Six strategic areas of focus for expanding air cargo business

Alongside becoming a major air travel hub for tourists and business commuters, many of the GCC’s main airports are also aiming to become an important aviation cargo hub for the region and its connections in the East and the West. With much potential still to be tapped, Roland Berger partner Sheila Nazareth shares a number of strategic moves airports could take to lift their market share.

Worldwide revenue generated in the cargo aviation industry has more than doubled in the period between 2019 and 2024, reaching a peak of $210 billion. While overall revenue has declined in the past year, the medium to long-term perspective, is geared at growth as international trade and consumption expands. Air cargo volumes are currently hovering at around 117 million metric tons per year.

The market for air cargo traffic is relatively concentrated, with the top 20 airports holding around 42% of the market (in terms of volume). The Middle East has two airports in the top 20: Doha (~2.3 million metric tons) and Dubai (~1.7 million metric tons) – combined they handle roughly 65% of the Middle East air cargo volumes.

The two airports in the region thanks their competitiveness to their strategic location between Asia, Europe, and Africa. Further, they possess world-class infrastructure and benefit from a large, dedicated freighter fleet of Qatar Airways and Emirates.

Six strategic considerations

For other airports in the Middle East seeking to enhance their position in the market, here are six strategic areas to consider:

Assets and infrastructure are core conditions for potential growth. Building a global cargo hub requires robust infrastructure, efficient regulations, and landside and airside connectivity.

Middle Eastern countries can develop a robust aviation ecosystem and enhance cargo facilities to attract air cargo volumes. This can include developing large-scale sorting facilities, advanced tracking systems, and streamlined cargo handling and clearance processes.

An airport must grow as a cargo hub with a strong airline network that spans multiple destinations and has a sizeable freighter fleet. Fostering partnerships with major airlines and logistics providers can expand air cargo networks. This involves enhancing air connectivity by establishing direct flight routes to key destinations, facilitating seamless multi-modal transportation at air cargo hubs, and offering incentives for airlines to operate cargo services through their airports.

Freighters have become and will remain the primary option for carrying freight globally, a key lever to becoming more cargo-focused. In addition, an air cargo hub needs to work with other stakeholders for efficient multimodal connectivity.

Efficient ground handling is vital for a cargo hub to project a low dwell time. Ground handling should be the key focus, as it is a vital requirement for a cargo hub to project a low dwell time and increase airport appeal.

A ‘Cargo Community System’ can enhance the overall logistic sector experience. With air cargo increasingly focused across various verticals, data analytics and data mining technologies have become essential for all the players in the supply chain - shippers, freight forwarders, and airlines.

An Airport Cargo Community System (also called Cargo Community System (CCS) is a neutral and open electronic platform aiding intelligent and secure information exchange between stakeholders. It is a crucial tool in optimizing operational efficiencies and enabling digitalization of the end-to-end air cargo value chain.

Most global airports have CCS for a single-window system to boost trade. A single-window system enables electronic communications in airports between private transport operators (airlines, agents, freight forwarders, stevedores, freight depots), the private vicinity (pre- and on-carriage, usually by road), importers and exporters, the airport authorities, customs, and other authorities.

A smooth and efficient customs and regulatory clearance with clearly defined processes and digitization of paper trail is imperative for a cargo hub.

Efficiency is the heartbeat of modern trade, and adequate customs clearance serves as its accelerator. Streamlined clearance processes minimize bureaucratic red tape and expedite the movement of goods across borders. Imagine a shipment seamlessly transitioning from one country to another, minimizing wait times and unnecessary delays.

Middle Eastern countries can accelerate localization efforts to develop specialized cargo segments and boost exports. Countries can incentivize the local manufacturing industry to produce goods locally and export to relevant countries. Several countries, such as Saudi Arabia, have already augmented localization efforts, and conducting this practice in a planned manner can boost the appeal of the local manufacturing sector and the aviation industry.

Conclusion

Middle Eastern countries need to build a robust infrastructure, supportive regulations, and strong landside and airside connectivity, as these are crucial enablers to creating a cargo hub. This will help them capitalize on their strategic location between major trading regions, such as Europe, Asia, and Africa. By expanding the air cargo network, developing a solid aviation ecosystem, and enhancing localization efforts, they can position themselves as central hubs for international trade and logistics.