Ground offensive

FedEx may be flying high in the region and have a wealth of new aircraft in the pipeline, but Hamdi Osman, Senior Vice President of FedEx Middle East, Indian Subcontinent and Africa, is keeping his eyes firmly fixed on the ground

Hamdi Osman, Senior Vice President of FedEx Middle East, Indian Subcontinental and Africa

FedEx’s regional head Hamdi Osman may always have one eye on the sky, but his head is nowhere near the clouds. The straight-talking Senior Vice President is gearing up for the day when goods will travel from Dubai to Europe by road.

“The next war in the airfreight business will be on the ground,” he says with a confidence that belies the contradiction.

“Once you get the bottle-necks in Saudi cleared, then there’s nothing stopping you going through Jordan, Syria, Turkey, Germany and all the way up to the UK. If you can truck it from Dubai to Germany, you will probably be able to get it faster than through the Suez and Mediterranean – at half the cost.”

This summer, FedEx started putting that plan into action by expanding its operations within the Global Logistical Services bonded area at Bahrain International Airport.

FedEx added five additional trucking routes and made improvements to the facility, including a drop-off point for the FedEx World Service Centre. These changes provide easier access to customers needing to quickly deposit their shipments.

“The expansion signals the importance of Bahrain as major trucking gateway for FedEx to neighbouring countries,” says Osman.

“The extension is a direct result of the trust customers place in us, and the additional demand for the fast and reliable services we provide across Bahrain and the rest of the GCC.”

Paris CDG remains the main hub for FedEx’s Europe, Middle East and Africa (EMEA) division, with sub-hubs in Stansted, Dubai and Mumbai. It connects with Subic Bay and China eastbound and the global hub in Memphis westbound.

This arrangement has served FedEx well, although, with the Middle East and India booming, Osman is always looking to boost efficiency.

“A couple of years ago, there was demand on direct point-to-point between Asia and Europe and we used Almaty as an exchange hub – it saved us 25 minutes rather than coming into Dubai,” he says. “But Dubai will always be the main hub between east and west and this is because of the trade and its position between Asia and Africa. Dubai has become a gateway to India too – I say it’s now the ‘Hong Kong of China’.”

Dubai’s ongoing success is down to two reasons in Osman’s eyes – it is a major re-export hub, attracting goods irrespective of where they are manufactured, and it is also a magnet for sea-air movements, which can cut days, if not weeks, off delivery times.

The most recent boom has been further fuelled by the meteoric growth in the region’s construction business, affecting not only Dubai but also Bahrain, Qatar and Saudi Arabia.

“A lot of investment is coming back and this is one of the major driving forces in growth in the region,” he says. “If you look at the four integrators, everyone is in double-digit growth. We’re all benefiting. The key that differentiates us from the rest is we use our own flights, planes we land from CDG and on to Asia. No one else can do it on that magnitude. We have expanded into Iraq and Afghanistan and now, if you look at the map, Iraq, Qatar, Saudi – these are the emerging markets. You’d have never seen that kind of movement five years ago.”

Osman reels off facts and trends from a recent IMF report with the same ease one of the company’s 275,000 staff would scan a parcel: Saudi, the GCC’s largest consumer market, is up 60 points; Egypt is number one in growth year-on-year and cutting down the number of days it takes to establish business; Morocco is talking about zero rates clearance with the EU, and Tunisia will likely follow. Jordan is also doing well after signing a free trade agreement with the US.

But the GCC, for all its boom, has plenty of challenges at a macro level, principally with regards to common currencies, dollar pegging and variable tariffs.

“I’d probably be more of a champion of common tariff rather than common currency,” says Osman. “The tariff is really what makes or breaks our business these days. The UAE came up with the 4% rate on all products, and now 5%, which makes it much easier for our businesses – some companies still have 17,000 different tariff codes which makes it difficult.”

