Saudi Cargo looks across the pond
For Saudi Airlines Cargo, expansion is the name of the game and Africa is the top of the list. There's good reason for that too - aside from clearly emerging as the growth market for years to come, it also happens to lie virtually in Saudi Arabia's 'back yard'.
April 1, 2011
The geographic location is perfect says Saudi Cargo VP Commercial, Peter Scholten, “and what we have as advantage compared to our neighbours in the UAE for instance, is that Jeddah is next to Africa – whether you fly from Nairobi to Jeddah, or Addis Ababa to Jeddah its two hours – there’s only the Red Sea in between.” And although Saudi Cargo is literally on Africa’s doorstop, it has only a few destinations on the continent. Aside from its extensive passenger network providing belly cargo in North Africa, particularly into Egypt – now obviously in a period of some disruption – the rest of Africa did not have extensive coverage by the Jeddah-based carrier. Of the African destinations, freighter services run to Johannesburg in South Africa, Lagos in Nigeria, Khartoum in Sudan and Addis Ababa in Nigeria. The carrier recently started in Nairobi last year during what Scholten says was “a bit of a lull”. It was during lead-up to the peak season when the industry all expected the typical peak season in the Far East to fill aircraft and plump up the yields. “I got request to for flights into Nairobi because there was a shortage of capacity here. So we didn’t put the extra capacity on Asia, but put it on Nairobi instead,” he says. Saudi Cargo is now operating three flights a week – Jeddha, Nairobi, Jeddha and then on to Amsterdam for the flowers with the aircraft returning bck to Saudi Arabia. “The growth was very strong as we basically went from zero to three MD11 flights a week. We do two A320 passenger bellies, twice a week with about 5,000kg total, so we basically went from 5,000 kg a week to 180,000 kg a week – that’s pretty amazing growth,” Scholten adds with a grin. Growth plans The plan, he says, “is to grow a professional cargo airline and compete with our neighbours in the region,” over which Saudi Cargo has a key geographic advantage, particularly in terms of tapping the African market. Key to this will be fleet expansion which will see it growing its fleet to 11 freighters this year, with the first of six B767 freighters coming onboard in April, boosting its current fleet comprised of one A310 freighter and four MD11Fs. Saudi Cargo also announced plans to increase its investment in domestic stations to SR67.6 million (US$18 million), the company’s chairman Khaled Al-Molhem announced. “The move will add strategic depth to the company’s global operations,” he said, explaining that 31 per cent of the development funds will go to Jeddah, 49 per cent to Riyadh and 20 per cent to other domestic stations for expenditure on new ground support equipment, facilities and service agreements. Another aspect of Saudi Cargo’s strategic planning is to develop a dedicated charter outfit which requires dedicated capacity. “Our aircraft are 80- 90 per cent for scheduled work. If want to be involved in the charter market we had better have a plane available for charter work,” he says. “Africa for us is a major growth opportunity, we had a very quick entrance in the Nairobi market and we can enter other markets while we expand and grow here. Working with Kenyan Airways the carrier is also in the process of joining the Skyteam alliance which will help its growth plans for Africa. Earlier this year the carrier also picked up a contract from Fast Forward Cargo in the United Arab Emirates to operate 150 charter flights from Sharjah to West Africa – primarily Lagos and N’Djamena, Chad over the course of this year. Scholten says it’s comprised of sea-air cargo from Asia to Africa. The passenger side is also undergoing fleet renewal and expansion alongside significant growth of the Saudi Arabian economy. Saudi Arabia is the largest market in the region, the biggest country and biggest importer from a cargo perspective. Scholten points out that of all the cargo that comes into the Middle East (excluding military-related cargo for Iraq and Afghanistan), 80 per cent goes to Saudi Arabia. In terms of the increasing attention global carriers are now paying to the African market, Scholten, who has previous experience in the Kenya market through a previous position with Martinair, says “it is not so easy to step into Africa, not like a like Shanghai which is relatively easy to step into that kind of market. “Africa has its own rhythm, has its own rules, has its own phase of things – you can do very good business in Africa, but there are challenges. Not everybody will go here full-fledged. This takes a much longer term approach and is much more difficult to work in because of corruption, etc.” But he adds that one of major reasons Kenya became the largest horticultural exporters on the continent is because they are very liberal in their approach that everyone is welcome because it benefits the whole economy. “More people coming in will grow the overall economy – it doesn’t grow like China, but it’s stable growth,” he adds.