New hope for a new year
Peter Sedgley, senior VP for cargo commercial operations at Emirates
IFW: To say the least, 2009 was a difficult year for anyone in the air freight business. How are you expecting demand and rates to hold up in the first quarter of this year?
Sedgley: Historically, from about 15 December each year, there has usually been a very sharp drop, then it has been dead until 15 January, before surging until Chinese new year. But we didn’t see a drastic drop this Christmas, demand stayed there, and we continued operating freighters. Europe’s weather was atrocious, so it’s hard to tell whether real demand is down when people and goods can’t get to an airport. But demand was picking up fairly early in January and the booking profiles are up, but it’s not going to be easy. We’ll need to be targeted and focused, and it’s going to be challenging.
IFW: Is the worst over, after more than a year of extreme highs and lows?
Sedgley: We’re optimistic for the first quarter, and for 2010 overall. We launched a service to Durban on 1 October last year, and to Luanda on 25 October. On 28 March, we will start a new route to Tokyo, and between May and August, we’ll start new routes to Amsterdam, Prague and Madrid, so that illustrates our market view.
IFW: The impact on the bottom lines of airlines was harrowing last year. What did Emirates do to limit costs and protect cash flow?
Sedgley: Given the global conditions we were faced with, we’re quite proud of what we achieved over the year. The staff worked hard, and we made every effort to contain costs without sacrificing people. We haven’t laid anyone off, but all staff had the option of taking unpaid leave. Some cabin crew took time off, but in cargo and operations most stayed, because we had the volumes. Our modus operandi is to ensure the quality is there, so we really and truly wanted to use the opportunity to be the people’s carrier of choice.
I think we’re coming out of the other side of the downturn with a super network. We’re connecting to all continents in one stop. Lots of destinations are served two or three times a day and freighters feed in and out. It was a very challenging time but we’re coming through it as a very efficient and focused organisation.
IFW: How did Emirates fare in terms of cargo yields, rates and volumes in 2009?
Sedgley: We haven’t grown our revenues to the extent we would have liked. But, having said that, we will demonstrate growth this financial year, which finishes in March. Volumes have grown significantly. At the end of December, our core belly freight business was up 16% on a year earlier.
IFW: How did freighter operations hold up?
Sedgley: We were affected. The levels weren’t what we wanted and therefore we weren’t flying them at the normal frequencies. This was mainly to do with the Chinese market, where exports were down significantly for a lot of the year. Hong Kong was OK. We were most heavily impacted on yield. In terms of rate per kg, it did come down a lot.
There was also a currency depreciation, which further impacted on yield. And the market mix was not great. There was excess capacity out of Europe, which put rates under pressure. In early 2009, it was very depressing. We were very lucky that our customers were so supportive. We didn’t have to resort to the crazy rates that some carriers did; we maintained some stability.
IFW: Did this all change in the autumn, when demand from Asia into the US and Europe picked up?
Sedgley: From September, there was an acceleration in demand out of Chinese markets. Production in China picked up and there were a number of new electronic product launches. Because people were not holding too much inventory, and also because shipping lines were laying-up ships and slowing-down vessels and shippers holding inventory at sea, when the demand situation did turn, it lent itself to air freight. Demand surged and we were able to capitalise on that.
IFW: Did you put more freighters into China?
Sedgley: We already had scheduled routes, but we were able to put more services in and, from mid-October, our freighters were flying flat-out. Our B777s were fantastic – they were flying intensively. We were doing ten flights a week out of Shanghai and 15 a week out of Hong Kong, which has continued since, as per our schedule. In addition, we did some transpacific charters, although we don’t fly much out of China to the US. Most of the demand we saw was Asia to the Middle East and Europe.
IFW: How was demand from the Middle East? Dubai has had well documented problems with the property market and construction, but how did the rest of the region do?
Sedgley: The Middle East has been buoyant, compared with other areas. We saw a lot of Chinese production that would normally go into Europe coming here [Dubai] and to Africa. The sea-air volumes are also increasing. The Middle East in general is trading well. Figures from Iata show that the Middle East grew air freight volumes by 7% last year, and Dubai Airport saw volumes up by more than 5%. Our volumes out of Dubai held up quite well.
IFW: We saw a lot of freighters parked-up last year and there are question marks about how much capacity will return to the market, given the large number of more efficient freighters due for delivery. How do you see the supply side of the freighter market this year and next?
Sedgley: I think we’ll see a new market for freighters. With new fuel-efficient capacity coming in, I don’t think it is worth scheduled airlines bringing B747-200Fs back – they are not reliable or efficient. Will they be taken by charterers? Maybe, but I honestly believe that most capacity parked will stay parked. The fuel price is not coming down. We forecast it to increase. So the operating economics mean you need more efficient aircraft, and yields are still not back to 2008 levels by any means.
