Dubai's Dnata looks to South East Asia for further growth

Dubai-based ticketing company eyes South Asia for expansion

Dnata believes many countries in South East Asia, including Thailand, Vietnam and Malaysia, will experience a boom in air travel in the coming decades. Above, the Sukhotai Kingdom park, Thailand.
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Dnata, the ground-handling and ticketing firm based in Dubai, plans to set its sights on the burgeoning South East Asia market after integrating recent acquisitions in the UK and Australia, executives said.

But it has cited high barriers to entry into some of the markets expected to experience a boom in air travel in the coming decades, including China, India and the Middle East.

"We think a lot of the smaller Asian countries are going to do well," said Gary Chapman, the president of Dnata, a sister company to Emirates Airline and owned by the Investment Corporation of Dubai. "Just look across the whole region, from Singapore, Thailand, to Vietnam and Malaysia - the whole peninsula is going to be strong."

By contrast, the prospects of entering the high-profile Bric nations of China and India is difficult because existing firms have high asset values and there are other risks such as concession fees and a constantly changing competitive landscape, he said.

"China and India are both very difficult markets. There are few ground handlers doing well in those jurisdictions," said Mr Chapman. Dnata does operate in the wider Middle East region, including ground handling in the northern Iraqi city of Erbil, Sharjah and Jordan.

However, this regional expansion has been difficult. "We have seemed to struggle to get established around the region," he said. "The barriers to entry here are quite significant in terms of the market being very fragmented, and government controlled."

But Mr Chapman said that prior to any Asian growth, the company would focus on assimilating recent acquisitions after a five-year buying spree that saw it snap up several global aviation services firms.

Dnata has more than 20,000 employees involved in ground handling, flight catering and IT services, spread across 73 airports in 37 countries on five continents. It is coming off a six-year growth spurt where it increased revenues fourfold and went from a primarily Dubai-based company into a global aviation firm.

Four years ago Dnata generated 15 per cent of its revenues from outside the UAE; today its international businesses account for 60 per cent of turnover.

In its latest financial report, Dnata reported operating profit rose 19.7 percent to Dh559 million (US$152.1m) during the year ending March last year compared with the previous year.

Yesterday, the company announced a corporate rebranding and said it would rename several recent international subsidiaries under the Dnata banner including Plane Handling, based in the UK, and CIAS in Singapore.

In contrast to its acquisitions prospects in Asia, Dnata regards Europe as a mature, low-growth market where it will look to find synergies. It has signed a memorandum of understanding with LSG Sky Chefs, affiliated with Lufthansa, to create a joint venture in the UK. EU approval of the deal is expected later this year.

Dnata typically operates ground-handling services in airports where it has two or three competing companies vying for business.

Its market share is estimated to be 25 per cent at Britain's Heathrow Airport, 60 per cent at Australia's largest airports, and 50 per cent at Singapore's Changi Airport.

Dnata, founded 52 years ago, is one of the oldest companies in the UAE. In the 1980s its executives helped to found Emirates Airline.