FROM MAGAZINE: Germany ranks high in trade game

Germany’s air cargo rally rolls on, with its leading airlines and airports posting solid traffic growth driven by strong export orders and surging e-commerce shipments.

Twinkle Sahita

Over the years, Germany has become the must go-to-hub for goods moving into Europe. This major European hub continues to play dominant role in foreign trades. From exporting highest value commodities such as the automotive parts to temperature sensitive goods such as pharmaceuticals, the air freight industry in the country has been instrumental in backing the trade growth.

A high value industry, air cargo is critical for serving this market that demands speed and reliability for the transport of goods. European airlines posted a 10.5 percent (or around 14 percent adjusting for the leap year) increase in freight volumes in February 2017 and a capacity increase of 1.4 percent. The ongoing weakness of the Euro continues to boost the performance of the European freight market which has benefitted from strong export orders, particularly in Germany, over the last few months, according to the recent report released by the International Air Transport Association (IATA). This very well indicates that air cargo remains crucial to the health of Germany’s economy.

As an active trading country, it has been making strategic moves to boost trade such as expanding country’s exporting markets, addressing regulatory and political issues likely to dampen country’s trade scenario and expanding airport infrastructure facilities.

Germany is home to some of the largest airports handling tonnes of freight volume everyday. The freight segments of some of these airports have seen continued positive momentum in the first quarter of 2017. One of them is Munich Airport which has set a new record with an increase of 12.4 percent.

Munich Airport’s airfreight segment again achieved even stronger growth than passenger operations in 2016. “The total cargo tonnage increased by 5.4 percent to 354,000 tonnes. The strong increase in 2016 results from additional capacities which were well received in the market. The two new Lufthansa destinations Teheran and Denver as well as Delta’s new Detroit operation added to the cargo volume. Further increase came from Emirates third daily frequency from and to Dubai. Qatar Airways increased capacities by switching from Boeing 787 and Airbus A330 to Airbus A350, so did All Nippon Airways by switching to Boeing 787-900. Again, for us also a proof, that our market is accepting and keen on additional airline capacities in Munich,” shared Markus Heinelt, Director Traffic Development - Cargo, Munich Airport.

“Cumulatively we have reached +7.8 percent for the first quarter 2017. And this will continue as we are expecting additional cargo capacity on new routes this year e.g. United Airlines starting off with San Francisco and increasing number of flights of Saudia and Air China.”

The airport currently negotiates the expansion of cargo infrastructures with various interested parties.

“We are in permanent bilateral talks with the management of the top cargo airlines and forwarding agents in order to retain and provide customised solutions. Additional step is, we are going to provide a new web-based cargo service tool, so called "e-learning cargo". That will be a dedicated proactive information system for the Munich Airport cargo community,” added Heinelt.

Another major European gateway Frankfurt Airport (FRA) has handled 535,764 metric tonnes of cargo (airfreight + airmail) in the first three months of 2017. This represents an increase of 5.8 percent in cargo throughput compared to the same period last year. The bulk of the cargo for German based cargo carrier Lufthansa Cargo is routed through Frankfurt Airport. Lufthansa Cargo has been looking at expanding partnerships over the last few years to tackle current air cargo industry’s conditions. The cargo division of the airline recently entered into a partnership with United Cargo covering services between the US and Europe. It also has partnerships in place with Cathay Pacific between Hong Kong and Europe and ANA on services between Japan and Europe.

HNA Group, the Chinese conglomerate which owns Hainan Airlines, has agreed to buy a majority stake in Frankfurt-Hahn Airport in Germany for €15 million, as part of its drive to expand its transportation portfolio. Hahn is around 120 kilometres from Frankfurt, Germany’s largest airport, but unlike Frankfurt and Munich Airport, it has a 24-hour operating license, making it attractive for freight flights. Hainan based HNA Airport Group is a global leader in the airport service operation business, specialising in airport investment, construction, and operations management. HNA Airport Group has already established management operations and relationships with 13 airports worldwide.

