Overheard at Cargo Facts EMEA: Leadership in conversation

Freighter market analysis; the most recent intelligence on the conversion market, and anticipated conversion orders for the year; sustainability practices and insights on current trends: All these and more were topics for discussion at the recent Cargo Facts EMEA event in Dubai, where industry leaders shared their perspectives on the factors fueling the freighter industry. More than 200 executives gathered in Dubai to learn and strategize how to incorporate the latest freighter developments into their own operations. While the Cargo Facts team immediately shared breaking news from the event, it now offers a glimpse of the conversations that took place around the industry issues explored. What are the concerns of the leaders who came together for Cargo Facts EMEA? What follows are some highlights from the event. E-commerce grows as market settles [caption id="attachment_56861831" align="alignright" width="450"] The opening session at Cargo Facts EMEA 2023. (Photo/Cargo Facts)[/caption] The largest drivers of market demand in the air cargo industry are now e-commerce and express shipping. But after the historic pandemic-spurred growth of the past couple of years, air cargo saw a significant decrease in volumes in 2022. “Over the past year — and especially the past three years — we have proven that this sector and industry are relevant, and there is high demand for speed and agility,” Saudia Cargo Chief Executive Officer Teddy Zebitz said during a panel in Dubai. “E-commerce is significantly growing for us and everybody else.” “E-commerce is maybe the bridge that will make this cyclical downturn not as hard as in the past,” he said. “For those who have been around since 2008 and 2009, we can talk about a real decline, and that’s not what we’re seeing at the moment. “With the ratio of increase of e-commerce, I’m fairly optimistic on behalf of our sector. What we’re seeing is double-digit growth, and it doesn’t seem to slow down.” Drones expand presence Drones in recent years have elevated their platform and capabilities from last-mile to conventional operations, enabling the unmanned vehicles to move air freight anywhere in the world with a smaller carbon footprint than traditional freighter aircraft. Drone execs John Hermann Leon, Wingcopter head of corporate development and strategy; Svilen Rangelov, Dronamics co-founder and chief executive; and Ed De Reyes, Sabrewing Aircraft chairman and CEO, conversed on the benefits drones can provide to the industry. “Our aircraft takes off like a helicopter, but it does not hover; it flies like a fixed-wing aircraft,” de Reyes said of the Sabrewing Rhaegal-A. “We’re even more fuel-efficient than any cargo aircraft of the same payload and size. We use about 70% less fuel than a SkyCourier.” [caption id="attachment_56861832" align="alignleft" width="450"] John Hermann Leon, Wingcopter head of corporate development and strategy, and Svilen Rangelov, Dronamics co-founder and chief executive. (Photo/Cargo Facts)[/caption] Meanwhile, in the last-mile segment, Wingcopter’s 198 drone was designed to support rural markets that do not have the infrastructure of dense populations to support e-commerce trade. “Once you go outside of big cities and into rural areas, we see a significant underserved category, because they don’t have the customer density whereby conventional logistics solutions would be able to serve them well enough,” Hermann said. “This is where we really come in because, with our delivery drone, we enable the same-day, instant delivery of goods to small retail stores, but also to the end consumer in a more efficient way.” From a sustainability standpoint, the drone carbon footprint is smaller than conventional aircraft. However, some drones are powered by fossil fuels while original equipment manufacturers (OEMs) continue to seek carbon-neutral alternatives. Dronamics powers its Black Swan drone with the Rotax piston engine, which burns conventional jet fuel. But, Dronamics has also been exploring alternatives to become carbon-neutral and recently formed a partnership with Zero Petroleum that could provide a solution. “If you want to fly to remote areas, you have to use fossil fuels, but at the same time, tomorrow there will be a catalyst here,” Rangelov said, referring to Zero Petroleum. “We have a partnership with them because they have found a way to produce 100% synthetic gasoline.” ACMI, charters play to strengths Narrowbody and widebody operators at the event agreed that there have been no major, adverse setbacks to operations or revenue since the market began its downturn last year. “This isn’t the first time that we’ve seen a cargo market dipping down or rising up,” Air Atlanta Icelandic Chief Executive Baldvin Hermannsson said during a discussion on ACMI and charter markets. [caption id="attachment_56861833" align="alignright" width="450"] Air Atlanta Icelandic Chief Executive Baldvin Hermannsson and Iman Marco, CEO and managing director of World Cargo Airlines and MENA Cargo Airlines. (Photo/Cargo Facts)[/caption] “Air freight is cyclical,” he said. “We always try to take a long-term approach to everything that we do — whether it’s how we work with our customers or how to plan our fleet. I would say the current softening of the market hasn’t really affected us at all.” While aircraft utilization may be slightly lower, Air Atlanta Icelandic’s freighters are all “locked up on long-term contracts” and the carrier has no availability until 2024 or 2025, Hermannsson added. The charter market also appears to show signs of stability amid market normalization, and has thrived in the e-commerce sector. Iman Marco, CEO and managing director of World Cargo Airlines and MENA Cargo Airlines, said that in the past year, his airlines — part of the Asia Cargo Network group — have seen a surge in e-commerce. The group recently entered the Middle East market and operates flights across Southeast Asia. “There has been an increase in demand for charter services since COVID started in 2020,” Marco said. “I think all operators will know that we have seen a serious surge in the charter services required and the demand for that. “This is