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I have just finished an article on Dubai's trade position. It gives an oversight of developments, growth of Dubai's economy supporting a 1.5 to 2 billion consumer market as a worlds central cargo transit hub/gateway in the Middle East.

Comments are always welcome.

ps: Arnie and Captain Ozzie, this is the so called 'utter nonsense' world trade position that Dubai's trying to represent around 2020.

Check it out.

http://invezztor.blogspot.com/2009/03/d ... ay-of.html

Robby, what a lot of people do not realize is that Dubai has an incredible amount of Import / Re-export trade. When you walk along the creek in Deira and see those Dhows all moored 6 deep, this is Import / Re-export trade in real life. This however is just a small part of it, literally thousands of Containers are shipped out of Jebel Ali Port every month to destinations far and wide, most people are completely unaware of this facet of Dubai.

JA free zone was running pretty well at least before crisis. If you had wanted to established company there you would've waited more than a year for a ware house.

So a new air cargo terminal there together with existed state of the art ocean port was realy great idea.
I have no idea what is the sence to build passenger terminal there.
I don't know what are they going to do with existing air port, Cargo vilage and Dubai airport Free zone, where they have invested huge money... At the same time they startted to build Terminal 3 and airport in J. Ali.

Actually Dubai is not a stop on the way from Europe to Far East only, but a big hub for trading with Middle East, Iran, Central Asia and Africa. Emirates is also very active in India. Due to undeveloped Indian road infrastructure it's easier to deliver goods to the big cities directly with out using hubs and road network like Amsterdam and Franfurt in Europe. So Emirates has strong positions in India as well.

I am quoting this section from the last FT article

Though Dubai is racked by debt – $70bn of it – much of that comes from massive infrastructure projects that have positioned it well for the future. Infrastructure spending is old hat in Dubai. When Sheikh Rashid built the Jebel Ali port in 1979, to much criticism, he made a big bet – and won. Today, Jebel Ali helps place Dubai among the 10 largest container terminal port cities in the world. When Sheikh Rashid chose to take on a big loan in the late 1950s to dredge the Dubai creek to allow for larger ships, he was panned. It worked. The ships came, and so did the merchants.

The pre-oil emirate grew and flourished.

The same can be said of its airports, airlines, telecommunications and broadband networks, metro system and expanded highways. There is no city within striking distance of challenging Dubai as a hub in a region that extends beyond the Arab world to 1.5bn people. Its airport is among the 10 busiest for international passenger traffic. It is also among the world’s top 15 air cargo hubs.

http://www.ft.com/cms/s/0/0a38911a-0e88-11de-b099-0000779fd2ac.html?nclick_check=1

Yup Dubai is the dominant city as a logistics hub in Asia and every MNC's supply chain does have Dubai in its plan of delivering tangibles to the European, wider middle east and asian markets.

No arguments about that surely

sage & onion wrote:Robby, what a lot of people do not realize is that Dubai has an incredible amount of Import / Re-export trade. When you walk along the creek in Deira and see those Dhows all moored 6 deep, this is Import / Re-export trade in real life. This however is just a small part of it, literally thousands of Containers are shipped out of Jebel Ali Port every month to destinations far and wide, most people are completely unaware of this facet of Dubai.

Thanks Sage. I indeed seen some information regarding re-export but I could not find any significance of that trade segment in todays creek activity. I will add it soon.

edit: Done.

Red Chief wrote:JA free zone was running pretty well at least before crisis. If you had wanted to established company there you would've waited more than a year for a ware house.

So a new air cargo terminal there together with existed state of the art ocean port was realy great idea.
I have no idea what is the sence to build passenger terminal there.
I don't know what are they going to do with existing air port, Cargo vilage and Dubai airport Free zone, where they have invested huge money... At the same time they startted to build Terminal 3 and airport in J. Ali.

Actually Dubai is not a stop on the way from Europe to Far East only, but a big hub for trading with Middle East, Iran, Central Asia and Africa. Emirates is also very active in India. Due to undeveloped Indian road infrastructure it's easier to deliver goods to the big cities directly with out using hubs and road network like Amsterdam and Franfurt in Europe. So Emirates has strong positions in India as well.

