Managing expectations

posted on 4th April 2018

There are many reasons why airlines, especially all-cargo carriers, may look to call at smaller airports, including lower costs, lack of congestion, speed of handling and proximity to the local industrial community.

The lack of interlining opportunity can be a significant downside, however, and was one of the factors ANA Airline Management cited when it decided to switch its managed freighter fleet from Ostend to Liege at the end of May. The latter was also offering much lower fuel prices, the company says.

ANA, which operates two MD11Fs and one B747-400F on scheduled services to and from Africa as well as worldwide charter flights, had used Ostend as its base since 2007, and its withdrawal has cost the airport 75% of its cargo traffic. In June, OST handled just 1,032 tonnes of cargo.

The outlook is brighter at Maastricht Aachen airport, which last year saw a 5% improvement in cargo throughput to 79,000 tonnes thanks to increased uplift by Cargolux, Turkish Airlines and Royal Jordanian. Many high-tech and consumer electronics distribution centres are located around Maastricht, and perishables is an expanding import market, factors that have contributed to a significant and consistent growth in cargo volumes handled at the airport over the last few years.

Ethiopian Airlines has launched a twice-weekly freighter service from Addis Ababa to MST, carrying mainly flowers, vegetables and fruit, which flies on to Dubai and Hong Kong with general cargo. The carrier hopes to double to a four-a-week frequency for the winter season.

Kent’s Manston airport (MSE), 90km south-east of London, was also once a favoured perishables destination. The now defunct MK Airlines flew there – as well as to Ostend – from Africa, and Cargolux also operated there until April this year. However, the airport closed in May, just six months after Ann Gloag, co-founder of public transport provider the Stagecoach Group, acquired it for £1 from Infratil.

Gloag had claimed she saw “real potential for growth that has not been fully captured”, and prior to her purchase, Manston submitted a 40-year plan to the UK’s Airports Commission in which it claimed it could be handling five million passengers and 400,000 tonnes of freight per year by 2025. But despite interest from one company in taking on the airport as a going concern, Gloag was apparently more attracted by the option of selling the land to property developers – presumably for considerably more than £1.

New Zealand-based Infratil also announced in early 2012 that it wanted to sell its other UK airport, Glasgow Prestwick, after incurring annual losses of £2 million there. The sale process was equally fraught. After 18 months, the Scottish government agreed to put PIK back into public ownership last November, also paying £1.

The outcome has been happier than at Manston. Chief financial officer Grant McLeod reports that PIK, located on the west coast of Scotland near Ayr, handled almost 6,500 tonnes of cargo between January and June, well ahead of the 4,300 tonnes recorded for the first half of 2013. Cargolux operates five flights a week there, connecting via PIK to Seattle, Los Angeles and its Luxembourg hub. Air France Cargo calls twice weekly en route from Chicago to Paris, while ad hoc charter traffic has been well ahead in the last three months, McLeod says.

“We’re probably different from Glasgow airport [the city’s other airport in Paisley] because we have so few passengers. We’re quieter here and our customers get dedicated service,” he says. “We have a long runway and handle a lot of out-of-gauge cargo such as aircraft engines and oil equipment which is trucked to and from Aberdeen.

An unusual one-off was the Gumball Rally in June. Air Charter Service contracted Kalitta Air to fly 56 cars in two B747s across from New York for the European leg of the event. Nevertheless, Prestwick’s current volumes remain well below their level 10 to 15 years ago, when annual flown tonnages regularly topped 40,000 tonnes from customer including Polar Air Cargo, Air France, Lufthansa, Cargolux, FedEx, and Singapore Airlines.

Although its main purpose is moving passengers, Glasgow Airport (GLA), won Glasgow’s air cargo bragging rights in the first half of this year with a total of 7,470 tonnes, up 36.1% on the 2013 figure. Spokesman Brian McClean says Emirates’ double-daily B777 service is mainly responsible, helping shift Scottish whisky, langoustines, shellfish and other commodities to Dubai and beyond to Asia. This reflects the current shift towards passenger belly capacity and the strategy of airlines such as Emirates to increasingly fly direct to regional passenger airline markets, as opposed to focusing exclusively on the big metropolitan passenger airport hubs.

