on the Emirates passenger network, during the year, Emirates SkyCargo introduced four freighter-only destinations to Almaty, Bagram, Campinas and Erbil. “Growth of Dubai itself has also played a pivotal role in creating a large cargo market,” he noted.

Dubai & Emirates enjoy symbiotic growth

Menen acknowledged that Dubai and Emirates’ growth have been symbiotic where both have catalyzed one another’s growth. “You see, the relation is symbiotic where both Emirates and the world-class city of Dubai benefit each other. While Emirates has played an important role in creating a nexus between global transport and Dubai as a multi-modal hub, the growth of Dubai itself has also helped in creating a large cargo market.”

Truly, Dubai has undergone tremendous growth over the years. Today, it enjoys its favorable place as a significant player in international trading and transport logistics. This growth is a result of the Dubai government’s strategy in developing sectors that have been the key contributors to economic growth, including transport and logistics.

Dubai International handled 187,905 tons of international air freight in May this year. Annual freight traffic in 2010 was 2.27 million tons, compared to 1.93 million tons in 2009, an increase of 17.7 per cent.

The combination of rallying tourism and Dubai’s established role as a trading centre linking economies in the Far East, Europe, Africa and North America is also a key advantage for its aviation industry and economy.

The Emirate’s geocentric location is another plus allowing traffic to be easily routed either east-west or north-south.

“An estimated 5.8 billion passengers reside within an eight-hour flight time and Dubai is on the doorstep of two of the most dynamic markets in the world – India and China, which holds

great potential for us as for other air carriers in the region. And, Emirates Airline has largely been successful in tapping this opportunity,” said Menen.

In addition, the government’s support of businesses and efficient customs facilitation add to Dubai’s appeal as a prime transit and re-export hub, handling an average of 70 per cent of air cargo in the Middle East per year.

This dominance is expected to continue, as the International Air Transport Association (IATA) forecasts that the UAE will be the sixth largest in the world in terms of international freight, with a projected 2.75 million tons handled by 2014 and Dubai will play a central role in this growth.

However, Dubai’s success is exemplified by the efficiency of Emirates’ operations. Emirates’ profits have been sufficient to pay for all the investment in its fleet and repay its loans over the past decade. Moreover, contrary to the widely held belief, Emirates does not receive government support through subsidies or other financial interventions, but has in fact paid out annual dividends to the government of Dubai totaling US$1.6 billion since 2002.

Challenges

Though 2010 was a good year for the company, it had to deal with some obvious problems to see itself permanently in green. Considering the unstable political climate and business environment in the second half of 2010, the carrier was able to able to swiftly adjust flight schedules, redeploying aircraft to balance the network and optimize revenue.

“Security also has been a primary concern for us. As a truly global and major stakeholder in the airfreight market Emirates SkyCargo is proactively working to see how our experience can positively contribute towards making airfreight movements safer today and in future,” said Menen. “Suffice to say; in this regard we are fully compliant with global screening and reporting protocols with regards to moving freight.”

“Besides, environmental policies also add to our costs,” he added. “The biggest challenge however remains to be high fuel prices,” he admitted. The first four months of the year had seen $280m added to the carrier’s fuel bill.”

Crafting success

“Nevertheless, despite challenges we have been able to achieve ambitious expansion and growth plans coupled with excellent customer services and high profits,” Menen noted.

With plans to increase the number of routes it serves, Emirates is looking to schedule more flights to destinations in North and South America, Australia and Asia. South Asia is a potential market for Emirates – Menen believes, the future lies in the growth potential of emerging markets such as India and China.

“We will see a shift into the consumer markets of India and China, which are strengthening with a new set of consumers who are young with a disposable income. India has tremendous potential for investors and excels in certain sectors such as IT. India has the advantage of language whereas China has a more disciplined labor force. It will be competitive between the two countries but liberalized trade agreements may change future dynamics,” he said.

In 2011-12, Emirates expects delivery of 21 new aircraft, including six A380s, 13 Boeing 777s and two Boeing 777F freighters. Since 1 April 2011, Emirates has received one Boeing 777 bringing its current fleet as of May 2011 to 153 aircraft, including eight freighters.

This will in turn grease Emirates SkyCargo’s global ambitions as it uses belly-hold capacity in Emirates’ 145 passenger aircraft as well as main deck capacity on its fleet of eight freighters, featuring three Boeing 747-400Fs, two 777Fs, two 747-400ERFs and one 747-400SF. However, these expansion plans will have to be measured against market conditions, with the aviation industry particularly susceptible to fluctuations in fuel prices and economic sentiment.