If you read the piece, you had all the answers to your questions!

Dubai will keep the current airport and Dubai village for its own UAE domestic gateway activities. The second airport (Al Maktoum Int.) will be used for foreign carriers only. So its basically a transit hub for the Asia Pacific, Europe and Africa region. Air transportation is to suplement slower sea cargo activities in the Gulf and other destinations in use today.

quatroporte wrote:I am quoting this section from the last FT article

Though Dubai is racked by debt – $70bn of it – much of that comes from massive infrastructure projects that have positioned it well for the future. Infrastructure spending is old hat in Dubai. When Sheikh Rashid built the Jebel Ali port in 1979, to much criticism, he made a big bet – and won. Today, Jebel Ali helps place Dubai among the 10 largest container terminal port cities in the world. When Sheikh Rashid chose to take on a big loan in the late 1950s to dredge the Dubai creek to allow for larger ships, he was panned. It worked. The ships came, and so did the merchants.

The pre-oil emirate grew and flourished.

The same can be said of its airports, airlines, telecommunications and broadband networks, metro system and expanded highways. There is no city within striking distance of challenging Dubai as a hub in a region that extends beyond the Arab world to 1.5bn people. Its airport is among the 10 busiest for international passenger traffic. It is also among the world’s top 15 air cargo hubs.

http://www.ft.com/cms/s/0/0a38911a-0e88-11de-b099-0000779fd2ac.html?nclick_check=1

I'm not sure Quatroporte, what you intend to say. In my latest article: Dubai's Economic Slump http://invezztor.blogspot.com/2009/03/d ... slump.html, I mentioned the debt issue, the 10 billion credit facility (making it 70 billion). All correct I see.

As for its mainport function, Dubai is currently among the top 15 air cargo hubs/gateways. But the future masterplan of Dubai World Central represents a position in the top three and by looking at the proposed plans now, they will be number one in worlds air cargo hub transportations around 2020. The DWC project masterplan is envisioned to sustain the UAE growth to around 2050 and cover a consumer base of approx 1.5 to 2 billion consumers (1/4rd of worlds population). Thats massive for a single cargo hub.

Its all here: http://invezztor.blogspot.com/2009/03/d ... ay-of.html

RobbyG wrote:

quatroporte wrote:I am quoting this section from the last FT article

Though Dubai is racked by debt – $70bn of it – much of that comes from massive infrastructure projects that have positioned it well for the future. Infrastructure spending is old hat in Dubai. When Sheikh Rashid built the Jebel Ali port in 1979, to much criticism, he made a big bet – and won. Today, Jebel Ali helps place Dubai among the 10 largest container terminal port cities in the world. When Sheikh Rashid chose to take on a big loan in the late 1950s to dredge the Dubai creek to allow for larger ships, he was panned. It worked. The ships came, and so did the merchants.

The pre-oil emirate grew and flourished.

The same can be said of its airports, airlines, telecommunications and broadband networks, metro system and expanded highways. There is no city within striking distance of challenging Dubai as a hub in a region that extends beyond the Arab world to 1.5bn people. Its airport is among the 10 busiest for international passenger traffic. It is also among the world’s top 15 air cargo hubs.

http://www.ft.com/cms/s/0/0a38911a-0e88-11de-b099-0000779fd2ac.html?nclick_check=1

I'm not sure Quatroporte, what you intend to say. In my latest article: Dubai's Economic Slump http://invezztor.blogspot.com/2009/03/d ... slump.html, I mentioned the debt issue, the 10 billion credit facility (making it 70 billion). All correct I see.

As for its mainport function, Dubai is currently among the top 15 air cargo hubs/gateways. But the future masterplan of Dubai World Central represents a position in the top three and by looking at the proposed plans now, they will be number one in worlds air cargo hub transportations around 2020. The DWC project masterplan is envisioned to sustain the UAE growth to around 2050 and cover a consumer base of approx 1.5 to 2 billion consumers (1/4rd of worlds population). Thats massive for a single cargo hub.

