Emirates cargo unit taps into e-commerce boom with new delivery service

Emirates, the world’s biggest long-haul airline, started an online shopping package delivery service between the US and the UAE to capitalise on e-commerce growth and cope with a decline in global air freight.

Emirates SkyCargo, the largest international air cargo operator globally, launched Emirates Delivers, a service that will allow UAE residents and businesses who shop online at US stores to get parcels delivered to their doorstep within three to five working days, Nabil Sultan, Emirates' divisional senior vice president for cargo, said on Tuesday.

“With the decline in general air cargo, how do you compensate for that drop with the new vertical of e-commerce? Growth of e-commerce demand requires a new way of delivery,” Mr Sultan said. “It’s a no-brainer.”

E-commerce transactions in the UAE are forecast to reach $16 billion (Dh59bn) in 2019 and grow 23 per cent annually between 2018 and 2022, according to a joint study by Dubai Economy and global payments company Visa. Emirates is tapping into the regional boom in e-commerce to help fill the cargo belly of its mammoth fleet of passenger aircraft and its dedicated freighters.

The move comes amid a global slowdown in general air cargo volumes spurred by intensifying trade tensions, uncertainty around Britain’s exit from the European Union and growing geopolitical tension.

Demand for air freight contracted 3.9 per cent in August year-on-year, marking the 10th consecutive month of decline in freight volumes, the International Air Transport Association said this month. This is the longest period of decline since the global financial crisis in 2008 as the US-China trade spat weighs heavily on the industry.

Emirates began testing its e-commerce delivery service on 4,000 customers a year ago as part of its efforts to diversify its offering.

Emirates Delivers, which went live online on October 15, will allow customers to sign up for free on its website, get a physical address in the US and choose to either ship their purchases immediately or store them for free over a period of up to 30 days as they continue shopping.

Prices start at Dh47 per kilo and the parcels can be shipped to a home or an office address in the UAE.

Emirates Delivers expects to handle 1,000 to 5,000 packages a day using a fleet of 15 vans, according to Dennis Lister, vice president of cargo commercial development at Emirates SkyCargo. It is aiming for delivery within 48 hours as volumes grow.

Emirates SkyCargo plans to expand the service in the next six months to add more originating destinations, Mr Sultan said.

“What we launched today is the tip of the iceberg,” he added. “It’s a big-ticket item for us in the future.”

Emirates SkyCargo has belly-hold capacity in the airline’s fleet of 265 wide-body aircraft, including 12 freighters.

The airline operates 13 routes to the US, with cargo capacity on more than 100 flights weekly including scheduled dedicated freighter services to Columbus, Chicago, Houston and New York.

Middle East airlines' freight volumes decreased 6.7 per cent in August compared to the same month last year, marking the sharpest drop in freight demand among all regions, according to Iata. Escalating trade tensions, slowing global trade and airline restructuring have affected the region's performance since the fourth quarter of 2018, it said.

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Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.

Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.

“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.

Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.

“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.

Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.

From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.

Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.

BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.

Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.

Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.

“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.

Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.

“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.

“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”

The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”

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How to keep control of your emotions

If your investment decisions are being dictated by emotions such as fear, greed, hope, frustration and boredom, it is time for a rethink, Chris Beauchamp, chief market analyst at online trading platform IG, says.

Greed

Greedy investors trade beyond their means, open more positions than usual or hold on to positions too long to chase an even greater gain. “All too often, they incur a heavy loss and may even wipe out the profit already made.

Tip: Ignore the short-term hype, noise and froth and invest for the long-term plan, based on sound fundamentals.

Fear

The risk of making a loss can cloud decision-making. “This can cause you to close out a position too early, or miss out on a profit by being too afraid to open a trade,” he says.

Tip: Start with a plan, and stick to it. For added security, consider placing stops to reduce any losses and limits to lock in profits.

Hope

While all traders need hope to start trading, excessive optimism can backfire. Too many traders hold on to a losing trade because they believe that it will reverse its trend and become profitable.

Tip: Set realistic goals. Be happy with what you have earned, rather than frustrated by what you could have earned.

Frustration

Traders can get annoyed when the markets have behaved in unexpected ways and generates losses or fails to deliver anticipated gains.

Tip: Accept in advance that asset price movements are completely unpredictable and you will suffer losses at some point. These can be managed, say, by attaching stops and limits to your trades.

Boredom

Too many investors buy and sell because they want something to do. They are trading as entertainment, rather than in the hope of making money. As well as making bad decisions, the extra dealing charges eat into returns.

Tip: Open an online demo account and get your thrills without risking real money.