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Emirates expands its horizon after 'first of a kind' Cargolux deal

EMIRATES SkyCargo's recent deal with Cargolux should not have been the surprise it was as the two carriers have a long working relationship, reports London's Air Cargo News.

The two companies first started working together in 1988, just three years after the Dubai-based airline was launched, said Emirates vice president Nabil Sultan.

Since the 1980s, they have worked together to a greater or lesser degree depending on market conditions, eventually leading to the "first of a kind" space sharing deal announced at the Air Cargo Europe event in Munich.

The real advantage of the partnership is it allows the carriers to expand their network and bring in new cargo streams without having to add to their freighter fleet.

"This recent agreement is vitally important for us," Mr Sultan said. "The basis for this agreement is the fact that it gives us this huge ability in creating feeder traffic using their freighter operation.

"Cargolux is a big airline - it is specialised in cargo, it has the right credentials with 26 freighters and more than 70 destinations.

"For us for to be able to create or use their network, their freighter operation to create a feeder traffic for our passenger belly is quite important," he said.

Belly capacity represents 70 per cent of Emirates SkyCargo's total space and this per centage is increasing each year as its passenger fleet expands.

Therefore, being able to bring in more cargo from more areas of the world to fill this space is a key advantage of the agreement, Mr Sultan told Air Cargo News.

In turn, Cargolux will gain access to more than 150 destinations around the world.

Looking ahead, Mr Sultan says it is too early to confirm which services Emirates SkyCargo will take space on, but there is at least one obvious operation where efficiencies can be created.

"The benefit to us is that they operate to key production markets using their freighters and that's where we don't have sufficient capacity.

"Take some of the big production markets in the Americas where we have limited capacity, a good example is Atlanta - we have one frequency per week and they run a daily operation.

"For us it does not make sense that we continue to operate there. I'd rather have a block space on their freighter, which I can sell and control 100 per cent and probably withdraw my capacity out of there and put it somewhere else where I can use it more efficiently.

"They are looking at several opportunities in our network, for instance they are looking at India where currently we have a huge capacity, Kuwait, Jordan, regional Middle Eastern flights, some of the African flights where they have limited frequency, we have a daily capacity.

"With Emirates SkyCargo now able to add to its network without extra freighters, this presumably means the airline has no plans to return to the manufacturers for more all-cargo aircraft.

"We don't have anything in the pipeline with regards to freighter operation," Mr Sultan said.

"For us that makes it much more reasonable to have a partner like Cargolux - they have got 26 freighters and are completely open to discussion.

"With their capacity we should be able to create just about enough demand to fill up our passenger fleet.

In fact, as Mr Sultan said, Emirates will actually be returning two of its leased Boeing 747 freighters later this year.

The move means that Emirates SkyCargo will now only operate one freighter type - Boeing 777Fs - while the overall fleet will be limited to B777s and Airbus A380s.

"Having a B747 mix isn't cost effective," he said. "So for us, we would prefer to put the back and if we have a huge need, Cargolux is there as a partner so we can use their capacity.Moving on from its network expansion plans, the carrier will also look to further expand its product portfolio over the coming couple of years.

Over the last six months, the cargo carrier has launched two new products; SkyFresh, which covers the perishables market, and SkyWheels for the luxury car market.

The reason for the addition of more products is that Mr Sultan believes the biggest transition the industry is seeing is how to become specialised in as many verticals as possible because "the days of just moving general cargo are gone".

Said Mr Sultan: "There are a couple of more products that are in the pipeline that we are looking at to see how to create those products and how do we position it.

"We are quite careful - we don't want to just go in there are dish out these products. The key is to really understand the requirement, understand the processes and get the experts on-board.

"It takes a little bit of time but it is worth the effort because once we launch, we know we will have a superior product."In total, the airline will launch three or four new products over the next couple of years, although he will not be drawn on exactly what those products will be.

Another area that Emirates SkyCargo has been leading the industry on is its approach to fuel surcharges.

In 2016, the carrier led the industry in cancelling offering an all-in price, rather than having a separate fuel surcharge.

This year the airline has again led the industry, but this time in separating the surcharge back out.

Mr Sultan said the decision to reintroduce the fuel surcharge was down to shippers. He explained that a lot of the cost associated with shipping is related to fuel and the end customers wanted more visibility on why prices would change.

"While we were trying to create transparency, we were not actually delivering that to the end customer.

"The freight forwarders were happy with the concept because you reduce their work - the staff no longer need to find out what their fuel surcharge is - but when we made life easier for the freight forwarder we made it more difficult for the customer."