Its all here: http://invezztor.blogspot.com/2009/03/d ... ay-of.html

I was trying to point that dispute Dubai having all those credit issues and development projects being canceled... Dubai is still one of the top players.

I have read your article... and you have made a well study through out... you have to remember, the new Jabel-Ali Airport is on hold and we don't know if this project will see light at the end.

I am a very positive person about Dubai and I am glade there are people like you who stand out for it. we all are riding the storm and no one knows how things will look like in 5 or 10 years later

RobbyG wrote:Dubai will keep the current airport and Dubai village for its own UAE domestic gateway activities. The second airport (Al Maktoum Int.) will be used for foreign carriers only. So its basically a transit hub for the Asia Pacific, Europe and Africa region.

80 Billions? Huh... It will be the most expensive refueling pump ever made....

You as a Bachelor of Engineering probably know the cost of new HKG airport, that was built in an artificial island in deep waters...

The Dubai's amount is more close to permanently sinking Osaka airport....

I don't think that they have a plan for returning so huge investments...

Roy, it's clear that you have never seen Dubai International to speak that it could be used for domestic activities only... It looks that they have already invested at least 10 billions in the structure....

Red Chief wrote:

RobbyG wrote:Dubai will keep the current airport and Dubai village for its own UAE domestic gateway activities. The second airport (Al Maktoum Int.) will be used for foreign carriers only. So its basically a transit hub for the Asia Pacific, Europe and Africa region.

80 Billions? Huh... It will be the most expensive refueling pump ever made....

You as a Bachelor of Engineering probably know the cost of new HKG airport, that was built in an artificial island in deep waters...

The Dubai's amount is more close to permanently sinking Osaka airport....

I don't think that they have a plan for returning so huge investments...

Roy, it's clear that you have never seen Dubai International to speak that it could be used for domestic activities only... It looks that they have already invested at least 10 billions in the structure....

To be precise: current estimates are $82 billion for the project...but with current devaluation of the dollar I expect the costs to rise in the future based on inflation and higher commodity prices so I added a range of $80-90 billion.

As for Dubai International Airport (DXB) and Dubai Village; This is currently the only airport in Dubai that supports its growth.
Later on, when Al Maktoum Int. is complete you will see operations of Emirates airlines remain predominantly on DXB as well as other airlines that do trade with Dubai and the UAE for its direct domestic needs and re-export to Iran and other Gulf regions (how is that called....back-land?).
If you understand the difference between a Gateway and a Hub transportation network, than you have a much better view of what I mean. You might even find a slight error in my writing then....ooppzz now they start looking....

Rob,
I don't criticize your article. It's only information message...thanks God.

I simply don't understand why they need "a passenger capacity of almost double the world's busiest passenger airport (Hartsfield-Jackson Atlanta International Airport)" in J. Ali.

Red Chief wrote:Rob,
I don't criticize your article. It's only information message...thanks God.

I simply don't understand why they need "a passenger capacity of almost double the world's busiest passenger airport (Hartsfield-Jackson Atlanta International Airport)" in J. Ali.

Oh, I don't mind criticism at all, be it constructive critisism.
I take every comment into consideration and explain my thoughts were needed. I hope you understand what I meant to say.

Well, its all about ambition. Thats for sure.
Like I said in the 'utter nonsense' topic, the growing middle class in China and India is becoming a true consumer market. And this is a growth market unforeseen in history. Its significance can simply be put in perspective in population numbers.

Europe currently inhabits 250+ million consumers.
The US has about 200 million possible consumers (bit down now aint it )
China has a rising middle class with approx 1 billion plus consumers. See the significance of every individual spending 100 bucks a month?
India the same and I haven't yet spoken about countries as Vietnam, Korea, Taiwan you name it !!

Dubai is preparing for a part in that consumer base and wants to make big money in trade. Something they always have done in history, next to a (relatively) short period of time with gargantic oil revenues after the late sixties

Can't blame Sjeikh Mo for having a good vision. A bit of a large risk appetite though, but big brother Abu Dhabi comes to the rescue. Its a good lesson for Dubai.
The future of Dubai is basically already laid out due to its geographical position looking at the worlds map. Its about taking opportunities and lead the way as pioneers always do.

