Podcast: Emirates’ Nadeem Sultan on cargo growth

Jeff Lee
Hello and welcome to this episode of cargo facts connect, the podcast of cargo facts, the newsletter of record for the air cargo and freighter aircraft industries for over 40 years. I’m Jeff Lee, editor of cargo facts and it’s Friday, the 22nd of March. Last week, the global air cargo industry convened in Hong Kong for IATA’s World Cargo Symposium, in what turned out to be the biggest IATA event ever. I had the chance to catch up with Nadeem Sultan, senior vice president of freighters and cargo planning at Emirates, to talk about his return to the Middle East, Emirates’ perspective of the market, his strategy for the new and converted 777 freighters set to join Emirates’ fleet in the next few years, and more. Listen in.

Jeff Lee
Well, Nadeem, good to see you here in Hong Kong. Let’s just given you know, your rich experience. How are you feeling about the freedom market right now? Now that you’re with Emirates

Nadeem Sultan
I think the freedom market is pretty strong. I think there is an overall lack of capacity across across the industry, I would say when it comes to maindeck. You know, we at Emirates have invested quite a bit now in additional aircrafts additional maindeck freighter capacity, you know, namely to 10 aircrafts that we have on order for conversion to triple seven, three hundreds. And we’re also taking delivery of five new triple sevens from Boeing this year, which are going to replace some of our older triple sevens. But unfortunately, those have been delayed as well. So I think production delays at Boeing’s end. And together with the delays in the conversion program has really put a crunch in the main fader capacity market at the moment.

Jeff Lee
We’ll get into those specifics in a bit, but for the rest of this year, we’re in mid March, but you know, for the rest of the year, what kind of objectives do you have, kind of for growth in the network and, and all that.

Nadeem Sultan
So the first thought was that the year has started up very strongly, you know, we’re we’re seeing exceptionally high tonnage is for this time of the year for, you know, traditional, you know, past years, I would say. So, you know, from that point, perspective, you know, it looks like a promising year for air freight overall, you know, we are, we are forecasting, or we think we probably should expect a growth from one to 2%. Overall in the air freight market this year, we at Emirates are now looking at doing our annual realignment of our network. So in essence, you know, being a combination airline, we’re going to look at, you know, the balance between our belly capacity and our feeder capacity and making sure that both of them complement each other. And at the same time, more planning for new destinations on the freighter side, keeping in mind the new aircrafts that are due to come into the fleet over the coming 12 months, I would say. And that’s an exercise ongoing, and it’s also one of the key reasons why I’m here in Hong Kong this week, is to meet with our strategic customers and partners to see where, you know, in essence, the demand is and which at Wendy’s, they would want us to serve.

Jeff Lee
Yeah. So when you’re talking about the regions and the Os and Ds, how is it different from, let’s say, from last year?

Nadeem Sultan
I think one of the key differences and perhaps not just last year, but over the last couple of years, we’ve seen is obviously the tremendous growth of E commerce, and the uniqueness that that brings, as compared to the typical freight forwarding business. And that’s something that that we’re having to, I would say adapt to. And I think that applies to everybody within the air cargo industry. And it brings certain unique requirements. Also, a bit more stringent requirements when it comes to connection times and transit times to meet obviously, the like, last mile delivery timelines that these customers have with their end customers, with obviously, with cameras are second to none, when it comes to quality and on time performance. So I think, you know, we’re getting a lot of requests around that, you know, where people want to partner with us and be that partner of choice when it comes to this specific product. So this is a new, I won’t say necessarily new but an exciting area that we’re going to be focusing on over the coming couple of years. Right.

Jeff Lee
Right. And and of course, ecommerce being, you know, low density, but but high volume is what leads me to my next question, which is about the triple seven 300 conversions, which are, you know, pretty well suited for that kind of shipment? What’s the latest on the plan for these 10 conversions? Because it things are a bit delayed by people talking about their production delays, but conversion side delays as well. Yeah, what’s what’s the latest and the timeline for for these?

Nadeem Sultan
So so yeah, I have had some delays on the certification process. You know, a number of aircrafts have already been converted in flight test program is ongoing due to the unforeseen circumstances in the Middle East now, that potentially partially is driving some of this delay. We are planning now to hopefully get a confirmation on the STC. So we’re in April in May, as soon as we have that, then our you know, we are set up with our partners, you know, to initiate the conversion program and then it’s an S In six months approximately for the first aircraft to be converted, we have initially earmarked 10 aircraft from our fleet, we have a sizable pool of triples on three hundreds, and we expect more aircrafts would be converted to, you know, in the future, once the initial batch has been converted them, to your point, they’re extremely well suited for E commerce and, you know, maybe not traditional general freight, you know, which makes it, you know, a brilliant aircraft for especially this region, and I was in mainland China and Hong Kong is going to be key mark is where we’re going to look at deploying these assets.