Increased competition is also being felt on the ground and in the air, with Empost recently muscling on in the integrators’ territory. “The market is large enough to have many new players, the only question I’d ask is ‘what is Empost really after when they grow up?’”

More pertinently, now that Empost has joined the integrators’ scene, Osman wants the 10% levy that express operators pay scrapped.

“We are the only industry besides tourism that has to pay [the levy],” says Osman, who started FedEx corporate life as a truck washer in 1978. “The reason why we paid the charge was because we were taking business away from the post. If the UAE has open skies and wants to be a central hub, then these are issues that have to be addressed. It’s the biggest concern of express operators.” From Dubai, FedEx operates six frequencies to Europe, with flights to Paris complemented by a subcontinental loop which encompasses Dubai-Delhi-Mumbai- Dubai.

Indian westbound trade is currently growing very fast and Dubai effectively serves as the West Asian hub. Singapore serves Asia proper, as India is yet to establish a major hub. Centrally located Nagpur has been mooted, but its infrastructure will take years to develop. Hyderabad is another possibility, but it is further south.

Another hot topic is the upcoming Dubai World Central. While clearly a fan of the project – “you have the combination of air, sea and ground in one unit. It’s not made for 2010 or 2015, but 2050” – Osman has yet to put pen to paper with any major investments. “We have marked our place but I won’t make a decision to build or not to build until the million dollar questions are solved – how are we going to connect, and how long is it going to take me between the two airports? If all the cargo is here, and all my business and customers are here, will that make sense? It might be easier for me to go to Sharjah. We all love Dubai, but it’s something that’s got to be looked at.”

FedEx is about to start receiving the first of a staggering 95 B757s, with deliveries starting from March/April next year. It has also signed an order with Boeing for 15 B777Fs last year.

The fuel-efficient B757 model offers greater payloads than previously offered by Boeing and Airbus, thereby providing better operational efficiencies. “I think the medium-sized aircraft will really help tremendously our hub and spoke network. We’re seeing more inbound demand from Asia to the Middle East, the outbound business hasn’t been there yet. But it’s going to come, especially with China announcing big investment with Africa.”

The fastest growing area of Africa is the central belt between Nigeria and Kenya, notes Osman, and he commends the Chinese for making commitments on the continent now. “I think they will yield the fruit of their labours there within three of four years and see more two-way traffic. Africa will be the next frontier after the Middle East.”

BUYING AND EXPANDING FedEx Corp has had a busy year on the acquisition front, snapping up the express business of the DTW Group, its joint venture partner in China, its global service participant PAFEX in India and Flying Cargo Hungary. It is also busy re-branding its recently acquired UK domestic express company, ANC, and all 2,000 vehicles and 3,000 uniforms will sport the FedEx logo by next autumn.

In March, FedEx expanded its International Priority Freight Service to an additional 39 countries within its EMEA region. With access to over 110 countries and territories this expansion increases express freight coverage to more than 90% of the world’s GDP. Customs clearance is included in the transport rate, and shipments are backed by a FedEx Money-Back Guarantee.

This priority service is supported by leading-edge technology, which allows customers to increase efficiency in supply chain management, and provide complete transparency into the movement of goods.

The FedEx Powerpad wireless technology is also being rolled out across the UK, Belgium, Spain, Germany, Italy and France, as part of a global plan to deploy 50,000 devices to FedEx Express couriers in more than 60 countries this year. The trendy pad enhances customer service by providing near-instant wireless access to the FedEx network. It enables couriers to send and receive instant information when away from their delivery vans.

FedEx has invested more than $200 million globally in the last five years in new wireless technologies and service implementation. The company continues to develop and use solutions that improve reliability and productivity, and make shipping information readily available to employees and customers worldwide.

The company pioneered the use of wireless technology for shipping more than 25 years ago when it created its own private radio network, one of the world’s largest. FedEx was the first to offer real-time package-tracking and drop-off location information via most types of PDAs and wireless phones. And with Osman at the helm, FedEx is likely to continue to pioneer.