because of the growth of e-commerce. We’ve seen the demand increase all the way up to the Russia-Ukraine war. That’s when we started seeing an increase in operating costs and other challenges,” he added. Feedstock supply is limited Four leasing industry leaders shared similar views on limited feedstock supply for twin-engine narrowbody and widebody freighters during a talk on conversions. “Where do we get our supply from?” Airwork Ireland Managing Director Eamonn Cronin asked. “It’s either from other lessors, from the OEMs, or from airlines as the passenger aircraft come off lease or are getting older.” New technology is needed to increase the delivery and efficiency of new production passenger aircraft to increase feedstock numbers, he said, adding, “When you look at the 737 Classics, they are getting older and probably less reliable, so we do have to re-fleet.” [caption id="attachment_56861847" align="alignleft" width="450"] Eamonn Forbes, chief commercial officer of Titan Aviation Leasing, and Derek Paterson, vice president of EMEA sales at Aero Capital Solutions. (Photo/Cargo Facts)[/caption] Eamonn Forbes, chief commercial officer of Titan Aviation Leasing, agreed on the need to replace older aircraft, as Boeing expects the global freighter fleet to grow by up to 50%. “With 2,200 freighters in the world today, Boeing is forecasting that it will increase to about 3,200-3,300 freighters by 2040,” Forbes said. “So when you factor that in, plus the retirements that we’re seeing with MD-11Fs, the Classics, we would share Eamonn’s view on a well-functioning market.” Derek Paterson, vice president of sales in the EMEA region at Aero Capital Solutions, said the cause of limited feedstock supply for narrowbodies is not only the surge in demand during the past two years, but also production slowdowns for the 737NG and A321 programs. “If you take a look back twenty years — your typical ideal freighter conversion point — 2003 was probably the lowest point in production on the 737NGs, so it’s not surprising that right now there are going to be fewer aircraft. Another factor is the delays with the 737 MAX and the A321neo leading to passenger airlines holding on to their aircraft and requesting lease extensions as traffic recovers, Paterson added. Another factor is the delays with the 737 MAX and the A321neo leading to passenger airlines holding on to their aircraft and requesting lease extensions as traffic recovers, Paterson added. Partnerships prove vital role in Africa Africa is an emerging market that will require the strategic alignment of trade agreements between countries and partnerships among carriers, logistics companies and freight forwarders to develop its potential. “There have been some really good developments in the policy space,” Kenya Airways Head of Cargo Commercial Peter Musola said at the event. “The African Union has instituted a couple of interesting initiatives,” he added. “One of them is the Single African Air Transport Market (SAATM), and then we have the African Continental Free Trade Area (AfCFTA). These two initiatives are quite pivotal in terms of opening up Africa to trade amongst itself.” The SAATM agreement paves the way for open skies between countries in Africa, while the AfCFTA aims to eliminate trade barriers and boost intra-Africa trade. Hamdi Osman, chairman and CEO of U.A.E.-based startup SolitAir International, expanded on the role of his new carrier, while voicing support for the effort to strengthen partnerships between airlines and countries in the region. [caption id="attachment_56861849" align="alignright" width="450"] The Africa panel at Cargo Facts EMEA 2023. (Photo/Cargo Facts)[/caption] “SolitAir will never — as long as I am still alive and managing it — be more than a narrowbody aircraft operator,” Osman said. “We want to be a neutral airline that works with every integrator and with all the airlines. Everyone needs that middleman, because we see a gap in the market, especially in Africa, the Middle East and the Indian subcontinent.” Osman stressed the importance of teamwork, saying individual efforts will not yield the required results to build a solid airfreight infrastructure within Africa. “Everybody’s trying to work alone,” he said. “In Africa, you cannot work alone. It is going to cost you a lot. You can pay a lot and you’re still going to come up with nothing on the other end.” Astral Aviation Chief Executive Sanjeev Gadhia has embodied this approach, enabling the airline to expand its footprint while opening more trade lanes and partnerships with countries and operators in Africa and the Middle East, such as Astral’s recently announced memorandum of understanding with Etihad Cargo. “The relationship with Etihad actually went one step further, where we would actually commence flights from Nairobi (NBO) to Abu Dhabi (AUH),” Gadhia said. “We will do this by April, and the plan is that half of Astral’s capacity will be taken by Etihad on the NBO-AUH sector for cargo beyond AUH. Likewise, on the return, Etihad will feed Astal’s network into AUH.” With new agreements in place among operators both within and outside the African continent, Astral and Kenya Airways are paving the way for Africa to be recognized as an emerging market globally. This could encourage more African countries and their airlines to participate in the air cargo trade. Gadhia said he anticipates more African entrants to the freighter space. “We need more freighter airlines in Africa,” he said. “If you look at the size of the continent and the number of cargo airlines, there are very few of us. We’re seeing some of the national airlines getting freighter aircraft, like Air Tanzania.” About thirty-five African countries have signed on to the SAATM, but the continent will progress as the agreement gains momentum. “We are hoping to get to fifty-two or fifty-four,” Kenya Airways’ Musola said. “Once we get at least 98% of all countries in, then I think this will be a fantastic game-changer — not just for trade, but for air cargo in Africa.” Cargo Facts Asia, the essential event for stakeholders in Asia, will take place in person April 17-19 in Singapore. Register today.

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