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CARGO Last modified on April 18, 2013

Tough times

Martin Roebuck takes a closer look at the challenges and opportunities facing a handful of cargo focused airports in Europe and North America.

It has been a tough few years for the airfreight industry and, as a result, many cargo-focused gateways in Europe and North America have reported a decline in volumes or little or no growth.

Indeed, the downturn has been such that some traditional all-cargo gateways, such as Paris Vatry, have now started handling passenger services to boost revenues.

Many all-cargo or heavily cargo-focused airports were born in the days when it made sense to move cargo operations out of the congested major hubs into specialist facilities, which could guarantee fast and efficient services.

However, with the continued economic downturn now meaning that many leading, better-connected airports having cargo capacity to spare, what is their USP now?

US based consultant, Michael Webber, certainly believes that it is hard to justify an all-cargo business model at a secondary airport in today’s market.

“I’m not sure if there was ever a compelling market requirement for cargo-focused, secondary airports that had no widebodied passenger aircraft calling but were capable of handling freighters,” claims Webber. 

“It was commercially feasible at one time, but that’s not to say they were meeting a specific need.”

Webber excludes the integrators, who didn’t look to leverage established passenger networks in the way that conventional cargo carriers often benefit from. 

“Integrators brought their own connectivity – trucks, ground handling, de-icing, everything. They didn’t need to co-exist with anyone, and could simply build their own hubs,” Webber says.

Yet even airports with an integrator as an anchor tenant are struggling to grow their cargo volumes and have been forced to diversify.

Despite handling over 4.2 million passengers per annum, East Midlands Airport claims to be the UK’s busiest “pure cargo airport”, due to the fact that it is a hub for DHL and UPS and supports operations for TNT and the Royal Mail.

Its status ensured that it handled around 300,000 tonnes of freight and mail in 2012, the same as the previous year, but John Froggatt, cargo and commercial bid director for owner, Manchester Airports Group, believes that the performance was satisfactory considering the difficult operating climate.

“Against the background of a difficult year for the airfreight industry, East Midland’s flat overall performance says a lot for the resilience of DHL, UPS and TNT,” says Froggatt.

Ad hoc cargo charters, a relatively small part of EMA’s business, grew by over 30% last year, and the airport is looking to develop this further in the year ahead by targeting outsized-loads.

Elsewhere, in Belgium, TNT’s European air hub, Liège, saw a 14.5% slump in traffic last year because of reduced activity by Southern Air and other charter operators. 

Ethiopian Airlines’ upgrade to B777 freighters on its daily operation, and new freighter services from Turkish carrier, My Cargo, to Istanbul, Niger Air Cargo to Niamey and Avient to Yerevan, were all huge positives, but could not fully compensate.

Martin Fraissignes, director of strategy and development at Châteauroux Airport, two hours south of Paris, recently addressed a conference in Beijing on what it means to be a cargo-friendly airport. 

“Chinese airport executives were interested to learn from our model and how they could duplicate it,” he says.

Châteauroux promotes itself on the basis of charges that Fraissignes claims are 50% lower than the main Paris airports, shorter flying time from the south, unrestricted 24-hour operations and good intermodal connections.

Yet, last year saw no growth, although one positive was Egyptair’s October decision to launch a weekly A300-600 freighter from Cairo. Inbound flights primarily bring strawberries and other perishables destined for Europe’s markets while southbound loads include day-old chicks, electronic goods and aviation parts.

According to Fraissignes, the night flight ban at Frankfurt has generated interest from prospective customers in the Far East and Middle East, but significantly, pilot training and aircraft maintenance now each generate as much income as cargo. 

And Châteauroux has built a paint hangar that can accommodate B747s and is also planning to add a 10,000sqm MRO facility. 

Not far away from Châteauroux, Paris Vatry Airport, a former military facility 150km east of Paris, recorded a 6% increase in cargo throughput last year – but still shifts less than 200 tonnes a week.

Yangtze River Express began operating three freighters a week last April, but the experiment lasted only until July, says Youri Busaan, general manager of airport operator SEVE.

Busaan, who claims that Vatry is the thinking customer’s alternative to CDG, believes that it has the potential to handle more niche charter flights. 

“We run the handling company, security, the full package. People want someone to handle the whole operation instead of negotiating with different service providers,” he says.

When Madonna completed her European concert tour last year in Nice, the charter operator chose Vatry ahead of several other airports for freighting four B747s worth of equipment back to the US, despite the fact that it was a 10 hour truck journey from the south of France.

“There’s less taxiing here. In four or five minutes, you can be unloading, compared with 15, 20, maybe 25 minutes at CDG,” Busaan says. “And, we’re a full 24-hour operation. They have only grandfather rights, so night operations are restricted to existing operators and slots.” 

Vatry has added passenger services in the last three years, but cargo still accounts for 50% of revenue. “It’s still the business I want to pursue,” admits Busaan. “But we’ve set a prudent budget for 2013. Many customers are still having a bad time.”

In the US, forwarders such as Emery and BAX Global traditionally operated their own heavy freight air networks from their respective hubs such as at Dayton and Toledo in the manufacturing heartland of Ohio. 

Other operators such as Airborne Express, based at the former military airport of Wilmington, Ohio, and Kitty Hawk Aircargo, at Fort Wayne, Indiana, also ran scheduled overnight freight services.

