Can you provide us a qualitative overview of the performance of Gulf Warehousing Company (GWC) in 2015 and what are your expectations for performance in 2016 given current global market conditions?
The company is in a strong position to capitalize on the high priority the state is placing on diversifying income sources, and increasing the participation of the private sector in various aspects of economic activity and the overall development of the state. As the state has secured the financing for so many projects, while the total expenditure on these projects in 2016/2017 expected to be over 50% of the total expenditure in the budget for 2014/2015, which rounded out at QAR 218.4 billion, GWC is confident that the logistics market will continue to thrive, allowing them to achieve further milestones in 2016, and maintaining its shareholders and clients expectations.
What is the current total warehousing capacity available in Qatar and what is the current demand for warehousing? How much of the total warehousing on offer is provided through GWC?
GWC has a strong footprint in logistics infrastructure of over 2 million square meters, representing state of the art warehousing and distribution centers, open yards, and container yards in addition to maintenance workshop, data center and staff accommodation. We are the pioneers in the field of real estate and logistics infrastructure development, as we continue to bid on and enter into new logistics hubs projects, such as our latest GWC Bu Sulba Warehousing Park expected to be operational by Q1 2017. We continue to grow our assets by developing our locations, such as our expansions of our Ras Laffan Industrial City site and the Logistics Village Qatar Phase V expansion, offering the very latest, state-of-the-art storage and supply chain solutions.
What are the major projects currently under development to increase warehousing space in the market given an often cited lack of warehousing and storage capacity in the country?
The various projects handled by the Economic Zones Company, or Manateq, aim to strongly address the lack of logistics infrastructure and economic zones in the State of Qatar. The GWC Bu Sulba Warehousing Park in particular aims to fill a gap in the targeted solutions aimed at small and medium enterprises in the logistics field.
Furthermore, what impact has depressed oil and gas prices had on shipping operations in Qatar? How has this impacted your operations specifically?
With the hydrocarbon industry facing a new reality, it fell upon the non-hydrocarbon industries to make up for the gap, having for the first time surpassed the 50% contribution mark to the GDP of the nation. These industries have worked hard to deliver, and have brought about a strong 7.3% growth in real GDP in 2015, with transport contributing to this growth and representing 47% of the current $111 billion of currently planned projects in Qatar.
Having established a strong foundation in the local economic landscape, GWC has been able to deliver a strong 32% growth in net profits, maintaining its financial foothold despite the current economic environment.
Given changing market dynamics in the international maritime industry due to decreased output from markets such as China, what is the development strategy for GWC going forward? Which of your business units do you see as offering the greatest potential revenue sources in 2016?
In light of the changing economic trends, the Company has worked diligently to formulate a strategic document that will guide us and ensure steady growth through the next five years. We have therefore chosen to focus on our local market in order to maximize the utilization of our resources while eyeing selective opportunities in the region.
With a rather well established maritime industry in the country, it is often noted the logistics and warehousing segment has been underserved. Where do you identify the need to further invest in this segment? Is there potential for foreign investment in this sector and does GWC in particular have specific development plans going forward in this arena?
Indeed, we will always enforce and empower our local presence in the segment. Most recently, we have entered into an agreement with UPS, becoming their Authorized Service Contractor in the State of Qatar. We are definitely working towards increasing our presence in the courier segment, an industry that has received much attention lately, with even Qatar Airways Cargo exploring the possibility of adding direct delivery services.
Preparing in Times of Plenty for Times of Mean
Food security addresses a fundamental human need to know that the food and drink we are consuming will do us no harm. As part of the National Vision 2030’s efforts to ensure the Qatar’s human development through enacting health initiatives across the board, ensuring the safe handling and storage of food has become one of the nation’s priorities. Gulf Warehousing Company has done its part to provide the best cold storage solutions possible to the nation – here are some of the considerations that must be taken into account when providing refrigerated and chilled warehousing.
The Right Qualification
Ensuring that the location you have chosen to store your items has been properly inspected and certified is high on the priority list. The industry recognizes both the ISO 22000 and the Hazard analysis and critical control points (HACCP) as the best industry practices, both addressing the various biological, chemical, and physical hazards that might endanger food safety and provide processes to address these risks. It is important to note that these are certifications that are given to sites, not organizations, which means that it is the site that is inspected and certified, such as our facilities in Street 15, Street 41, and the Logistics Village Qatar.
The Right Temperature
It is important to store every food item at the right temperature to ensure both its safety and its structural integrity. Ice Cream might crystalize if it’s not stored at a temperature of -25 C. Frozen meats and vegetables must be stored at -18 C, whereas general food items such as cheese or pickles do best at +3 C. Finally, confectionary items such as chocolate are stored at +18 C, again to ensure its safety but also to ensure the preservation of flavor. Facilities that offer more than one storage temperature are separated into chambers, with the temperature in each chamber closely monitored.
The Right Equipment
Gulf Warehousing Company has found that the Very Narrow Aisle (VNA) racking system, which stores more items in less space by narrowing the space between the racks, is perfect for food storage. In refrigerated and chilled environments, however, modifications have to be made to most VNA systems, in order to avoid the hydraulics and oils in the systems from freezing and seizing up. For our employees, we find that thermal wear imported directly from the UK ensures their safety in these extreme temperatures.
As part of the National Vision 2030’s efforts to ensure the Qatar’s human development through enacting health initiatives across the board, ensuring the safe handling and storage of food has become one of the nation’s priorities.
