The Gulf-Cooperation Council (GCC) region, which includes all the Persian Gulf Arab states except Iran, is a profitable market for the global air cargo sector. New reports indicate that the region could become more lucrative, as the GCC is set to record strong e-commerce growth in the next few years.
Lucrative region
The GCC possesses a thriving collective economy, which according to EY – a banking sector specialist, could become the sixth biggest economy on earth by 2030. The region, therefore, has high rates of consumer spending, for example people in the GCC spent US$9.3 billion on beauty and personal care products alone in 2016, a rise of 10% from the year before. This is proving beneficial for air cargo.
As internet coverage rises in the GCC, more consumers are choosing to buy products online. This has provided new business for carriers, as they can supply the speedy product transport services, which many people have come to expect in the digital age. The GCC’s air freight sector is a US$7 billion market and the Middle East, which includes the GCC, saw its air freight volumes keep growing in 2016.
E-commerce growth
It looks as though the GCC’s air cargo market will record further growth in future, as a new report from consulting firm A.T Kearney argues that the region could become the fastest expanding e-commerce market on earth. According to Freight Week, an industry portal, in 2015 online shopping contributed US$5.3 billion (0.2 of its gross domestic product), to the GCC’s economy. But A.T Kearney forecasts that this contribution will increase almost fourfold, to a massive US$20 billion, in the period to 2020.
Commenting, A.T. Kearney Partner Laurent Viviez said: “We expect the growth of e-commerce in the GCC to transform the future of businesses, economics and lives across the region – but only with the right set of enablers in place… And it doesn’t rule out traditional retailers, who can be on the winning side of e-commerce by adopting an omni-channel approach. We see the future for the sector as not digital-only but ‘physical with digital’ – traditional retailers can really tap into this.”
Serious potential
Speaking out on this research, Ignazio Coraci commented: “At ASC Cargo, of which I am CEO, we perform cargo and ground handling services for GCC-based carriers, such as Kuwait Airlines. We have seen first-hand how the rise of e-commerce has boosted the region’s air freight sector, as consumers increasingly choose to buy goods online, generating more business for carriers in the GCC region.
“It is clear, therefore, that if A.T. Kearney’s forecasts prove accurate, and the GCC’s ecommerce sector expands to US$20 billion by 2020, air freight firms could benefit from the additional income generated. Also, air cargo’s fortunes could be boosted further, by Amazon’s recent decision to buy Souq.com, the largest online marketplace in the Arab world. With Amazon’s technological investment and expertise, Souq.com will be able to improve their services, making it easier for GCC consumers to purchase goods online, and creating more business for air cargo, so the future is looking bright for the sector.”