However, all disappeared in rapid succession in the early 2000s as demand fell away and truckers built more efficient nationwide networks, leaving largely untenanted airports casting around for replacement business.

“For every argument you throw out there for using an alternative airport – lower charges, lack of congestion etc – the bigger guys have an answer,” says Michael Webber. 

“You may argue it’s good that your customers don’t have to compete against passengers, for example, but it’s contraflow anyway, as you do most of it at night. And freight forwarders enjoy the idea of passenger services to all those destinations. The ‘no congestion’ argument kind of suggests no one wants to come out there.”

 

 

 

Wilmington became a parcel hub following DHL’s purchase of Airborne, but lost out in 2009 when DHL withdrew from the US domestic market after failing to take market share from FedEx and UPS.

FedEx moved in at Fort Wayne after Kitty Hawk went bust in 2008, but even the integrators are seeing muted growth in domestic air volumes. 

Webber notes that FedEx bought three of America’s top 20 trucking firms as it built its overland network. Most FedEx and UPS customers now choose deferred road delivery rather than pay for overnight air service. 

The BAX sorting facility at Toledo – mothballed after DB Schenker, bought the company in 2005 and closed the overnight transport operation two years ago – is getting a new lease of life under the name BX Solutions. 

Former senior management of BAX Global are launching an express road delivery service across the eastern and central US, and hope to take it national by May.

BX is working with the airport to establish international air connections to feed its overland network, but there are no plans to resurrect domestic freighters.

The US faces fewer night restrictions than Europe and there is no great pressure on runway capacity, Webber says. “We’re talking about a market in which the top 100 US airports lost 30% of their tonnage between 2000 and 2010, so there’s been no real constraint here for 10 or 12 years.”

This underlines the challenge facing airports such as Chicago Rockford International Airport, which boasts UPS’s largest regional parcel sorting facility and is home to 30 industrial tenants, but has so far failed to attract scheduled traffic away from Chicago’s main O’Hare International Airport.

Ken Ryan, cargo and business development director at RFD, says a nearby Chrysler plant generates occasional charters. There is also an aerospace cluster in the area, and parts for Boeing’s 747-8 are produced locally. 

“Atlas use us when they can, Volga-Dnepr make charter calls, and Cargolux and Southern Air call here,” says Ryan. 

O’Hare has a huge catchment area stretching from Kansas City to Toronto, served nightly by an army of trucks, but suffers from congestion, Ryan points out. 

He says: “With the modernisation programme going on, delays should be reduced. But they’re so busy that when you start getting back-ups, there are major consequences.”

A freighter from Asia, changing crew and refuelling in Anchorage and then flying on to Rockford, saves 35 to 40 minutes on combined flying and taxiing time compared with O’Hare, according to Ryan.

But the total saving is much greater, Ryan claims, because offloading at RFD can start in minutes.

“Nippon Cargo Airlines ran 13 test flights out of Tokyo Narita in December 2011 and wanted to see how trucking was in winter. We proved we could deliver faster to customers. It’s two and a half to three hours faster than flying into O’Hare direct,” Ryan says. 

“Our landing fees are one-third of theirs and our parking fees are zero, compared with $1,000 for the first four hours for a B747-400 at O’Hare, but I guess their volume discounts are attractive.

“NCA promised they would come in after doing the tests, but they take a view that it doesn’t warrant the risk, even though we have shown it works. We’ve had a whole series of airlines saying, ‘If you get the first guys in, we’ll come too’. 

“UPS doesn’t count for them – they want to see conventional cargo. I think the biggest issue is fear of change, fear of what the customer may think.”

Dave Lancaster, director of cargo development at Lambert-St Louis International Airport, faces the same inertia. 

“The majority of cargo is sucked into Chicago, five or six hours away by truck, and some goes to Dallas. We don’t have 200 or 300 freight forwarders and brokers here as Chicago does, and the industry is settled in its methodology,” he accepts.

Lambert was an important cargo hub for many years, before TWA’s acquisition by American Airlines, mainly thanks to its central location. 

“We’re on the edge of the ‘rust belt’ and not as impacted as Michigan. We’re on a Boeing defence and aerospace production site and new industries such as bio-sciences have sprung up,” Lancaster says. 

“We have a perfect road structure, with east-west and north-south interstate highways intersecting near here. We consider Chicago to be ‘up north’ compared with St Louis, and certainly our weather is better.”

China Cargo Airlines began weekly freighter flights from Shanghai in autumn 2011 under a two-year agreement with Lambert, but pulled out by mid-2012 as the Chinese economy slowed, and put all its focus on Chicago.

The airport is making a fresh effort to attract international cargo traffic via the Missouri Export Incentive Act – a scaled-down version of the so-called ‘Aerotropolis’ scheme of 2011 – which involved $300 million in tax credits for real estate development but was rejected by the state’s Senate.

On the table now is an eight-year, $60 million support programme that will see air cargo export shipments directly subsidised at 40 cents per kilo.

“It’s a very simple, forwarder-focused programme – seed money that will give carriers confidence that they will get support for years to come. We will also waive their first 18 months of landing fees,” says Lancaster.

There’s no denying it’s a tough market out there, but airports continue to innovate and adapt in a bid to maximise their cargo potential.

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