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With so many column inches about the Gulf carriers devoted to their fast-expanding passenger opera-

tions, it is easy to forget that Qatar Airways, Emirates Airline and Etihad Airways carry more than just human cargo. Beneath the main decks of their passenger aircraft, the regions big three airlines are also driving rapid growth in freight traffic over Doha, Dubai and Abu Dhabi - turning the Gulf into a bridging point for goods as much as travellers.

the numbers are staggering, even for a sector long associated with breakneck expansion. Middle Eastern carriers nearly tripled their share of global air cargo traffic from four per cent to 11 per cent between 2003 and 2013, accord-ing to US aircraft manufacturer Boeing.

Cargo

The Gulf region has turned into a bridging point for goods as much as it has for travellers, with even greater volumes likely to come

The new Silk Road

by Martin Riversthegulf@tradearabia.net

While Asia-domiciled airlines still have a much larger 36 per cent share, their counterparts in the Gulf are steadily sucking up cargo from the East and redistributing it to North America and Europe.

this mirrors the shifting sands of global air passenger flows, whereby geograph-ical advantage and deep-pocketed investment have turned the Gulf hubs into favoured stopovers for intercon-tinental journeys. their success has largely come at the expense of histor-ic aviation centres in Europe, which pioneered air transport during the first half of the 20th century but now find themselves weighed down by legacy cost-bases and dated infrastructure.

Last year was no exception for the Gulfs rising stars, with the international Air transport Association (iAtA) estimating that Middle Eastern carriers once again grew air cargo throughput faster than any other regions operators. traffic, as measured by freight tonne

kilometres (FtK), rose 11 per cent during the course of the year, compared with just 2.3 per cent in Europe. the frenetic pace of Gulf growth has barely slowed in 2015, maintaining impressive year-on-year expansion of 9.2 per cent in January.

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Its pretty much the same picture for cargo as for passengers.

Whats happening in the Gulf is that state-owned carriers are being built up by their governments with incredible amounts of money

Michael Gntgens, Lufthansa Cargo

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The Qatari flag-carrier has vowed to become one of the worlds five largest cargo operators by 2018 by investing heavily in infrastructure on the ground, in the sky, and in human capital

But with cargo capacity, as measured by available freight tonne kilometres (AFtK), rising nearly twice as fast in the same month (18.1 per cent), there are signs that the regions big players could be struggling to fill their cargo holds. European legacy airlines such as Lufthansa, Germanys flag-carrier, have long maintained that the Gulf super-connectors are dumping capacity in order to price their competitors out of the market. Allegations of anti-competi-tive behaviour gained traction in March, when three US carriers published evidence of up to $42 billion of state subsidies for Qatar Airways, Emirates and Etihad.

its pretty much the same picture for cargo as for passengers, explains Michael Gntgens, communications director of Lufthansa Cargo. Whats happening in the Gulf is that state-owned carriers are being built up by their governments with incredible amounts of money.

these airlines are putting extremely high capacities into the region, and they do everything possible to fill these capacities. But this, paired with no real necessity to earn money directly out of it, does of course change the [competi-tive] situation - especially for routings [from Europe] to Asia, to india, South Asia, South-east Asia. there you see a complete changing of the game over the past ten years or so. its not a level playing field.

Qatar Airways Cargo is now looking to replicate the success of the carriers passenger business

ments for two more A330Fs plus a further eight options.

By acquiring dedicated freighters, Qatar Airways can prioritise the needs of major freight forwarding custom-ers whose preferred routings and timings might not overlap natural-ly with passenger flows. it can also exercise flexible capacity manage-ment for individual markets. Our big advantage is that we have a combina-tion of the belly capacity on the passen-ger aircraft - which in certain cases is sufficient - and in other cases, where the payload would be restrictive, then we would consider operating freight-ers, Ogiermann explains. it's really about network optimisation.

A total of 47 global destinations are currently served by freighters, with Los Angeles becoming the fourth US point in April. Last year alone saw 11 destina-tions added, including cities as diverse as Zaragoza in Spain, hyderabad in india, Shanghai in China, and Mexico City. the cargo chief says opportuni-ties for new freighter destinations are evaluated on a rolling basis, especially in Asia and Africa.

