© 2020 All rights reserved to Maaal Newspaper
Publisher: Maaal International Media Company
By: Dr. Bader Alaydi
Air cargo or air freight is defined by International Civil Aviation Organization (ICAO) as any property other than mail, stores, and passenger baggage carried on aircraft. However, airlines have a broader view of air cargo as any property (freight, express, and mail carried on aircraft), with the exception of passenger baggage. This indicates that all cargo services are air services carrying only cargo, whether on scheduled or non-scheduled flights. Hence, Air Cargo Village is simply a logistical location for air cargo containing all stakeholders as cargo operators, integrators, airport operations, customs & security, freight forwarders, and brokers. The key driver that stimulates air cargo is the economic growth and globalization. As of today, air cargo maintains an important role in economic expansion, specifically in developing markets. Indeed, air cargo acts as a trade facilitator to maximize the global reach of businesses by promoting their products to far-away markets through cost-effective and faster channels of distribution. This is important to establish and execute the best practices and to deliver products in a very short time relative to sea or road channels of distribution. Usually, air cargo is time-sensitive products or requires special care, such as dangerous goods, chemicals, live animals, temperature-sensitive pharmaceuticals, food, flowers and plants.
A recent report by IATA reported that air cargo transports around $6 trillion worth of goods annually on a global basis which represents at least 35% of all global trade in terms of value, but it represents only 1% of global trade in terms of volume. This shows an imbalance between value and volume, which is explained by product types carried by air. In fact, the majority of air cargo is valuable and important products. Furthermore, IATA reported that air cargo used more than 100,000 airplanes and moved over 20 million parcels worth $18.6 billion every 24 hours on a global basis.
Riyadh and Dammam international airports started Cargo Village as a strategic initiative to contribute in achieving the aviation vision to be an active player in the supply chain system. Within this direction, both airports aim to diversify their revenue. It is been noticed that the aviation industry has suffered dramatically in the past 3 years due to the pandemic. However, the air cargo performance has not been impacted, although there were some restrictions. Such a strategic initiative will create extra revenue generated from aeronautical and non-aeronautical sources. Furthermore, the launch of the Cargo Villages by both airports will enhance the growth of the Saudi economy by facilitating trade with other countries, enhance the promotion of the various economic and sports events that require the transport of big valuable products like cars or horses, and improve the well-being of citizens and residents.
Both villages are expected to reduce the unemployment rate in the country. In line with the mission of Riyadh Village, Riyadh Airports Company highlighted it as a participant in the Riyadh City Transformation as “the strategic go-to logistics hub for the region”. Using a state-of-the-art logistical platform, Riyadh Village is expected to have about 5000 direct jobs with up to 10000 indirect jobs. Dammam Village is not far from these numbers, considering it serves as a regional hub for global companies.
Having clarified the importance of the cargo villages launched by Riyadh and Dammam, there is a need for a clear strategy to be developed by both villages to reach the vision stated by the leadership. There is a huge gap between the performance of both villages, with Dubai Cargo Village (DCV) leading. DCV started in the early 90s handling less than 100000 tons annually with four bays of Boeing747s. Through the years, DCV has gone through huge development and expansion projects. In 2022, DCV managed more than 81.162 billion items of goods with an estimated value of 875.86bn Dhs., including insurance and shipping costs. The great performance of DCV has positively impacted the Dubai economy and the well-being of the region. This will force Riyadh and Dammam Cargo Villages to develop a comprehensive innovative strategy to capture its share and exceed the DCV’s performance.
Soufiane Daher, an Air Cargo Adviser, highlighted the difficulty of cargo strategy development due to various factors such as rigid policies or data unavailability. Mr. Soufiane proposed a cargo village strategy development consisting of three phases. It is important for the airports to understand the current market situation to identify value drivers and align with the local communities. Later, the vision can be set, and cargo capabilities can be outlined. The following chart shows the process in more detail:
A similar approach is introduced by Nallian which is the world’s first provider of an open ecosystem of collaborative solutions underpinned by a next-generation data sharing platform for logistics hubs. The Nallian approach is simple and composed of 7 steps but shares the same concept as the previous one. However, both approaches neglected the marketing strategy which is a basic output of the strategy development process.
It is well-known that marketing is one of the key success factors in any business and cargo village is not different. Simply, marketing is the identification of a target market, its needs and how to serve those needs. This means both Riyadh & Dammam Cargo Village must communicate the value proposition, which should be accurate and compelling. The value proposition message must show the cargo village customers a description of the challenges the customers are facing, what competitive advantages are offered to them, and a solution to their challenges that’s better than the competitors. Communication with customers requires Cargo Village to develop a marketing campaign. Such strategy requires understanding the market, planning the campaign carefully, choosing suitable media and platforms, building relationships with key customers and suppliers, keeping track of results, and being patient. One of the most important issues within the cargo village business is to focus on building new business partnerships. Although it is important to be transparent about what you offer and offer tailored solutions that address the needs of your target market through understanding the needs and wants of your target market, also showing your commitment to working together is highly recommended.