Canadian Shipper

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Pushing East


Air Canada is pushing further east. The beginning of November marks the start of new services from Toronto to Dubai and Delhi. Flights to the Indian capital were scheduled to commence on November 1, followed by the launch of the Dubai route two days later.
The airline has operated flights to India before, but with stops in Europe. Dubai is a new destination for it altogether. Both are served non-stop, using the carrier’s brand new Boeing 787-900 Dreamliners, which offer better fuel efficiency and range than planes with similar seating capacity, as well as improved cargo carrying capability.
“These are great opportunities from both a passenger and cargo perspective,” comments Vito Cerone, director of marketing and sales, the Americas of Air Canada Cargo. At this point he is not sure how much cargo the airline will be able to carry to Dubai, given the combination of a new aircraft and a new sector.
“We will have to see how much cargo we can load, how much passenger baggage there will be on the flights, but I am sure we can get seven to eight tons on the plane,” he says.
With little head-on competition the new route offers the prospect of juicy yields. The aviation agreement between Canada and the United Arab Emirates grants six weekly flights to airlines from each side. At the eastern end, those are split evenly between Dubai-based Emirates and Etihad from nearby Abu Dhabi.
Air Canada starts with three weekly frequencies too but is looking to step up its presence later on. “With international destinations the goal is always to try to gear up as much as possible,” Cerone says, adding that ultimately this should be daily flights.
With limited direct lift to Dubai, Air Canada will go after high yield traffic like pharmaceuticals for the new route. “We always try to focus on premium traffic. At the end of the day, I have seven to eight tons per flight. I don’t have 30 tons available,” Cerone says.
Shippers who cannot or will not pay a premium to get their cargo flown to Dubai have ample choices of indirect routings. Emirates moves some of its traffic from Canada over U.S. gateways, where it operates a mix of passenger and freighter flights, notes Ashok Thomas, chief executive officer of Global Supply Chain Logistics, a Toronto-based forwarder with strong ties in Dubai, where Thomas worked in senior positions in the logistics arena before moving to Canada.
Likewise, other Middle Eastern carriers like Etihad, Qatar Airways and Saudi Arabian Airlines fly from their respective home bases to Canada as well as several U.S. points and deploy freighters on some U.S. routes.
“A lot of Canadian business is going out of the U.S.,” says Thomas, adding that some airlines quote two rates for shipments bound for the Middle East – one for smaller shipments on direct flights and one for larger consignments on an indirect route.
Additional lift to the Middle East comes courtesy of a host of European airlines. “Every European carrier competes in that market, given the yields to Europe,” comments Joe Lawrence, president of airline general sales agent Airline Services International.
“It is a very competitive market,” he adds. “Competition is tougher than it ever has been.”
Shippers who need freighter capacity have no direct options to get their cargo to the Middle East, but again they can avail themselves of indirect routings.
“There is maindeck capacity in Canada, both by European and Asian carriers. This is not a major issue. If you need more, you can go to New York or Chicago,” remarks Brian Pedersen, vice president airfreight at Kuehne + Nagel Canada.
Lawrence sees a role for freighters chiefly when it comes to outsize cargo that cannot fit in the belly hold of a passenger plane or hazardous materials that are banned for passenger aircraft. However, there are restrictions on hazardous materials even on freighters, he notes. As for trucking hazardous goods to a freighter leaving from the U.S., this would require using an authorized trucking firm, which tends to be prohibitively expensive, he adds.
The oil industry has a fair amount of traffic to the Middle East, some of it outsize pieces or dangerous goods, but most other commodities can go in passenger planes.
“A lot of focus is on high-end business. A lot of high quality perishables fly to the Middle East. For example, if a chef in a high class restaurant in Dubai wants high quality mushrooms and the best are in Canada, they will fly them in,” remarks Pedersen. “What we see most is probably aviation and aerospace traffic, and then perishables.”
In the early days Cerone has no particular commodities in his sights, but the emphasis is on high yielding traffic. “Pharmaceutical cargo is always there,” he says.
Kuehne + Nagel treats the Middle East and Africa as one regional structure, with headquarters in Dubai. It is one of the logistics firm’s fastest growing regions, according to Pedersen.
“Dubai and Saudi Arabia have always been very strong. These are year-round markets, they are not seasonal,” says Lawrence.
In 2014 Canadian merchandise exports to the UAE amounted to $1.748 billion, dwarfing an import volume of $86.7 billion from there.
The low westbound volume reflects the UAE’s role as an entrepot for the Middle East and a crossroads for cargo moving between the Far East and Europe. Cargo flowing through Dubai has gone through the roof, but little of this torrent of goods originates in the UAE.
“Virtually everything from the Middle East is either from the Indian subcontinent or from the Far East,” comments Thomas.
In the first seven months of this year over 1.4 million metric tons of air cargo moved through Dubai, up 2.7 percent from the same period in 2014. This marked a slowdown from previous years, reflecting the loss of momentum of Chinese exports to the Middle East and Europe.
The Middle Eastern carriers have built up vast route networks, using their home bases largely as transit points for cargo moving between third countries. “Virtually every Middle Eastern player flies to Africa and to the Indian subcontinent. Emirates and Etihad also fly beyond to the Far East,” remarks Lawrence.
He notes that there is very little difference in airfreight rates to Dubai and India.
Airfreight with destination Dubai does not necessarily remain there. Much of the cargo unloaded at Dubai’s twin airport complex is broken down by forwarders there and shifted to other flights or alternative modes of transport to leave the UAE. The strength of Global Supply Chain Logistics has been the handling of cargo from Canada that goes to destinations beyond Dubai.
“This is not a mature market like Europe. It is not easy for a newcomer to enter,” remarks Thomas.
Canadian forwarders would find it hard to muscle in on the market from Canada to the region at any rate, as much is controlled at the other end. Not only do forwarders in Dubai break up consolidations to distribute shipments across the Middle East and beyond, but the routing is also determined in the Middle East.
“A lot of the traffic is consignee-driven. The forwarders at the receiving end dictate how the traffic is moved,” Lawrence says.
Meanwhile, Thomas is preparing for the next opportunity in the region. “A large opportunity, for Dubai in particular, as soon as the sanctions are taken off, will be Iran. That is going to be one of my emerging markets,” he says.


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