You always have to be ahead of the game and be quick, he says. "But its not that we aim for an impressive number of stations. We go where the business wants us to go.

turning to America, another key growth market, Ogiermann insists that efforts by anti-Gulf lobbyists to amend the US-Qatar bilateral air services agreement - effectively slamming the brakes on US expansion - are wholly misguided. Qatar Airways has invest-

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Our problem is that we dont have enough capacity at the moment. We are not dumping capacity anywhere on the globe. Were following the needs of our customers - they tell us where they want us to operate, and we go according to their needs

Ulrich Ogiermann, chief cargo officer of Qatar Airways

Ulrich Ogiermann, chief cargo officer of Qatar Airways, agrees that global cargo markets have changed profound-ly over recent years, but his explanation of this trend bears little resemblance to the timeworn complaints of Europes legacy carriers.

Our problem is that we dont have enough capacity at the moment, he insists. We are not dumping capacity anywhere on the globe. Were following the needs of our customers - they tell us where they want us to operate, and we go according to their needs.

Reconciling these two opposing narratives is made difficult by the fact that Qatar Airways does not publish detailed performance statistics for its

cargo business. Whereas Lufthansa, a publicly traded company, discloses both its FtK traffic data and its AFtK capacity data - thereby revealing the load factor, a measure of how full its cargo holds are (69.9 per cent for 2014) - Qatar Airways only releases FtK figures. Based on this limited data, it is clear that the Doha-based carrier has grown cargo traffic eleven-fold over the past decade. But whether that growth has been rational, or whether its cargo holds have been flying half empty, is anyones guess.

Even if Qatar Airways did disclose its load factor, further financial data would be needed in order to establish cargo yields and determine if the space is

being marketed at commercially viable prices. Flying with fully loaded planes is no achievement unless you charge customers enough to cover your costs.

But while Lufthansa Cargo last year posted an operating profit of 100 million ($106 million), Qatar Airways has never publicly revealed its financial performance. Covertly obtained annual reports - used by the US lobbyists to substantiate their allegations of subsidies - show that the 22-year-old airline is still dependent on equity infusions and loan guarantees from its government, without which it might not qualify as a going concern under international accounting standards.

No matter how much this vexes its rivals, the Qatari flag-carrier has

vowed to become one of the worlds five largest cargo operators by 2018. it aims to achieve this by investing heavily in infrastructure on the ground, in the sky, and in terms of human capital. Ogiermann himself is widely regarded as a leading voice in the air cargo industry, having formerly headed up Cargolux, Europes largest cargo carrier, and served as chairman of the international Air Cargo Association (tiACA), an industry trade group.

Alongside the fleet of 138 passen-ger aircraft, Qatar Airways also deploys 14 main-deck freighters: eight Boeing 777-200LRFs and six Airbus A330-200Fs. An order for another four 777Fs was finalised in January, while the airline has outstanding commit-

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ed $1 billion in its cargo terminal at hamad international Airport, so any move towards overseas protectionism will be fiercely opposed. Wherever we can, we try to promote the benefits of open trade, he argues. trade always drives growth. it drives the creation of jobs. So we are always interested in very liberal aero-political agreements, because they are to the benefit of the economies.

his counterparts at Emirates and Etihad are equally committed to, and dependent on, Open Skies. Emirates Skycargo currently serves five cargo-only destinations in America, and vice president henrik Ambak has hinted at more US route launches for its 14-strong, all-Boeing freighter fleet. Etihad Cargo serves three US freighter destinations, partly in conjunction with Atlas Air, an American charter airline.

if push comes to shove, the govern-ments of Qatar, Dubai and Abu Dhabi may seek to leverage their geopoliti-cal and economic clout to preserve

the existing bilateral agreements that America has signed with Qatar and the United Arab Emirates (UAE). their airlines have outstanding orders for hundreds of Boeing aircraft, indirectly supporting thousands of jobs in the US aerospace sector.

however, dangling these orders as a bargaining chip will not be entirely convincing. European aircraft manufac-turer Airbus produces the only viable alternatives to US-built widebody aircraft, and most European countries

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Lufthansa Cargo claims that Gulf carriers dump cargo capacities across the globe

already impose their own traffic restric-tions on the Gulf carriers.

Diplomatic antagonism may therefore be resorted to. the UAE set a worrying precedent for this in November 2010, when it closed Camp Mirage, a Canadian Forces base near Dubai, during a heated row with Ottawa over landing rights for Emirates and Etihad. the camp was used as a staging post for the war in Afghanistan. Washington can ill-afford a similar falling out as it seeks Gulf support to suppress insurgencies in iraq, Syria, Yemen and Libya.

in ancient times, transporting goods from East to West necessitated months-long, perilous journeys over a network of trade routes collectively dubbed the Silk Road. today, goods are despatched to far-flung markets in a matter of hours. the Gulf carriers have placed themselves firmly at the nexus of this new, airborne Silk Road, and their governments are unlikely to relinquish that privileged position without a fight.