Jeff Lee
Just when you when you said you expect more of you we were talking about Emirates his own fleet, yes. Okay. Okay. And you, you’re still expecting them all tend to be done at the Etihad engineering?

Nadeem Sultan
Yes, Yes. Yeah.

Jeff Lee
Okay. Okay. So I guess you were just kind of waiting for the STC before sending any aircraft?

Nadeem Sultan
Yes, yeah. In essence, the aircrafts are being are being operated as we speak now. But, you know, there are there is a plan that would allow immediate release of those aircrafts and straightaway go into the conversion line, right, to get them converted.

Jeff Lee
So was there an element of, you know, given how strong the passenger market is just you want to keep them? flying passengers as long as you can? Yes. Until you really have to send them Yes. To be converted? Yes,

Nadeem Sultan
yes. And no, absolutely. And we’ve obviously invested in terms of maintenance, etc, for those aircrafts, you know, to be still able to continue to operate them today. We were always Officially, the initial batch was supposed to be delivered last year to us into the converted. But subsequently, of course, you know, on the passenger side, you know, it’s been a tremendous year for Emirates strong growth overall. So there’s a lot of requirements for extra capacity and demand. And yeah, at the moment, those aircrafts are going to continue to fly on the passenger side until such time that the SEC is approved, and that will slowly start phasing them out and bringing them in for the conversions.

Jeff Lee
How tricky has been to kind of balance the contrast and demand between the passenger side and the freezer side? Because actually, in some ways, the delay has benefited Emirates as a whole. Right? Yeah.

Nadeem Sultan
I will say yes, and no, it’s sort of a double edged sword to a degree, you know, the, you know, the delay has meant that on the passenger side, we’ve had more capacity. But equally as a combination airline, we need the freight is through our bellies from Dubai. Yeah. So, you know, and obviously, when we look at flights performance, we look at overall revenue that includes passenger and belly cargo revenue. So, you know, it’s not sometimes like for like, but it’s more of a balancing act that we’re trying to do. And, you know, undoubtedly, you know, based on our future fleet requirements on the freighter side, we know, we’re going to look at a tremendous growth on the passenger side in terms of wide body capacity. And we need to gear up at scale up our capacity on the main air freight aside to ensure that we can feed those values from the I guess

Jeff Lee
the question is, I mean, I’m not even gonna attempt to work out the maxes, whether the company as a whole would have earned more revenue from keeping those airplanes flying passengers or having them converted and earning cargo revenue.

Nadeem Sultan
But, yeah, that’s, that’s a very tricky question, I think. Yeah, apart from the numbers, there are a lot of other strategic, you know, aspects that are that are brought into that equation, you know, that that determined what is in the best interest of the company. And that’s something that that has, you know, that has been done by the Mrs. Management very carefully. And I think we, you know, we’re confident we’ve made the best decision for the business. And equally everybody within the business fully supports. As soon as the conversion line is ready, then we start converting all of these airports to ensure we’re in a good position to feed our bellies from the hip and provide our customers the much needed incremental capacity that they need.

Jeff Lee
So those are you doing those one by one? At least initially? Yes. Yeah. And then, of course, like you were saying, you have five more new triple sevens coming in this year. Now, in the past few years, these new deliveries have basically replaced some of the old and leased frames. Is that still the case right now?

Nadeem Sultan
Yes. Yeah, that will be the case. We’re going to be phasing out some of our four amorosa standard older airplanes. They’re almost 12 years old. Yeah. Which always do from an industry perspective, is not the case. But you know, considering our internal KPI requirements when it comes to on top performance and technical dispatch, reliability. You know, we’re we’ve made that conscious choice to be replace those aircrafts with brand new factory built for ages that are due to be delivered. But yeah, those are going to be like for like replacement. Then on top of that we are currently leasing threesome for sevens on ICMI as an interim solution to, you know, to cater for some of the demand, and then those 10 conversions are going to be a key component. But equally we are also now looking at, you know, future next generation aircrafts in terms of maindeck freighters, whether it’s a triple seven dash eight F, or the A 350 freighter, and we’re looking at both, and we see a need of, I would say a mixed fleet on the freighter side, in terms of, you know, the current triple sound production for eight is the converter, triple seven, three hundreds, which are going to be amazing on certain routes in certain markets. And equally we see, you know, a need for long haul heavy duty freighter that that brings the 110 120 Tomato range. Right.