Its as simple as that.

Red Chief wrote:I simply don't understand why they need "a passenger capacity of almost double the world's busiest passenger airport (Hartsfield-Jackson Atlanta International Airport)" in J. Ali.

Red Chief is making sense... you raised a very good question

maybe thats Dubai's vision...

RobbyG wrote:Europe currently inhabits 250+ million consumers.

OFF... Inhabitance of Europe is more than 700+ million though. What do you mean speaking about consumers there?

100 bucks per month is a big amount in continental China... Wemen on a conveyor at Guangzhou have wage 30 bucks per month. Most of them are from Sichuan and another inner lands where wage is even lower... There are less than 100 million real customers there...
The situation in India is even worse I think...

Red Chief wrote:

RobbyG wrote:Europe currently inhabits 250+ million consumers.

OFF... Inhabitance of Europe is more than 700+ million though. What do you mean speaking about consumers there?

100 bucks per month is a big amount in continental China... Wemen on a conveyor at Guangzhou have wage 30 bucks per month. Most of them are from Sichuan and another inner lands where wage is even lower... There are less than 100 million real customers there...
The situation in India is even worse I think...

Yes, you are talking about current conditions. But I'm talking about the possible consumer base in the near distant future, just like the Dubai World Central masterplan entices.

Currently, everybody is in pain or will be facing financial pain as unemployment is rising across the globe...

RobbyG wrote:Yes, you are talking about current conditions. But I'm talking about the possible consumer base in the near distant future, just like the Dubai World Central masterplan entices

Sorry for lack of imagination but there is no sign of this future nowadays.

How all those gigantic mass of people (you multiplied to a random amount of money) relates to Dubai?

So far it has been a game in one gate: Japanes consumes mostly Japanes goods, Korean consumes Korean goods only, Chinese predominantly consums Chinese goods. The thing that all those nationality have in common is export to Europe and US.

In the near distant future it is not going to change...

Now all cargo aircraft flys from Europe to Far East merely empty. The situation is so bad as even your cargo carrier Martin Air delivers frut and vegetables to the UAE to have any payload on the way from Europe to the Far East.

Before soaring oil prices for relatevelly small shipment 1-2 tonns from AMS to Sharjah I have the same freight charge as for the Ocean freight... The freight charge from HKG to SHarjah was 5 times larger although the distance is similar...

Well, to keep it simple:

Every consumer wants a diswasher from Korea or Italy (for instance), an car from Germany, cooking stoves and personal care items from the Netherlands, you name it. Every item or service that is needed involves some type of transport or backorder. Dubai is will earn money in that feedthrough process, be it by ship, by plane or by truck. Even if a product passes Dubai airports for refueling or maintenance (especially in the future) they earn money. Transit cargo movements or added value services (packaging, redistribution etc), again they earn a bit of money.

Do I make sense to you? Because it is the way an economy works.

Can you explain to me what you mean in your last statement about freight charges from HKG being 5 times more costly that from AMS?

As you put it, it means that Europe is more competitive in pricing, which in my opinion and position is a very good sign for Europe.

It means only one thing you can't understand there is no payload from Europe to the Far East at all, although the same aircrafts from HKG/PVG/TPE to AMS/FRA flys fully loaded... but unfortunarely the aircrafts can't fly from the Far East to Europe only they have to return back...

Some cargo airlines implements round the World trips to avoid flying with out payload....

You explain me a common theory but the practice is different as usual...

I get your point. Thanks.

That is a major problem for some airlines. But I have a friend working at Martinair (recently become a wholly owned company of Air France/KLM) that says Martinair doesn't have issues yet as they also fly military cargo for governments, also fruit and vegetables, indeed. It doesn't matter what you fly, as long as you fly in aviation.

KLM Cargo for instance is able to fly a route fully loaded and get back empty without making a loss. They even make a slight profit sometimes. This is very uncommon and depends completely on how you manage your freight rates, flight schedule, landing rights, planning, wages etc etc.

