FROM MAGAZINE: Air cargo seeks opportunities in landlocked countries

As a result of no territorial access to the seas, limited border crossings and transit dependence, landlocked countries are looking to air cargo for their future to increase their competitiveness on the global trade map. At the same time, air freight industry sees an opportunity of business in these countries.

Twinkle Sahita

About one out of five countries in the world is landlocked, according to World Bank estimates. 20 of 54 low-income economies are landlocked, the majority of them in sub Saharan Africa, while only three of 35 high-income economies are landlocked (not including European microstates and dependencies). High prices have hit many countries around the world, but landlocked developing countries bear an extra burden. Afghanistan, Central African Republic, Burundi, and other countries without a port pay more and wait longer for imported oil, food, and other goods. And they have an equally hard time exporting, with the result that they trade less and grow more slowly than their coastal neighbors.

However, in the recent times, the trade sector is witnessing changing fortunes of landlocked countries as well as of air freight industry that sees an opportunity of business in these countries. With the start of air cargo corridor between India and Afghanistan, it is now estimated that the trade between the two countries would touch the $1 billion in the next three years from the current levels of $800 million. The first flight from Kabul took off on June 19 this year.

Analysing the air freight sector in Afghanistan, Liana Coyne, director, Coyne Airways, said, “The Afghan air cargo market can be divided into two parts: the first being military cargo for the Afghan and Coalition troops; the second being normal commercial traffic for ordinary people. Ideally, a decline in military air cargo would be matched by an increase in normal commercial air cargo. Unfortunately, I am not entirely confident that this will come to pass. Despite the billions of dollars spent on Afghan reconstruction and Afghan business acumen, donors and enterprises can be easily spooked by ongoing insecurity on the ground and actual or perceived misappropriation.”

“I think that prospects would be even brighter for both the Afghan economy and air cargo if more airlines were comfortable with uplifting cargo from civilian Afghan airports. Unfortunately there are lingering concerns regarding airport security and screening, which make many (but not all) operators prefer to fly empty from Afghanistan; this also inhibits any potential transit traffic. This represents an opportunity lost, and is one of the blocks to the Afghan government’s ambitious plans for its airports to resume a key position on the ‘New Silk Road’.”

The UN has noted that, apart from Europe, there is not a single successful highly developed landlocked country as measured by the Human Development Index, and nine of the twelve countries with the lowest HDI scores are landlocked. The countries who have managed to overcome the curse of being landlocked have generally been able to do so because of the strength of the region, not just the individual country. They have enjoyed liberalised, low-cost secure access to regional markets, unburdened by too much bureaucracy. Landlocked Developing Countries (LLDCs) with easy access to regional markets are more attractive for airfreight service providers because then it becomes possible to sell both terminating and transit freight, and it becomes easier to manage asymmetric flows.

Compare, for example, the fortunes of a landlocked country like Luxembourg which has easy access to the developed infrastructure and markets of its European neighbours.

When it comes to Hungary, this European country is seeing international brands expanding their presence with air cargo relevant manufacturing or logistic distribution units in Hungary. Automotive, electronics, communication, pharmaceuticals, biotech, machinery; medical equipment, live animals, are all sectors developing their presence in this emerging air cargo hub. Budapest Airport seems to benefit from these developments and also it has value added advantage of extensive road (highway) network to 20 (EU and non EU) countries in trucking distance. The gateway has direct highway connection.

Highlighting one of the recent developments for the airport, René Droese, Property director, Budapest Airport, informs, “No less than six direct flights to New York and Chicago per week will be launched by LOT Polish Airlines from next May, creating a direct link again between the United States and Hungary after a six-year hiatus. The Polish flag carrier will operate these flights with the Boeing 787 Dreamliner. In addition, American Airlines (AA) will launch a daily service from Philadelphia to Budapest in its summer schedule next year.”

As far as land locked African countries are concerned, lack of integrated multimodal transport system (such as air, road, sea…), poor infrastructure, high operational charges, taxes and royalties, trade barriers including traffic right, longer bureaucracy and process inefficiency & corruption, high fuel cost are the major bottleneck for their logistics which result inefficiency in the sector.

Some of the landlocked countries in Africa such as the Central African Republic do not have a dependable all-weather route to the sea: its corridor in Cameroon becomes impassable during the rainy season because of poor infrastructure there, and its other route via a river in the Democratic Republic of Congo becomes impassable during the dry season. Therefore, regional relations are important.

The traffic flow through cargo hubs in Africa must be optimised to generate sufficient demand between African sub-regions, in particular for the benefit of LLDCs. Berhanu Kassa, director Global Cargo Sales and Services, Ethiopian Airlines, suggested few ways to optimise the traffic flow. One of the ways, he said, is to work on the major challenges of air cargo by fostering the level of infrastructure such as airport, Information and Communication Technology, road, working on peace and security, strengthening the current regional integrity, competence of the local logistics industry, etc.

Among the other ways, he believes investments in air freight infrastructure, especially runways and warehousing; enhancing inter & intra trade and investment among countries by having a favorable Trade and investment policy and procedure can help LLDCs improve their competitiveness.

“Currently, our air freight export is dominated by flower, meat or in general perishables. With the launch of industrial parks (many textile companies including major high end brands) in the country we are expecting significant amount of textiles to be transferred via air lift. So far the nation has witnessed modest growth in the main air freight export item, flower,” adds Kassa.

Ethiopia is the most populous landlocked country in the world, as well as the second-most populous nation on the African continent, suggest reports. The flag carrier of Ethiopia has experienced the best performance ever in terms of tonnage in the first half of 2017; ATK growth was 27 percent while FTK growth was 41 percent.

With the recent developments such as the India-Afghan air freight corridor and many other landlocked countries looking at infrastructure developments, prospects remain higher for these countries. Landlocked countries should liberalise access to foreign airlines. Liberalisation remains key to managing asymmetric flows and rationalising capacity for maximum efficiency.