Beirut Cargo Center
“Freight forwarding is a profitable business in Beirut but there is room for much more,” says Joseph Harb, president of Beirut Cargo Center (BCC), “I always tell my team that we are only at 10% of what is in our reach.” One of no more than 15 forwarders with a strong presence in the market, BCC has dominant positions in providing logistics to shows and exhibitions and in the shipping of household goods. The company started operations in 1993, after Harb decided to leverage his nearly two decades of managerial experience in the Dubai shipping industry, by returning to Beirut and setting up shop. “Our expansion and acquisition of business went very fast,” he says, “each year we created new departments and added 10 to 15 persons to our staff.” Today, BCC employs 130 staff, with separate departments for sea, air, overland freight, customs clearing, warehousing, exhibitions, and packing and moving. Factors that Harb credits as decisive in his company’s success are working according to international standards and implementation of quality systems and services, aided by an emphasis on training and consistent reinvestments of profits. In the area of rate competitiveness – in any segment of shipping equally important to high service quality – Harb brought a relationship with European logistics provider, Schenker, as crucial intangible capital to BCC. A $7.7 billion company by 2003 turnover, Schenker signs worldwide annual contracts with cargo carriers in a magnitude of 1 million TEU. As their local partners, BCC share in Schenker’s global buying power, allowing it to stand strong in rate rivalries. A decade of growth means that BCC is now an established entity in the freight forwarding business here. It also means that the company could be approaching the size limits for an operator in the dimensionally disadvantaged Lebanese market. But staying true to his credo that much more growth is achievable, Harb is now accruing the adrenaline for his most ambitious jump: becoming a regional logistics provider for Schenker and some of their big manufacturing clients. A project for establishing a Beirut distribution center for a growing European consumer electronics company has already been drawn up to substantial detail. Based on a permit to operate in the free zone at Beirut Port, BCC would immediately seek to acquire a warehouse space of up to 1,000 square meters there in order to implement these projects, thus effectively doubling their existing warehouse capacity. In development steps to follow, the company would set up a trucking department of 20 trailers with scheduled daily overland runs to Levant destinations. In the mid-term, Harb expects to expand his free zone warehouse to 10,000 square meters. Internal consolidation of the Lebanese freight forwarding industry through mergers and acquisitions is unlikely, Harb says. In his view it is a more realistic scenario that his international partners, Schenker, would one day decide to establish their own offices in Beirut, as Lebanon gains in the role as a freight forwarding hub. This possibility, however, does not worry the entrepreneur. The international firm would first approach its existing partner, BCC, and this would open new roads for development. “The future is international logistics,” Harb says, “If you have the international, you will also have the local.”
With 25 years of presence in the Lebanese market, Sealine and associated Seatrans are shipping agents and ship owners. The firm has found its niche in representing European cargo lines and as operator of a regular container freight service between Italy and the Levant. The company has a share of about 16% of tonnage volume passing through Beirut port and last year realized two thirds of its business as agents for European shipping lines, mainly German Hamburg Sûd and Italian Gilnavi. The remainder came from the operations of its own vessels, but this side of the business could increase in 2004 based on a strategic adjustment of operations that the firm implemented in late 2003. If successful, it will be a classic example for a move that turns an emerging problem into an opportunity. “We are directly affected by the euro exchange rate,” said shareholder Samir Noaime, “due to the strong euro, we are facing difficulties with lack of volume.” The appreciation of the European currency over the past two years has forced Lebanese traders to increasingly source their supplies from the Far East and the US, leading to a drop in shipping volumes on the traditional European supply routes. To balance the negative impact of the shifting trade patterns, the Sealine management modified their shipping service from one route – Ravenna to Beirut via Limassol – to two, by switching to Venice as Italian port for the second route and also adding the Syrian port Latakia before sailing on to Beirut. Besides offering more Levant-bound cargo opportunities, the change of strategy also opened greater potential to pick up Europe-bound freight, because Syrian export shipping volumes are far more substantial than the Lebanese. It is too early to assess the results of the new strategy after serving the Syrian port for now two to three months but the firm had encountered no obstacles, Noaime said. “We are well introduced in Syria and I am more than optimistic that Latakia and Tartous will be doing well.”
The operational environment for their activities in Lebanon is today incomparably better than in the 1980s when Sealine served the ports of Beirut, and in often forced diversions, Jounieh. It seems near miraculous how in those days, under the raging Lebanese conflict, shipping companies succeeded in supplying the country with urgently needed supplies. According to Noaime, the war had also been the reason why the company’s ships until today have not been sailing under Lebanese flag. The terse security situation and resultant excessive scrutiny of Lebanese-flagged vessels in European ports had mandated the company to register its vessels outside, in San Vincent and in Cyprus. However, as one vessel owned by the company is due for immediate replacement and the two others are also scheduled for renewal, the next generation of Seatrans ships would be flying the Lebanese colors. “We have a project to develop the fleet. We want to employ younger vessels with a little bit higher capacity” Noaime said, “and I will be proud to have the Lebanese flag.” With a capacity of 225 TEU, the new vessel is by no means a large ship and Sealine sees no difficulty in financing the renewal of their moderate fleet out of own resources, Noaime said. Under the company’s existing route setup, three vessels would suffice, but more could be added if a project for developing new routes to Turkey and Egypt were to succeed. But in the short term, Noaime’s expectations for 2004 are that a repeat performance of 2003 results would be reason enough to be happy.