You are right that this is an unsustainable situation where are lot of companies are going to get hurt. And the airline industry is getting hard hit momentarily for sure!
However an airlines has to fly a certain destination regularly otherwise they lose the landing slots (are being auctioned off regularly). So lots of companies fly empty on London Heathrow from everywhere in the world, just to keep the particular expensive landing right/slots.

But, having said that. No freight, no money. So we will see bankruptcies coming very soon I suppose.

I get it you work at Sharjah Airport? Dnata perhaps?
Maybe you can tell me which airline companies are flying without payload, or almost next to nothing?

sage & onion wrote:Robby, what a lot of people do not realize is that Dubai has an incredible amount of Import / Re-export trade. When you walk along the creek in Deira and see those Dhows all moored 6 deep, this is Import / Re-export trade in real life. This however is just a small part of it, literally thousands of Containers are shipped out of Jebel Ali Port every month to destinations far and wide, most people are completely unaware of this facet of Dubai.

You will need to send Robbytard photos of Deira dhows and Jebel Ali port as, remember, he has never been to Dubai. If he had some first hand knowledge of what went on in Dubai he could then probably provide some useful information.

I told you common practice long time before crisis... All airlines had flied at next to nothing from Europe to the Far East before soaring prices for fuel and implementing fuel surcharge...

Actually I haven't worked in Sharjah airport. I have been transporting some goods. That's why I know air freight rates quite good...

Red Chief wrote:I told you common practice long time before crisis... All airlines had flied at next to nothing from Europe to the Far East before soaring prices for fuel and implementing fuel surcharge...

Actually I haven't worked in Sharjah airport. I have been transporting some goods. That's why I know air freight rates quite good...

I heard ya. The financial crisis started back in August 2007. First signs of recession came up back then. Fuel high was in June/July 2008, $147 a barrel oil.
Prolonged periods of no cargo are futile. Thats why I expect some airlines with less proper management to go down under anytime soon. There's a wave of bankruptcies in all sectors and airlines are one of them.

RobbyG wrote:

Red Chief wrote:I told you common practice long time before crisis... All airlines had flied at next to nothing from Europe to the Far East before soaring prices for fuel and implementing fuel surcharge...

Actually I haven't worked in Sharjah airport. I have been transporting some goods. That's why I know air freight rates quite good...

I heard ya. The financial crisis started back in August 2007. First signs of recession came up back then. Fuel high was in June/July 2008, $147 a barrel oil.
Prolonged periods of no cargo are futile. Thats why I expect some airlines with less proper management to go down under anytime soon. There's a wave of bankruptcies in all sectors and airlines are one of them.

Any predictions as to which airlines we should expect to go under?

I'm not into predictions if you don't mind. Our free market economy already had to be sliced in half by now but governments across the board feel they should bail everything out, or at least keep them on a stimulus leash...

If the free market would have its full authority, some of the US full service carriers would have been filing for bankruptcy protection already.

Anyway, look at this. Might give you an idea about the regions where the cash burning airlines are presiding.
http://www.centreforaviation.com/news/2 ... mber/page1

Emirates-Etihad merger rumours - Is there room for consolidation in the Middle East?
28th November, 2008
International premium demand plummeted in the Middle East in Sep-08, while IATA predicts combined Middle East airline profits of just USD200 million this year. Taking out Emirates’ strong contribution most of the region’s 30+ carriers are likely to incur deep losses this year. So is consolidation the next step for the Middle East as a response to the sharp slowdown in global and regional economies? There have also been reports growing financial pressures in the UAE could even prompt a merger between powerhouse airlines Emirates and Etihad, to create an Air France-KLM style force in global aviation.

This rumour has already been officially denied.

As far as I read Emirates (EK) was the only profitable airline among major ME ones before crisis.... Etihad can't compare with EK in size...

I guess the merging could mean actual sale EK to AD.

At the other hand Emirates has launched the second regular flight per day to Moscow that is very surprised me....

Bora Bora wrote:

sage & onion wrote:Robby, what a lot of people do not realize is that Dubai has an incredible amount of Import / Re-export trade. When you walk along the creek in Deira and see those Dhows all moored 6 deep, this is Import / Re-export trade in real life. This however is just a small part of it, literally thousands of Containers are shipped out of Jebel Ali Port every month to destinations far and wide, most people are completely unaware of this facet of Dubai.

