Global recession led to redefinition of operations
“WE NO longer sell seats. We sell a lifestyle proposition. It’s not about what you get inflight. It’s about the different cultures and the different experiences... Now there is as much value on the journey as there is at the destination.”
This is how corporate and leisure air travel has been redefined as companies and individuals tightened their spending after the 2008/09 economic downturn, according to Fouad Caunhye, Emirates’s regional manager in southern Africa.
The demand for corporate air travel fell by almost a quarter during that recession but it is now picking up.
For Emirates, changes implemented to challenge business-as-usual practices after 2009 resulted in the airline increasing the contribution of corporate travel from between 15 percent and 20 percent then to about 40 percent of its business now.
“Yes we have been under pressure, like many other operators, but the interesting development is the recession has also redefined commercial operations boundaries. Whatever used to be business nodes have changed.
“There has been a shake-up in demand elasticity and demand requirements. The value drivers for the customers have all undergone a significant change,” said Caunhye.
The increase in corporate travel has brought with it an increase in bulk cargo exported by the airline.
Caunhye said last year Emirates’s global cargo tonnage through its Dubai hub increased by about 15 percent to 2.4 million tons. The recession has also redefined commercial operations boundaries. Whatever used to be business nodes have changed.
In South Africa, the airline makes available 900 tons of cargo space every week on its flights. One of Emirates’s main exports from Cape Town is lobster and from Johannesburg it is pharmaceutical products.
Boosting the airline’s cargo business was its tracking system, which worked in a similar way to the courier services, said Caunhye.
But while many studies had identified this trend in business travel, an American Express study noted that the uptick in corporate travel was going to be country specific, rather than global, and Africa was one of those specific markets.
Caunhye pointed out that the presence of China in Africa had allowed the continent access to markets beyond the traditional European economies.
And where European intermediaries held discussions and negotiated on behalf of African businesses, African entrepreneurs were now flying to destinations.
Air traffic in and out of Africa had caused international airlines such as Emirates to re-analyse the expected flows into the continent and to design new routes based on their expected profitability, said Caunhye.
For instance, Emirates would open a new route to Abuja, Nigeria, in August. African carriers should naturally capitalise on air traffic growth to the continent.
But the continent’s national carriers, such as SAA, have watched Middle East airlines eat their lunch, according to SAA chief executive Monwabsi Kalawe when he briefed Parliament on February about the airline’s lossmaking international routes.
Kalawe said all SAA’s eight international routes made losses of between R60 million and R309m.
Emirates flies to all five main gateways in Africa: Johannesburg, Cape Town, Durban, Lagos and Nairobi.
It operates 42 flights out of South Africa every week which, Caunhye said, were on average 85 percent full throughout the year. Cape Town’s occupancy rate was even higher, at 95 percent.
“It’s not that we are smarter than the African players or somehow a little bit more attuned to the market than they are. There are a lot of operators in Africa who have a very strong understanding of what their primary markets are about,” said Caunhye.
On having an unfair advantage over SAA, Caunhye pointed out that 93 percent of the average demand that the airline serviced out of the South African market was not serviced by a South African carrier.
“The 140-plus destinations that we have in the rest of the world are not serviced by a South African airline.
“So we have been good partners because of that. We have one codeshare [with SAA] covering all our six daily flights. It’s one of our oldest partnerships and it says a lot because we are not part of any alliance,” Caunhye elaborated on Emirates’s relations with SAA.