Germany’s Leipzig/Halle Airport has handled 265,904.3 tonnes of air freight/air mail (growth of 7.0 percent) – of which 99,024.2 tonnes were just in March. The airport has a 24-hour operating permit for cargo flights and direct links to the trans-European motorway and railway networks.

The airport’s World Cargo Center (WCC) has started operations at new cold storage for airfreight shipments. The warehouse has direct access to the apron and thus guarantees short transport routes to and from the aircraft as well as for trucks. In the new cold storage, goods can be stored at temperatures of + 2°C to + 25 °C and the facility is operated by Port Ground, specialised subsidiary of the Central German Airports Group. The temperature can be individually adjusted in three separate areas. Access control, video and temperature monitoring ensure the highest safety standards.

"The new cold storage for air freight expanded our comprehensive logistics portfolio and is particularly interesting for companies in the pharmaceutical, food and semiconductor industry in Germany and Eastern Europe," says Alexander König, CEO of PortGround. PortGround GmbH offers ground handling and freight services and other operations at Leipzig/Halle and Dresden Airports as a subsidiary of Mitteldeutsche Flughafen AG. Mitteldeutsche Airport Holding is the parent company of Mitteldeutsche Flughafen AG. The Group has three subsidiaries: Leipzig/Halle Airport, Dresden International Airport and PortGround.

The Paderborn-Lippstadt Airport, situated in one of Germany’s strongest economic regions at the border of North Rhine-Westphalia, Hesse and Lower Saxony, has also registered an increasing air freight transport volume in the past few years, which had previously been handled at other locations.

Dr Marc Cezanne, CEO at Paderborn-Lippstadt Airport, informed, “That is why last year we decided to strengthen our air freight sector as well as the service portfolio at our location. As a result, today we offer high-quality handling of various types of cargo and are connected to the Frankfurt HUB via regular truck service within the Lufthansa Cargo flight plan. In addition, charter freight services via planes of the type Antonov AN-26 owned by the airline Bright Flight, which are stationed at Paderborn-Lippstadt Airport, are available around the clock.”

Being an export oriented economy, there have been questions arising in the minds regarding the future of Germany’s economic growth post Brexit. German companies are already worried about a decline in demand for their goods in the UK, which accounts for 7.5 percent of Germany’s exports. Almost a third of the cars sold annually in Britain come from Germany, making the UK one of the biggest export destinations for German car producers. Britain’s exit from the European Union (trendingly known as ‘Brexit’) will also have a major impact on UK’s aviation industry. This assessment is mirrored by an IATA estimate that “the number of UK air passengers could be 3 to 5 percent lower by 2020, driven by the expected downturn in economic activity and the fall in sterling”. The near-term impact on the UK air freight market is less certain, but freight will be affected by lower international trade in the longer term.

Amidst such uncertainty in the air, the German air cargo players see rapid boom in the e-commerce market especially in the B2C segment due to the fact that the country builds the largest European consumer market with a population of 81 million. With 68 million people (84 percent of the German population) online on a regular basis, Germany is responsible for around one quarter of all European B2C e-commerce turnover. The AT Kearney Global Retail E-Commerce Index 2015 also identified Germany as Europe’s second largest online market behind the UK – but with almost triple the UK’s current growth potential. In fact, the Verband der deutschen Internetwirtschaft (Association of the German Internet Industry) has predicted turnover to surpass EUR 100 billion by 2020. Combined with an extensive, highly developed logistics infrastructure, Germany is the clear continental leader in this area and offers an ocean of opportunities for international online retailers and logistics service providers.

“I expect that trade by airfreight – import and export – will grow above average in the German market. Especially Munich offers a wide catchment area, premium industries, top consumer market which is excellent for e-commerce business. Therefore, respective political conditions allowing airlines to fly direct to Germany will be even more crucial in future. I assume that airline alliances will also increase to cope with this. In the future sustainability (green logistics) will gain more importance. Munich gets ready for this – aiming on becoming Germany’s first carbon-neutral airport by 2030,” concluded Heinelt.