You will need to send Robbytard photos of Deira dhows and Jebel Ali port as, remember, he has never been to Dubai. If he had some first hand knowledge of what went on in Dubai he could then probably provide some useful information.

Just don't include Jebel Ali Port, even if you see containers being moved there now, some are actually empty. Unlike last year where cargo ships had to wait for several days moored at sea just to load/unload their cargo due to sheer number of shipment.

Since January, there's almost 80% reduction of movement of cargo to and fro Jebel Ali port.

sage & onion wrote:Emirates-Etihad merger rumours - Is there room for consolidation in the Middle East?
28th November, 2008
International premium demand plummeted in the Middle East in Sep-08, while IATA predicts combined Middle East airline profits of just USD200 million this year. Taking out Emirates’ strong contribution most of the region’s 30+ carriers are likely to incur deep losses this year. So is consolidation the next step for the Middle East as a response to the sharp slowdown in global and regional economies? There have also been reports growing financial pressures in the UAE could even prompt a merger between powerhouse airlines Emirates and Etihad, to create an Air France-KLM style force in global aviation.

This rumour has already been officially denied.

This is highly unlikely to happen. Both airlines have a good financial base, Etihad and Abu Dhabi offcourse the best of two. Emirates has the largest network and capacity expansion program and that would make Etihad go under authority in a merger with Emirates. Abu Dhabi doesn't like this being the largest funder and most healthiest emirate. AD has its own plans in development for Etihad.

Both airlines don't benefit from a merger, except from some minor cost savings options like shared hedging of fuel. Emirates is an established airline with signifcant network while Eitihad is just starting the growth profile, both have almost no older aircrafts, only next generation planes.

At max I think a cooperation in route network is probable but merger...No. Airlines are both in difference stages of development. Merger will not be beneficial for them.

Lets see what this crisis leads us to. Might change all of a sudden in this environment.

DP World: Trade down broadly, no sign of recovery

Mar 25, 6:41 AM (ET)

By ADAM SCHRECK

DUBAI, United Arab Emirates (AP) - Cargo handler DP World said Wednesday that business at its ports dropped 8 percent in the first two months of this year as global trade evaporates because of the global economic slump.

The slowdown shows no signs of easing. The CEO of the Dubai-based company, one of the world's biggest and most geographically diverse port operators, said market conditions are changing on an almost daily basis, making it impossible to predict how badly business might suffer this year.

"Volumes are just disappearing," Chief Executive Mohammed Sharaf said in a round-table with reporters. "It's not that we are losing our business to our competition. ... It's just not there. It's gone."

Trade at the company's ports in the developing world is faring better than in more established regions, where it has seen double-digit declines, he said.


The bleak outlook comes despite strong 2008 sales growth for the rapidly expanding company.

DP World said it earned $530.7 million last year, compared with $1.15 billion in 2007, when it booked a large gain on the sale of U.S. ports to American International Group Inc. (AIG) amid a political firestorm.

After adjusting for that sale and other items, DP World's profit from continuing operations rose to $620.8 million from $419.7 million in 2007.

Revenue jumped 20 percent year-over-year to $3.28 billion, helped by increased capacity from new operations in Yemen, Senegal, Egypt and Spain.

To cope with the growing drop in shipping, Sharaf said DP World is aiming to cut at least 3 percent of fixed costs from what executives say is already a lean organization, and has laid off a "minimal" number of workers. It also has agreed to accept late payments from some shipping companies struggling to make ends meet in the short term, he said.

The company is also delaying the addition of about 50 percent of new capacity it had planned. Sharaf said all new projects except those due to come online soon are "under review."

That includes expansion of the company's main port in Dubai and a massive complex known as London Gateway set to become Britain's first new deep-sea container port in more than a quarter century.

DP World recently opened a new container port in the tiny African nation of Djibouti and plans to complete cargo terminals it is building in Callao, Peru, and Ho Chi Minh City, Vietnam by early next year.