The Right Practices
Our employees are instructed in the best practices and systems to ensure that food safety is never compromised. Among the most important concepts in food storage is First Expiry, First Out (FEFO), which organizes the stored food items by expiry date, and ensures overall freshness of the food items by distributing the foods with the earliest expiry dates first for consumption. These expiry dates are managed and monitored with a specifically designed Warehouse Management System (WMS), which tracks the whereabouts and expiry dates of the stored items through a number of hand-held RF terminals which report back to a central server. Our clients can then refer to reports published in real-time to see where there items are at any time, providing complete transparency.
Battle for the Skies: American protectionism targets GCC carriers
Several US airline carriers, led by Delta, United, and American Airlines, have engaged in an orchestrated campaign, suggesting that GCC carriers, and in particular Emirates, Etihad, and Qatar Airways, have benefited unfairly from nearly USD 40 billion in subsidies from their respective governments over the past decade. The American carriers have established an organization called American for Fair Skies, lobbying the US government to curtail the GCC carriers’ direct flights into the United States, and alleging that the Gulf carriers are operating on an uneven playing field. “This unprecedented level of support allows the Gulf airlines to operate not as businesses, as US airlines do, but as arms of their well-heeled predatory governments,” the organization states on its website.
The GCC carriers, for their part, have retaliated, stating that consumers enjoy their award-winning premium service and benefit from their global connectivity all across Asia, Africa, and the Middle East.
The independent Skytrax airline ratings agency seems to agree: The Gulf Big Three made it to the top 10 list at the agency’s prestigious 2014 World Airline Awards, while the U.S. “Big Three” barely cracked the top 50: Delta came in at 49, United at 53, and American at 89.
The Gulf Big Three have achieved several milestones of late: in 2014, the Dubai International Airport surpassed London Heathrow to become the world’s busiest airport, measured in terms of international passengers. They have also emerged as major global carriers, capable of going toe to toe with the industry’s giants. Blessed with fortunate commercial geography, placed within a four-hour flight’s distance from one-third of the world’s population, and an eight-hour flight’s distance to two-thirds, the Gulf carriers strategically developed their airports as hubs to make use of their comparative geographic advantage.
Their rise has also coincided with the emergence of a new global middle class and
an attendant surge in global air travel. Unsurprisingly, the fastest-growing market in air travel comes from emerging economies – places that the Gulf carriers serve well. According to the Airbus’s Global Market Forecast, emerging markets will account for nearly two-thirds of all air travel by 2033.
Relatively recently, the Gulf carriers have begun direct flights to the US, encouraging Asian, African, Middle Eastern, and Australian travelers to use the GCC as the hub for all their North American travels. Over the past five years, the Gulf carriers have flooded the zone, with some 252 direct flights a week from their respective hubs to 10 U.S. cities, from Seattle to Chicago to New York.
This has unseated the large American carriers, and some European carriers, as the airlines of choice for all trans-Atlantic travel, some of the most lucrative in aviation. As an example, Lufthansa the German national carrier has had its market share slashed by nearly a third since 2005, as some 3 million Germans annually opt for the Gulf carriers to take them to Asia.
The Gulf carriers also cite an American refusal to invest in their own carriers as potential reasons for increased traffic through the GCC. Qatar Airways, for example, made headlines, when it ordered 50 Boeing aircraft at a list price of USD 37.7 billion, while it is estimated that the Big Three Gulf Carriers will increase their collective fleets by 534 aircraft by 2027. The US carriers, meanwhile, suffered record losses in 2008, and only recovered by raising their prices while refusing to expand capacity on domestic flights.
Ultimately, many cite the hypocrisy of the American carriers who, in times of plenty, were the ones to negotiate the original Open Skies agreements, having established 100 such agreements in 1992 alone. These agreements are widely credited with expanding the global footprint of the US carriers, and benefiting cities like Dallas-Fort Worth, Detroit, Las Vegas, Memphis, Minneapolis, Portland, and Salt Lake City, which had virtually no international flights prior to 1992. It also was a boon to US tourism, air cargo, airports, and the aviation industry at large.
“There is no olive branch on this issue,” said Qatar Airways Chief Executive Mr. Akbar al-Baker at the International Air Transport Association (IATA) annual meeting in Miami. Under the agreements, “we can deploy as much capacity as we want in the US and the US carriers can deploy as much capacity as they want in my country.”
Still others feel the allegation of subsidies by the GCC governments by the American carriers only draws attention to the many safety nets already provided to the US carriers. After the 9/11 attacks, US carriers received some USD 15 billion in direct cash payments and loan guarantees from Washington. What’s more, the Fly America Act demands that US government employees use US carriers for domestic and international travel – a boon to the industry, with a whopping USD 9 billion spent on travel by the US government, according to the General Services Administration.
The GCC carriers, for their part, have retaliated, stating that consumers enjoy their award-winning premium service and benefit from their global connectivity all across Asia, Africa, and the Middle East
Many, including US-based global cargo carrier FedEx Corp and Emirates code-share partner JetBlue Airways Corp, feel that the move by the Americans for Fair Skies is nothing short of harmful protectionism which will set a bad precedent while adversely affecting the international aviation market. “Any rollback of liberal market access and Open Skies policies will reverberate across the whole world and will lead to retaliatory protectionism affecting all aspects of trade,” said Mr. Al-Baker.