Cargo volumes soared 36% in 2017 at Norway’s main airport and the number of all-cargo operators has gone from two to 10 in under two years. But its predominantly seafood export customers face rising competition for capacity, report Justin Burns and Will Waters
Seafood is driving rapid air cargo growth at Oslo Airport, and the global appetite for Norwegian fish is set to propel tonnage even higher – even if rising competition for air freight capacity slows the airport’s extraordinary recent success attracting new freighter services.
In less than two years, the number of freighter carriers at Oslo has gone from two to 10 and from seven weekly flights to 20, leading to volumes soaring 36% in 2017 to 185,000 tonnes.
Carriers joining Korean Air Cargo and Qatar Cargo on the roster include Emirates SkyCargo, CAL, Turkish Cargo, AirBridgeCargo, Cargolux, and Atlas Air – along with DHL with the world’s first domestic seafood freighter between Lakselv and Oslo – although Cargolux recently dropped its Oslo stop due to aircraft routing changes.
Oslo’s operator is Avinor, and director of traffic development and cargo Martin Langaas says there is plenty more to come, forecasting further growth in 2018. “There are large investments coming up to support our growth and we are in interesting talks with our existing partner airlines and new ones for more capacity in the years to come,” he says.
“Without saying too much, we are very confident that we will be able to present more news and routes from Oslo Airport in the near future.”
Thanks to the new freighter connections, freighters operated by general cargo carriers now make up 27% of total tonnage at Oslo, and integrators a further 22%. The load factors are also high as the main commodity is salmon, which is dense and heavy, and as a result most flights depart close to maximum take-off weight. But there is a larger slice to be had: in 2017, around 1.2 million tonnes of salmon was exported out of Norway, but only 230,000 tonnes were exported fresh as air cargo.
Avinor is facilitating investments to help it meet increasing seafood demand and is in the final stages of planning for a Seafood Centre, which when built will be the world’s largest dedicated seafood export terminal.
“It’s a unique project where the world’s largest seafood exporters have joined forces with Oslo Airport to define the future industry need for seafood air cargo logistics,” Langaas says.
Construction is planned to start sometime early in 2019 with an opening in late 2020, and the airport is in final negotiations with potential handlers for the terminal, he adds.
The strategy to make Norwegian seafood fly from Norway rather than other European points, partly by engaging directly with the seafood exporters themselves, has produced rapid results, and the growth in capacity has generated further demand, Langaas notes. Oslo is now the number one cargo airport in the Nordics, and Norway alone accounts for over half of all air freight in the Nordics and Baltics combined.
“Just two years ago, Copenhagen used to have a similar scale of freighter operations like we now see at Oslo and was the largest freighter airport in the Nordics,” he adds. Oslo is now “the largest full freighter hub in Northern Europe, while Copenhagen has lost airlines, and only one freighter calls on one weekly rotation”.
Seafood volumes flown via Oslo grew strongly in 2017, but last year was actually a challenging time for exporters, with limitations on the available biomass. Despite this, their movement by air grew by 16%. Similar growth levels are expected again this year, with the total volume of all seafood from Norway that is shipped as air freight forecast to rise by up to 40,000 tonnes this year.
An estimated 39% of all seafood from Norway that is shipped as air freight is flown directly from the country, with the remaining 61% leaving by truck to be flown out of other European airports. Langaas says to maintain the airport’s market share of flown Norwegian seafood in 2018, assuming a similar growth in Norway’s seafood export volumes as seen in 2017, the airport would have to add around 21 new weekly passenger bellyholds to Asia, or four weekly freighters; the average freighter load out of Oslo in 2017 was close to 80 tonnes.
“The growth of the seafood industry is so rapid that Oslo Airport is constantly challenged on capacity,” explains Langaas. “The global demand and hunger for Norwegian seafood will bring volumes to the roof, and we believe we are just seeing the beginning of this adventure,” he says.
Another reason for the sharp growth at Oslo “is we are actively seeking lanes and capacity to reduce the need of trucking to airports in continental Europe”, something the seafood industry is also keen to achieve.
E-commerce and energy verticals
However, seafood is not the only vertical in the ascendency; e-commerce imports via the likes of TNT, FedEx, DHL and UPS increased 25% in 2017. Langaas said the airport has also seen strong investments in pharmaceuticals, with cargo handlers and operators gaining IATA CEIV Pharma certification. And while seafood is the largest air freight commodity out of Oslo, it’s still less than 50% of annual tonnage. Norway is one of the world’s largest oil and gas (O&G) exporters and there has also finally been an uptick in O&G-related activities after a lull for a few years.
The future for cargo at Oslo certainly looks bright, but Langaas does have one concern: “The global increase in demand of air cargo is putting pressure on the previously very favourable trade balance of air freight between Europe and Asia for Norway,” he explains.
Because of the huge seafood export, we are also having a challenging airfreight balance with more export than import.
Historically, there has been higher demand for air freight from Asia to Europe than eastbound. “This has been a benefit for Norwegian seafood as Norway has been one of the main markets for shipments from Europe to Asia,” Langaas notes. “With the increase in overall global air freight demand, Avinor sees this access capacity is increasingly difficult to attract. Forwarders are having more and more difficulties to find space on flights from Europe to Asia.”