For courier enterprises, their speed and reliability have created huge opportunities in the last quarter of the 20th century. Companies specializing in express shipping of documents and goods experienced a rush in demand for international deliveries that hasn’t ceased growing since. The firm Aramex was founded as a regional response to the international courier business surge. Conceived in 1982, it developed from an auxiliary provider of narrowly defined express services to a full-fledged operator with its own international network. Today it flaunts its services as ‘total transportation solutions.’
In Lebanon, where Aramex has been operating since the late 1980s, the company saw the nature of demand evolve significantly in the past five years. “The weight per shipment has increased noticeably,” said country manager Asma Abboud, “and the content has changed.” Shipments weighing 40 to 50 kilograms are becoming more and more commonplace in the express segment and some customers use the service for sending consignments of 100 and more kilos to destinations within the region. Across the board on its services provided here, the company reached 10 percent growth in 2003. Over more traditional forwarding, Aramex express shipping has advantages in achieving door-to-door delivery in 24 hours or less to Middle Eastern countries. The company expanded into an increasing range of packing and shipping services, and in 2004, it wants to take a shot at developing its transit business here, which to date has been minimal.
In the domestic market, Aramex has embraced specialization. It does not deliver mass mailings and moved out of areas such as media distribution after LibanPost entered the scene. Shipping of bank documents, blood and laboratory samples, delivery of IT products under collection of their invoices, is where Aramex has a strong position. A Shop and Ship niche service facilitating forwarding and clearance for goods purchased abroad via the internet has some 250 subscribers who use it actively. The firm’s customer mix is 90 percent corporate and 10% individual but the individual clients are very important to the bottom line, Abboud said. She attributed a high share and loyalty of banks in the clientele to the fact that Aramex had been able to provide them with consistent service in the years of conflict. In their corporate philosophy, Aramex stress a team approach that affords staffers with opportunities to rise through the ranks. “Being a transparent company gives each of us a chance to grow and learn,” Abboud said, “each team member becomes an entrepreneur.”
On the level of Aramex’ country stations, this translates into a decentralized corporate culture where managers in every market can make decisions and add to the system. As a corporation, Aramex underwent a noteworthy evolution that took it from being a privately owned firm to go public on the Nasdaq and then, by way of delisting, return to private ownership with an investment fund based in Dubai. Each of these steps proved a useful learning experience and spurred the business on, according to Aramex chairman, Fadi Ghandour. On the whole, Amman-based Aramex saw a very successful 2003 and will “close the year with record results in revenues and net income,” Ghandour told Executive. While the Lebanon operation is doing “very well” the company is internationally looking at Africa and Southeast Asia for expansion. “There is no change in our strategy,” he said. “We are doing what we have always done, but we have become more aggressive on acquisitions.”
Executive travel services ExecuJet
At the top of the transportation pyramid reside flight services for corporations and wealthy individuals. Lebanon is a candidate to become an emerging market for this lucrative segment of the transportation industry. One of several contenders for a stronger corporate aviation business in Beirut is ExecuJet Middle East, a Dubai-based company and part of the ExecuJet group with operations in four continents. The firm, which already has a limited customer base of Lebanese clients, has ambitions to grow its business here into a much larger presence. As a first step, the company announced the appointing of a new sales team for the Levant at the end of last year. With this team, the company aims at penetrating the Lebanese and neighboring markets. “The ExecuJet business model is based on providing total aviation solutions,” ExecuJet Middle East managing director, Horm Irani, told Executive. “I believe that the model is very well-suited to improve efficiencies and comprehensively service the wide range of requirements in the Levant region.” The expansion project is still it its early phase and ExecuJet Middle East would yet have to set its timing for opening an office in Beirut or establishing a base of operations here, but it assessed a doubling of business aircraft movements through Beirut over the past six months, as “very encouraging” signs for local market growth. Irani labeled Beirut International Airport a hub for the western part of the Middle East that could play the same role as Dubai has assumed for the gulf region. “It would make commercial and operational sense to base ourselves out of BIA,” he said, “we anticipate no obstacles in growing our business interests there and establishing the offices and operations base we project.” He affirmed that the Lebanese government and aviation authorities have been very “proactive and progressive” in supporting infrastructure investments and legislating the freedom and ease of movement for sector companies.
Based in Switzerland, the ExecuJet Group was founded in 1991 and has been operating in this region since 1999. Besides offering consulting, operations/management and charter services, the Middle East unit is active in sales and financing of corporate aircraft, representing manufacturers Bombardier and Pilatus. A boost in flight services for corporations and high-level individual customers would certainly add to the Lebanese market. Although several providers in the high-end segment are interested in developing their business here, ExecuJet Middle East sees this area as one whose potential has barely been tapped into. From their perspective, awareness of the benefits of corporate travel is increasing, although Beirut as market for the high-end services is still lagging in some areas. “The risk is a little higher when compared to the Gulf and international markets as the market is still far from maturing,” Irani said. “Profitability is also assessed to be lower as customers are very value-conscious and have still not accorded the full premiums on the offerings.”