Minnows take on Frankfurt

Nevertheless, the big metropolitan passenger airport hubs still dominate Europe’s air cargo market. Frankfurt-Main not only dominates the picture in Germany, but overhauled Paris CDG in 2013 to become Europe’s number one cargo airport. This year’s first-half throughput was 1.1 million tonnes, 2.2% ahead of 2013.

Yet two airports sharing Frankfurt’s hinterland, Düsseldorf and Hahn, claim strategic advantages of their own. Düsseldorf, 180km from Frankfurt, is at the heart of Germany’s main manufacturing region and its catchment area includes 18 million of the country’s most affluent consumers, representing a major import market for electronics and other goods.

The region is home to one of the biggest Japanese communities in Europe, comprising 500 companies and 11,000 people. It is also responsible for 20% of German exports, of which a major share is traditional air freight business such as chemicals, machine parts, automotive supplies and electronic equipment.

Thomas Schuermann, manager marketing and sales, says: “Around 70 airlines serve the airport, many using wide-bodied passenger aircraft with substantial belly capacity. An independent trucking network is further stimulating Düsseldorf’s cargo growth.”

Last year saw the best cargo results for DUS since 2001, with more than 110,000 tonnes, and traffic for 2014, made up of 55% exports, 45% imports, is 7.5% further ahead. Gerton Hulsman, MD of Düsseldorf Airport Cargo, comments: “Around 150 forwarders have already set up offices in the area, to benefit from this market potential. The growth is enhanced by the introduction of new routes from the Far East and the USA, plus greater frequencies, but most importantly by increased aircraft size.”

A daily American Airlines service from Chicago, launched in 2013 and operated with a B767-300, offers an average eight tonnes of cargo capacity. Turkish Airlines, which for some years has operated four daily passenger flights to Istanbul, has switched up to A330s and occasionally A340s or B777s, providing up to 20 tonnes of capacity.

“We are working hard to expand our capacity to the Far East and Asia,” Hulsman says. “Air China’s passenger service to Beijing is achieving good eastbound load factors, but we know that there is much more cargo available in the region for Far Eastern destinations and we hope to welcome more Asian carriers.”

But having been trumpeted as the great success in European secondary cargo airports, Hahn, around 100km from Frankfurt, has seen its bubble deflate during the last two years. Flown cargo for the first six months of 2014 decreased by 21% to 58,000 tonnes. Transit cargo was down 72% and road feeder services by 13%, giving an overall total of 201,000 tonnes or minus 18%.

Christoph Goetzmann, director of business development at Frankfurt-Hahn, says the demise of Air Cargo Germany and Aeroflot’s withdrawal from the freighter business have been major factors, while Qatar Airways also pulled a twice-weekly freighter at the start of the last winter season. “But we’re in a good mood and have positive expectations for the second half,” says Goetzmann.

All-cargo carrier Yangtze River Express has increased to an average eight weekly calls, connecting Shanghai and Tianjin with Novosibirsk, various points in Europe, Chicago, Dallas-Fort Worth and Los Angeles. Navitrans also operates a Zhengzhou-New York-Hahn routing three times per week, calling also at Baku and Novosibirsk. Nippon Cargo Airlines also operates three services a week from Hahn via Amsterdam or Malpensa to Tokyo, and Goetzmann expects a fourth frequency soon.

“A couple of years back it was maybe enough to say we have a landing strip, we have no curfew, and we’re cheap,” says Goetzmann. “But we have to offer comprehensive solutions. Our advantage is that we’re uncongested and there is no complexity here. By the time some competitors would have moved cargo to the warehouse, we can have it on the truck.”

He accepts that Hahn is in a more rural area than Düsseldorf, but points out: “Even in denser areas you have to truck before or after the flight. Every flight is different and calls for sophisticated logistics planning. We have six or nine hours to pre-plan transatlantic or ex-Asia flights. If this is not cargo’s final destination, we will plug into the pan-European road network like any other airport.”