Competition for capacity
This growing competition for space on flights from Europe to Asia is also leading to increases in air freight prices – although not to the extent that it begins to challenge the economic model of flying seafood from Europe to Asia; seafood exporters have sufficient margins to pay rising air freight export prices.
“The demand is sending salmon prices skyrocketing globally, and we see that exporters are slowly realising that a rate increase for air freight is necessary in order secure the capacity they need,” Langaas says. “At Avinor, we support the airlines in gaining sustainable rates to serve the Norwegian market directly.”
He says most Norwegian seafood exporters need to improve their knowledge of air cargo and its global market dynamics – “as the fight for capacity will be vital to their ability to grow in the future”. Few currently have the knowledge they need to “be competitive and secure capacity to their customers in the future. Space is most certainly going to be an issue in the future if the market in general is continuing to grow.”
He says this also presents a challenge for air freight forwarders, who need to take innovative initiatives towards the seafood industry, in order to help educate and inform exporters about global air freight market dynamics – and provide solutions to meet their capacity needed.
Despite the rising competition for capacity, Langaas says it is “not difficult” to attract more capacity – “but the seafood exporters must be willing to pay more”. The airport is not expecting to be able to attract the 21 weekly passenger bellyholds to Asia this year that would be required to maintain its 39% market share of this year’s forecast seafood export growth, although Langaas adds: “It’s an illustration of the scale; but we are very confident that Oslo Airport will attract more capacity in the future and according to the needs of the industry.”
Some of this year’s growth of Norwegian seafood exports will be trucked to other European airports, to access available lower-cost air freight capacity – for example, bellyhold space. But Oslo Airport’s flown seafood volumes are likely to continue growing strongly again this year – along with the airport’s overall flown air freight tonnages, although probably not at the extraordinary 36% rate it saw last year.
Asian appetite fills Swedish bellies
Airport operator Swedavia has seen strong bellyhold cargo demand continue this year, but is keen to attract more freighter operators, reports Justin Burns
Rising belly cargo into Stockholm Arlanda Airport from new long-haul passenger routes is boosting volumes into Sweden’s airports.
In the first two months of 2018, Arlanda, Gothenburg Airport and Malmo Airport between them handled 47,067 tonnes, a year-on-year (YoY) increase of 11.4% on the same period last year. Tonnage growth was relatively balanced, directionally; exports were up, YoY, by 10.9% to 24,322 tonnes and consisted mainly of spare parts, machinery, pharma and salmon (originating in Norway), while imports rose 11.8% to 22,744 tonnes − mostly perishables, e-commerce and spare parts.
Swedavia Airports’ director of cargo, Ylva Arvidsson, says belly cargo is the main focus and volumes are being especially driven by new links added to Asia. Last year, Singapore Airlines started Singapore-Arlanda flights, while Air India started a Delhi route. And belly volumes in 2018 will be boosted from June when Arlanda will welcome direct services from China Eastern to and from Shanghai. Shanghai, Beijing and Tokyo were the largest single destination points in 2017 for Swedish air cargo exports, although the largest destination region was North America, where Sweden has good connections.
Verticals in the ascendency include e-commerce, and Arvidsson says since last July, Swedavia has seen a large increase of volumes coming in from China. She predicts that sector will continue to grow in the coming years, with an increase of smaller pieces to handle. Pharmaceuticals traffic is set to grow as cargo handler Spirit Air Cargo Handling has received IATA CEIV Pharma certification at Arlanda, and Arvidsson says other handlers are looking into gaining the certificate.
However, while Oslo airport has rapidly expanded the number of freighter carriers directly serving the airport during the last two years in response to growth in the seafood market, Arlanda currently only has two major widebody general cargo freighter operators − something Swedavia is keen to change. Korean Air Cargo operates three flights a week and Turkish Cargo has twice-weekly operations. These are in addition to daily or nightly flights from each of the main integrators, DHL Express, FedEx, TNT Express and UPS. Over at Gothenburg, DHL Express and TNT Express have daily flights while Malmo has daily flight by TNT Express and UPS is running a Scandinavian hub from the gateway with double-daily flights from Cologne connecting to Oslo, Helsinki and Billund.
But there are potential opportunities to add capacity, with so much Swedish air cargo trucked to and from airports in mainland Europe. “These volumes could be lifted from here if the capacity were in place,” Arvidsson says. “We have no curfews and can offer fast and efficient handling. We foresee that we will invest in terminal buildings in order to be able to offer more capacity to our customers. We do have land available for construction.”
Plans are in place to upgrade infrastructure, and Arlanda is looking at a full relocation of the cargo area, with studies being done on the feasibility and timing of such a move; Arvidsson says to “expect more news during 2018”.
This is all part of a strategy to expand air cargo in Sweden, she says, adding: “Swedavia, which is a state-owned company, has as (its) main task to increase the connectivity between Sweden and the rest of the world. Flights connecting our business community with other countries are important for both passengers and cargo. It is of utmost important for companies to make business and is vital for new companies when deciding where to establish.”