Hope for Iraqi air cargo market

Iraq's aviation industry is being slowed by excessive fees and tightly-controlled market access.

Anyone wanting to fly a cargo flight into Iraq has a choice between hiring Iraqi Airways and RUS Aviation or paying high fees.
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The growth opportunities in Iraq's aviation industry will soon be on show at the Iraq Airport Expansion, Cargo Logistics Conference and Exhibition starting this month in Erbil.

Almost 200 delegates from 35 countries will be in attendance including representatives from multinational companies such as Boeing, Siemens and Cavotec, all seeking to play a part in rebuilding an industry that has spent the past three decades in decline.

But controversies have dogged its much-anticipated recovery. Foreign cargo operators, as well as the UAE General Civil Aviation Authority (GCAA), have lobbied the Iraqi government to overturn an agreement between its flag carrier, Iraqi Airways, and RUS Aviation. RUS Aviation, whose ownership has not been disclosed, has become a significant player in the region since it began operations in 1999 at Sharjah. Based in a 2,000 square metre headquarters in the free zone, the company has a fleet of 28 Russian air freighters and, as well as Iraq, services the wider Middle East plus Asia, Africa, eastern Europe and China.

For the past 18 months anyone wanting to fly a cargo flight into the country has been given a choice between hiring Iraqi Airways and RUS Aviation to carry their cargo, or pay fees reportedly between US$20,000 (Dh73,456) and $100,000 per flight to operate independently. In the end, many cargo airlines are forced to turn down flight requests because the costs make them unfeasible.

The partnership between RUS and Iraqi Airways resulted in the US shipper FedEx pulling out of the Iraqi market in 2009, while the experiences of other air cargo operators has prompted an inquiry by the GCAA.

"We have contacted the Iraq authorities and are inquiring about this," said Saif al Suwaidi, the director general of the GCAA.

RUS, meanwhile, said it did not determine the fees it charged, and said it passed on a percentage of its revenues to Iraqi Airways, as well as using proceeds to finance the rehabilitation of Iraq's aviation industry.

Nasser al Bandar, the manager of the aviation department at the ministry of transport in Baghdad, conceded RUS's fees were high. "We take 12 per cent worth of RUS's revenue from its cargo business in Iraq, and they dictate the prices as they see fit."

FedEx was quoted in Air Cargo News saying that since Rus "gained total control of cargo airlift in Iraq in early August, RUS has arbitrarily rationed cargo flights into and out of Iraq while at the same time more than doubling the cost of each flight".

Fathi Buhazza, the president and chief executive of Maximus Air Cargo, said Iraq had lost credibility in the market. "A lot of companies have pulled out. It is basically not feasible to operate there," he said.

"Someone is making millions out of this," said Mr Buhazza, who has paid fees of about $45,000 per flight and is contesting other payments owed to RUS. "But who pays in the end? The people of Iraq. The market suffers, and the opportunities, the standards, the growth, all these things suffer."

Some firms have negotiated arrangements to operate cargo flights into Iraq without being levied fees, only to have them quickly nullified.

Midex Airlines said an agreement last year with Iraqi authorities to operate cargo flights into Iraq was revoked 12 hours after it was signed. Meanwhile, the Zimbabwean company Avient Aviation's access into Iraq was cancelled two weeks after it struck a deal to enter the country. The reason cited was "fall-out from the exclusive deal engineered by Iraqi Airways and … RUS Aviation, which effectively provided monopoly control of the Iraqi air cargo market", reported Air Cargo News.

The dispute over access for air cargo flights is mirrored in the executive jet industry. Since April last year, charter flights into Iraq have been administered by a private company, Palm Aviation, which has an exclusive arrangement with the Iraqi government, according to the Middle East Business Aviation Association (Mebaa).

As a result, charter companies looking to land an executive jet in Iraq have to pay surcharges that range from $7,000 to $24,000 per flight, compared with an industry norm of $500, said Ali al Naqbi, the founding chairman of Mebaa.

"While we do see other authorities outsourcing certain services to private firms, this has to be within limits and be fair, and make fees known," he said. "But this is not transparent, and it is not acceptable."

The halting progress in the aviation market comes as the country seeks to upgrade ageing infrastructure and open the economy to the benefits of free competition.

Mr al Bandar said the government's recent appointment of a new transport minister could spell change for the country's air cargo market. "We are looking at a different direction, which may include increasing competition, which would bring prices down."

halsayegh@thenational.ae