Integrators boost tonnage

Cargo throughput of several hundred thousand tonnes at some of Europe’s so-called “secondary” airports reflect their importance to integrators, and the flexibility they can offer away from main national passenger hubs. Two of Europe’s biggest integrator airports, Leipzig and Cologne, have risen over the last decade to become major cargo airports on the back of traffic from DHL and UPS, handling 878,000 tonnes and 717,000 tonnes, respectively, in 2013. Liège stands not far behind on 561,000 tonnes, largely thanks to the custom of TNT. And the UK’s East Midlands Airport (EMA), with 298,000 tonnes last year, and Stansted, with 236,000 tonnes, have also built sizeable businesses around integrator traffic.

Spain’s Vitoria airport, although on a much smaller scale, has benefited from integrator support too. Boasting a 3,500-metre runway and a dedicated cargo apron adjoining the first-line logistics area, allowing freight to be processed immediately and transfers made efficiently, VIT handled 23,000 tonnes of cargo total in the first six months of this year, an increase of 24.8% on H1 2013. The airport sees 20 scheduled cargo flights per day, primarily integrator traffic, with DHL using it as a base for south-west Europe, linking Porto, Lisbon, Santiago, Alicante and Valencia with Bergamo, Brussels and its main hub in Leipzig. TNT also flies daily from Vitoria to Madrid, and charters regularly take advantage of the airport’s infrastructure, carrying anything from Formula One cars to giant turbines.

Changing patterns

Integrator-dominated airports are obviously highly exposed to the business and decisions of their main customers, with Liege, Cologne, EMA and Stansted reporting slight declines in volumes in 2013 as TNT and UPS scaled back some long-haul capacity. However, their long-term performance clearly demonstrates that having an integrator for a customer provides far greater stability than relying on freighter operators flying general cargo. With the exception of Cargolux in Luxembourg – and on a far smaller scale in Maastricht – the fortunes of these general cargo freighter operators are far more vulnerable to the fluctuations in economic cycles than the integrators, and the less-complex handling infrastructure they require means it is far easier for them to switch their operating bases.

Even Europe’s most successful general cargo specialist secondary airport, Hahn, has struggled as freighter operators have faced a combination of weaker demand, overcapacity and high fuel prices which has made it difficult for them to compete against the increasingly available belly capacity from cargo-friendly passenger aircraft such as Boeing 777s and 787s, Airbus A340s, and the like. In contrast, Germany’s biggest regional passenger airport, Munich, has seen its cargo volumes remain relatively stable and steadily rise over the last 15 years, primarily on the back of – or, more precisely, in the belly of – passenger aircraft.

Outside of Europe’s export powerhouse, Germany, Maastricht is arguably the only western European non-integrator cargo-specialist airport to achieve any meaningful volumes, although even this is still a relatively small-scale, niche business. As Europe’s economies move out of recession, there are some signs of a possible revival of small-scale wide-body freighter operations. Indeed, as combination legacy airline groups such as IAG Cargo and Air France-KLM Martinair Cargo reduce or withdraw from freighter operations in favour of maximising their passenger bellyhold capacity, there may be further niche opportunities for freighter operators. However, much of the need for maindeck capacity on the main trade lanes is likely to be taken up by the rapidly expanding Gulf airlines.

Changing shipping patterns in the last three to four years have also been putting pressure on the integrators, as customers favouring so-called “deferred express” services – partly driven by the e-commerce developments – have forced companies such as UPS and FedEx to shift some traffic away from their own-operated freighter capacity onto third-party commercial air capacity, although the main beneficiaries of this shift are likely to be the Metropolitan airports rather than secondary cargo-specialist airports. And as the global economy has picked up this year, UPS has reported signs of growth once again for its international priority express products.

So, with Europe’s main metropolitan airports continuing to find ways to expand their capacity to meet rising demand, enabling good-quality bellyhold capacity to continue to rise, Europe’s secondary non-integrator cargo airports may be advised to limit their expectations.