Jeff Lee
Interesting. Yeah, it’s, I mean, speaking of HDMI, and those seven, four sevens aircraft, which you’re very familiar with? How are those operations working out? I mean, these basically kind of a stopgap until you eventually decide to go for one of the new large pipe party types.

Nadeem Sultan
I think we, I think, from our fleet strategy perspective, amorous has historically always had an element of ACI capacity within its fleet. It brings quite a bit of flexibility in terms of operations, in terms of, you know, making short term schedule changes, all those kinds of things make it from that perspective, it makes sense to always have, you know, some ACI capacity within the fleet. And, you know, if you asked me, you know, I would proceed that to remain the case in the coming years ahead. Those are the incremental features that we’re going to get are just going to help us expand our footprint in terms of opening up new markets, new Oh, Wendy’s, you know, we’re currently flying to 40, free to destinations on we’re envisioning, envisaging to increase that to 70 in the coming five years. And then, of course, you know, key markets where we’re currently present, like, for instance, in Hong Kong, you know, we need to grow more, and we’re going to deploy some of that new capacity into these markets as well to further expand our volumes.

Jeff Lee
Because you’ve got, I would imagine, I mean, I don’t know exactly, but the slot situation is like, the only way you can expand really is to help the capacity.

Nadeem Sultan
Yes, and then we’re we have had a very good relationship with with with with Kong market as a whole, including the regulator and the airport authority. Obviously, Hong Kong is soon going to have a third runway. And that is, you know, from what we understand a lot going to allow for some growth. And obviously, currently with our 36 freighters a week and 21 Passenger Services a week, you know, we are one of the key airline partners out there talking to and we envisage, you know, to be increasing capacity overall. And then over the coming years, you know,

Jeff Lee
great, and, of course, you know, overall, you’ll be very soon you’ll be growing quite, quite significantly. So, lots of exciting developments to come. Yeah,

Nadeem Sultan
it’s really twofold. So, you know, the feats that we’ve briefly mentioned, yeah, so there’s a lot of, you know, aircraft capacity coming in both passenger as well as freighter over the coming couple of years. But equally, you know, we’re looking at really now investing into the future for our air cargo infrastructure in Dubai. You know, in terms of new Air Cargo Terminal and expanding, you know, our current, you know, capabilities. And that’s something that’s that’s going to be a key component as well of Emirates. skycargo is future growth strategy. Fleet is one aspect, and then scaling up and further improving our air cargo handling capabilities in Dubai is going to be something else, volumes as well as technology. We’re looking at a lot of exciting new tech, you know, ai, 3d scanners, a lot of automation and robotics. So yeah, I think, yeah, the typical air cargo warehouses that we’ve known them as over the last decades or so they’re going to change in the coming decade in terms of how they’re going to operate from within those four walls.

Jeff Lee
Good. Well, thank you. And we look forward to seeing the Emirates free to fleet change as well, in the coming years, so thanks. Thanks again, did he not?

Nadeem Sultan
Thank you very much, Jeff. Yeah, now it’s gonna be an exciting time. And yeah, as I mentioned, that’s absolutely, you know, one of my key drivers of me being extremely happy to come and join the Emirates team is really we’ve got a tremendous, you know, plan in terms of future growth. But, you know, obviously, you know, top top quality airline and that’s something we’re gonna, you know, keep a key key focus on, you know, we want to ensure currently we’re achieving 99% Plus Teflon is booked across our network and you know, that’s something we never will compromise on. So our growth is going to be aggressive, yet controlled controlled to ensure that we remain at a service level that we’re delivering today. But definitely exciting times ahead for for Emirates skycargo no doubt..

Jeff Lee
Yeah. Good luck going forward.

Nadeem Sultan
Yeah. Thank you very much Jeff.

Jeff Lee
That was Nadeem Sultan, senior vice president of freighters and cargo planning at Emirates, joining me in Hong Kong. And that’s all the time we have today. For more coverage of the freighter aircraft market, visit cargo facts.com. Thank you very much for tuning in, and join us again next time.