Etihad Crystal Cargo, the Cargo arm of Abu Dhabi-based Etihad Airways, is anticipating a drop in its revenues this year on the back of escalating fuel prices and a decline in global demand for commodities, a senior official at the company has revealed.
“It is very difficult for us and the entire airfreight industry at the moment. The rising price of fuel has inevitably raised our operating costs to an all-time high and we don’t see this changing soon,” Des Vertannes, Etihad Crystal Cargo’s Executive Vice-President for cargo, told Emirates Business.
“Due to the tight market conditions, we might not attain the same level of revenue performance as last year.”
Last year, Etihad Crystal Cargo posted revenues of US$300 million, comprising 20 per cent of Etihad Airways total revenues. But the cargo division anticipates its contribution to the overall revenues of the airline will drop to between 17 per cent and 18 per cent this year.
“The difficulties we are experiencing are a reflection of the global trend within the air freight industry,” said Vertannes.
As a result of increasing fuel costs, airfreight companies globally have had to increase their fuel surcharges almost every three weeks. Since the beginning of 2008, fuel surcharges have gone up by over 30 per cent, causing a sharp decline in air cargo, as shippers seek cheaper modes of transport.
Vertannes said besides the escalating cost of fuel, the sub-prime crisis in the US and the subsequent economic slowdown in Europe had greatly compromised demand for commodities in those markets. Inflationary pressures in most Asian countries also continue to undermine purchasing power there.
“While there is enough tonnage in the Middle East region due to the infrastructural development boom going on, tonnage in the bigger and mature markets, such as the US and Europe, has dropped sharply. Current world demand is in thenegative,” said Vertannes.
While Etihad Crystal Cargo’s tonnage grew by 30 per cent last year compared to 2006, the growth is expected to fall to around 18 per cent this year, according to Vertannes.
“There have been misconceptions that since we originate from an oil-producing country, we are immune to the current fuel crisis. That is far from the reality since we gain no favours and we pay commercial rates for our jet fuel,” said Vertannes.
“It is a huge dilemma we are facing, but as a company we have to takemeasures to minimise costs to show our shareholders we are good custodians ofthe business.”
Last year, the company’s board approved the lease of an MD11 which supplements its two existing A300-600 freighters. The company has temporarily put brakes on any new acquisitions as it monitors the market trends in global airfreight.
Vertannes is optimistic the extension work at the current cargo terminal at Abu Dhabi International Airport will help in accommodating any extra tonnage by Etihad Crystal Cargo.
The extension work, to be completed in November, will increase capacity from the current 300,000 tonnes to 450,000 tonnes.