Industry Insights: The Case Study Of Dnata

In 2014, Dubai International Airport handled 70.5 million passengers and became the world's busiest international airport (“Critical for Changi Airport and SIA to join hands,” 2015), taking its title from London's Heathrow for the first time. Changi Airport, on the other hand handled a record 54.1 million passengers but showed a 0.7% growth over the previous year, its lowest since 2009.

How did Dubai make this happen?

Stewart Angus, who has worked for the Emirates Group for 19 years and oversees international business for the group’s Dnata ground-services unit says that “The success is Dubai’s location – it’s Europe’s most easterly hub and Asia’s most westerly hub.” Daniel Tsang of Hong Kong consultancy Aspire Aviation adds that “In terms of charter traffic, 25% of Australia-to-Europe traffic has shifted from Hong Kong and Singapore to Dubai in the last couple of years.” (“How Dubai became one of the most important aviation hubs in the world“, 2014).

Who is Dnata?

Dnata, or Dubai National Air Travel Agency, is one of the world’s largest providers of airport services that comprises more than 50 specialist businesses. Part of the Emirates Group, Emirates and Dnata learned from Singapore which saw Singapore Airlines’ partnership with Singapore Airport Terminal Services (SATS). Industry sources say Dnata started first, and when Emirates became well-known, Emirates Group was then created.

Dnata’s annual revenue increased 75% to $2.1 billion in 2013, while SATS’s revenue rose only 5.2% from 2011 - 2013 to $1.45 billion. More than 40% of Dnata’s revenue now comes from Australasia, partly as a result of a series of acquisitions starting with its first international deal ten years ago when it bought Singapore ground-handling company CIAS. So now Dnata Singapore has a part in the baggage-handling business at Changi Airport, as well as ground services at Guangzhou Baiyun International Airport, and Xi’an Xianyang International Airport plus ten smaller airports in western China as part of Dnata’s Asia joint venture business.

How can Singapore compete?

The Civil Aviation Authority of Singapore (CAAS) will support productivity projects with up to S$17 million in grants to improve cargo- and baggage-handling services (“Changi Airport to boost productivity,” 2015). Mrs Josephine Teo, Senior Minister of State for Transport said “The aim is to further strengthen Singapore's position as a regional air hub”, and that in its next phase of growth, “Changi Airport will focus on innovation, connectivity and the clustering of related industries.”

When completed, T5 is likely to be the third largest passenger terminal in the world, after facilities in Dubai and Beijing and will take Changi to 140 million passengers a year (“Changi Airport's T5 will be 10 times as big as VivoCity,” 2015). Associate Professor Terence Fan, a transport specialist from the Singapore Management University, said: "Perhaps Changi can consider opening itself to retail investors so that there is some private investment, either in terms of bonds issued to the public or shares to retail investors, or both, with the Government retaining an important say on strategic decisions."

What more should be done?

Etihad has set up travel agent Hala Group, which could put pressure on Dnata’s $180 million travel services division. It is estimated that six out of top ten Asian megacities of 2030 to be in either China or India. A map of the Asian megacities in 2030 sees Chengdu and Kunming in the geographic centre of the cluster, and they could be the hub for China-India traffic (“Joining up the dots: non-stop air services between Asia’s megacities,” 2016). What is our role then?

“Singapore needs air connectivity and that's what we've been saying all the time. If we don't have the money as a company, somebody must pay”, says Mr Liew Mun Leong, Changi Airport Group chairman.

The question is - who, must pay?