Need to increase belly capacity over freighter capacity

Published: Sunday, April 17, 2016

On the 6th edition of the Air Cargo 2016 recently held in Mumbai, Air Cargo Update caught up with Rainer Muller, VP (Commercial), Saudia Cargo on what the future holds for the freight forwarding industry. Excerpts from the interview:

In a recession-hit global economy, what are the key challenges the air cargo industry is facing? How is Saudia Cargo taking on this challenge?

The key challenge for the global freight market is the increase in belly capacity over freighter capacity which is evident by the fuel price decrease causing yields to decline, with the sole exception of markets like India, where volumes continue to grow.

What’s been your year-on-year (yoy) growth over the past five years and projections for the next five?

Globally, despite recession, the freight market has been growing by eight to nine per cent, but in India the average growth rate has been much higher, almost 12 to 15 per cent and that’s a good sign for us as well. We expect a moderate growth the next five years considering economic factors.

How is the African market shaping up for Saudia Cargo?

Africa is still one of our prime markets where we operate 25 destinations, out of which seven are freighter destinations. Volumes are growing, yet imports into Africa are impacted by two main factors: Devaluation of the US dollar and resource price shifts, implying a liquidity crisis and less buying power in the African market. Yet, there is still growth in Africa.

The market for perishables must be good?

Yes, we see a very stable, positive development in exports from Africa. We are the leading exporter of flowers from Nairobi. In our case, export of perishables from Kenya, South Africa, Egypt and Sudan also remain strong and stable.

From India, what category of goods fetch you the maximum business?

There are three categories (General Cargo, Pharmaceuticals, Perishables) and they are listed starting from the highest maximum business: General Cargo, which is mostly garments, Pharmaceuticals, a very important growing segment, and Perishables, including meat.

You do business in so many markets, which markets pose less challenges?

We have in place what we call a ‘local sales strategy’. We customize our sales strategy to the local market conditions. We have GSAs (General Sales Agent) and we feel this model is the right model for us. A lot of our GSAs are dedicated agents, meaning we can provide them specialized training in order to help them bring quality service to our customers here. We consider all markets we operate to pose challenges but, unfortunately, China is not as attractive as it used to be.

Any plans to ramp up in India?

Presently, we are well covered in India with eight offices. We will grow as per schedule.

How is e-commerce going to change the airfreight industry?

E-commerce, undoubtedly poses a big challenge for the airlines and the forwarding industry. Personally, I also see in it a big risk. As we observed in the 80s, there were these so called ‘express courier agents.’ They started by using the capacities of the airlines, but when they reached a certain volume, they decided to run their own operations. There are already signs that classified marketplaces, like Amazon in the US, and Alibaba in China, are getting into this space. This is going to pose a big challenge to the air cargo industry, as we have to now tailor products specific to their requirement since in the long-run they are going to use our capacities. We cannot sit-back and relax. We have to think mid and long term on this.