Sedgley: Historically, from about 15 December each year, there has usually been a very sharp drop, then it has been dead until 15 January, before surging until Chinese new year. But we didn’t see a drastic drop this Christmas, demand stayed there, and we continued operating freighters. Europe’s weather was atrocious, so it’s hard to tell whether real demand is down when people and goods can’t get to an airport. But demand was picking up fairly early in January and the booking profiles are up, but it’s not going to be easy. We’ll need to be targeted and focused, and it’s going to be challenging.
IFW: Is the worst over, after more than a year of extreme highs and lows?
Sedgley: We’re optimistic for the first quarter, and for 2010 overall. We launched a service to Durban on 1 October last year, and to Luanda on 25 October. On 28 March, we will start a new route to Tokyo, and between May and August, we’ll start new routes to Amsterdam, Prague and Madrid, so that illustrates our market view.
IFW: The impact on the bottom lines of airlines was harrowing last year. What did Emirates do to limit costs and protect cash flow?
Sedgley: Given the global conditions we were faced with, we’re quite proud of what we achieved over the year. The staff worked hard, and we made every effort to contain costs without sacrificing people. We haven’t laid anyone off, but all staff had the option of taking unpaid leave. Some cabin crew took time off, but in cargo and operations most stayed, because we had the volumes. Our modus operandi is to ensure the quality is there, so we really and truly wanted to use the opportunity to be the people’s carrier of choice.
I think we’re coming out of the other side of the downturn with a super network. We’re connecting to all continents in one stop. Lots of destinations are served two or three times a day and freighters feed in and out. It was a very challenging time but we’re coming through it as a very efficient and focused organisation.
IFW: How did Emirates fare in terms of cargo yields, rates and volumes in 2009?
Sedgley: We haven’t grown our revenues to the extent we would have liked. But, having said that, we will demonstrate growth this financial year, which finishes in March. Volumes have grown significantly. At the end of December, our core belly freight business was up 16% on a year earlier.
IFW: How did freighter operations hold up?
Sedgley: We were affected. The levels weren’t what we wanted and therefore we weren’t flying them at the normal frequencies. This was mainly to do with the Chinese market, where exports were down significantly for a lot of the year. Hong Kong was OK. We were most heavily impacted on yield. In terms of rate per kg, it did come down a lot.
There was also a currency depreciation, which further impacted on yield. And the market mix was not great. There was excess capacity out of Europe, which put rates under pressure. In early 2009, it was very depressing. We were very lucky that our customers were so supportive. We didn’t have to resort to the crazy rates that some carriers did; we maintained some stability.
IFW: Did this all change in the autumn, when demand from Asia into the US and Europe picked up?
Sedgley: From September, there was an acceleration in demand out of Chinese markets. Production in China picked up and there were a number of new electronic product launches. Because people were not holding too much inventory, and also because shipping lines were laying-up ships and slowing-down vessels and shippers holding inventory at sea, when the demand situation did turn, it lent itself to air freight. Demand surged and we were able to capitalise on that.
IFW: Did you put more freighters into China?
Sedgley: We already had scheduled routes, but we were able to put more services in and, from mid-October, our freighters were flying flat-out. Our B777s were fantastic – they were flying intensively. We were doing ten flights a week out of Shanghai and 15 a week out of Hong Kong, which has continued since, as per our schedule. In addition, we did some transpacific charters, although we don’t fly much out of China to the US. Most of the demand we saw was Asia to the Middle East and Europe.
IFW: How was demand from the Middle East? Dubai has had well documented problems with the property market and construction, but how did the rest of the region do?
Sedgley: The Middle East has been buoyant, compared with other areas. We saw a lot of Chinese production that would normally go into Europe coming here [Dubai] and to Africa. The sea-air volumes are also increasing. The Middle East in general is trading well. Figures from Iata show that the Middle East grew air freight volumes by 7% last year, and Dubai Airport saw volumes up by more than 5%. Our volumes out of Dubai held up quite well.
IFW: We saw a lot of freighters parked-up last year and there are question marks about how much capacity will return to the market, given the large number of more efficient freighters due for delivery. How do you see the supply side of the freighter market this year and next?
Sedgley: I think we’ll see a new market for freighters. With new fuel-efficient capacity coming in, I don’t think it is worth scheduled airlines bringing B747-200Fs back – they are not reliable or efficient. Will they be taken by charterers? Maybe, but I honestly believe that most capacity parked will stay parked. The fuel price is not coming down. We forecast it to increase. So the operating economics mean you need more efficient aircraft, and yields are still not back to 2008 levels by any means.
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