Lufthansa Cargo and its ‘Heyworld’ and ‘CB Customs Broker’ subsidiaries are developing their capabilities and infrastructure at Frankfurt Airport to offer full-spectrum, end-to-end solutions for e-retail shipments, reports Roger Hailey
Lufthansa Cargo has unveiled plans to offer an integrated, holistic solution for e-commerce shipments via its Frankfurt home base, already Europe’s top cargo airport by tonnages, with the airline and its ‘Heyworld’ and ‘CB Customs Broker’ subsidiaries developing their capabilities and infrastructure to offer integrated, end-to-end air logistics solutions for e-retail customers.
CEO Ashwin Bhat wants Frankfurt to be a global hub for e-commerce, a sector that continues to notch up double-digit annual growth for cross-border traffic. IATA estimates that 80% of cross-border e-commerce is transported by air, and cross-border e-commerce sales are estimated to reach US$2.1 trillion dollars in 2023, a 13% increase in a single year.
E-commerce, while not always a high-yield cargo sector, provides a solid base for carriers, especially those with a hungry fleet of freighters that need a mix of cargo to make each flight pay its way. Bhat told an air cargo audience in Munich that Lufthansa Cargo wants to extend its leadership role in the transport of care-intensive cargo, such as pharma, to the global e-commerce parcels business.
“E-commerce is all about speed, reliability and consistency,” said Bhat. “We clearly experience and see e-commerce as a growth market. We want to make Frankfurt a leader in this segment by offering an integrated, holistic solution for shipping, customs clearance and the further transport of e-commerce shipments.”
The airline is using subsidiary members of the Lufthansa Group to power its Frankfurt ambitions, notably its ‘Heyworld’ specialist freight forwarding unit for e-commerce shipments, and Lufthansa Cargo’s customs brokerage business CB Customs Broker (CBCB), which recently partnered with non-group member Georgi Handling to create a new e-commerce terminal in the airport’s Cargo City South. Asian airlines, which often touch down in the southern part of Frankfurt airport, will have e-commerce shipments handled automatically and more quickly due to the partnership, the partners said.
CBCB has also developed an inhouse software that digitalises customs clearance processes and can process large order volumes in a shorter time than before.
In the initial phase of the new terminal development, the partners will operate within 5,000 sqm of Georgi Handling’s existing Frankfurt Cargo City South facility in Building 568. In the medium term, as e-commerce volumes rise, the operation of an independent hall is planned, with tailored handling processes for e-commerce shipments. And longer term, a fully automated sorting facility will be built.
In addition to expanding its European medium-haul network to include four A321 converted freighters by the end of this summer, Lufthansa Cargo has also increased the capacity of its e-commerce hub in Frankfurt’s Cargo City Nord. Commissioned in 2019 and operated by Heyworld, the e-commerce logistics subsidiary can separate shipments automatically at the hub from traditional freight, and transport them onwards to end customers via third-party final-mile partners. Boris Hueske, joint MD of Heyworld, said the e-commerce and express specialist can manage 5,000 parcels per hour at its sort hub in Frankfurt.
The expansion of A321 freighters and faster processing at the German home base also offers the chance to speed up delivery times across the global network. For example, e-commerce shipments in Madrid will see transit times reduced from 48 hours by truck to just 2.5 hours using freighters, while some Far East services will see a four-day service cut back to less than 24 hours.
Lufthansa Cargo is also investing to keep pace with new and expected future regulatory changes in the European Union (EU) Customs regime under Import Control System 2 (ICS2) that have implications for e-commerce and other markets. ICS2, a large-scale advance cargo information system for air freight shippers and forwarders, became mandatory in July this year as a pre-loading and pre-arrival security programme that helps identify high-risk cargo.
Bhat commented: “With ICS2, we believe there will be a level playing field where all carriers follow the same rules and regulations. But it is not enough for us to make Frankfurt attractive as a gateway for e-commerce, so we will be working with our partners in Frankfurt to make cargo handling much faster and digitally connected to the regulatory bodies.” Bhat said there are ongoing discussions with the regulatory authorities in Frankfurt to explore and understand the challenges of e-commerce shipments.
Uwe Glunz, managing director of CBCB, said: “We are in the age of digitalisation and automation of customs clearance, but most processes are still handled manually in some parts of the world. Many customs clearance agencies still rely on hordes of people to process customer documents.”
Glunz said off-shoring manufacturing to low labour-cost countries came with a growing number of shipments from online retailers that could present a challenge in terms of digitalised customs procedures. He continued: “ICS2 will bring quite a change and opportunity for us to market our specialism in digital clearance, hence we are set up to offer a broad range of services for all customs procedures as we develop a deep expertise within the segment. With this automation level we can handle even the largest and most complex shipments with a quality process of around 99.5%.”
Bhat was asked whether Lufthansa Cargo’s investment in freighters, hubs and software to speed up e-commerce shipments would see a return from what can be lower-yield shipments. He responded: “I have an aircraft and I want to fill it with high-margin freight, the best cargo there is, but the reality is different. It is always about segmenting your capacity to get the best mix inside the aircraft, with both high-yield and low-yield cargo; that is the magic if you want to run a freighter or an airline profitably.
“It is about e-commerce being a nice baseload to have on an aircraft, and then on top of that we talk about pharmaceuticals, Heyworld, and automotive. Obviously, we can talk about a low-margin business, but it is still a margin.”