Nordic air cargo Braving all odds

Even as falling oil prices have taken a toll on the once-rock solid economies of Norway and Sweden, the region’s fish exports continue to attract attention, adding new dimensions to its competitive environment.

From flying Norwegian salmon to places such as Singapore and Japan, electronics and pharmaceuticals to the Middle East, Africa and other markets, Scandinavian products are being moved across the world. However, falling oil prices and deflation are weighing on the once-rock solid economies of Norway and Sweden, while Finland has taken a drubbing from the recent recession in Russia, its biggest trading partner.
“The Nordic countries have been looking strong in recent years, with economic and financial crisis in much of Europe… However, after years of robust growth, the shine seems to be wearing a bit off,” said economists led by Steen Bocian in a report from the Scandinavian Danske Bank. Having said that, Bocian added, “this does not mean that there are signs of economic crisis in the two otherwise very strong economies, but growth rates are heading towards the European average and downside risks have increased.”
A variety of goods are imported and exported into and from the region. Exports from Sweden include telecommunications equipment, pharmaceuticals, chemicals, electronics and tools, while imports are mainly dairy products, electronics, fruit and vegetables, textiles, plants and flowers. Denmark’s exports include ship spares, oil and gas equipment, pumps, windmill parts and pharmaceuticals, with key imports being oil and gas equipment, electronics, textiles, fruits and vegetables.
Popular commodities exported from Norway includes salmon, oil and gas equipment, ships spares, pharmaceuticals, chemicals and electronics, and key imports include oil and gas equipment, ship spares, pharmaceuticals, machinery and dairy products.
Assessing the performance of the air cargo markets in the Scandinavian region, “it is not getting any easier” believes Mikko Turtiainen, VP Global Sales, Finnair Cargo. “Looking at our home markets, Norway is the strongest at the moment with views on 2015 still remaining optimistic. The economic climate in Sweden and Finland still remain challenging, the trend in regards to air freight kilometers has been declining. Denmark has remained quite stable over the past 12 months. Capacity to and from this region will continue to increase over the next years, adding new dimensions to the competitive environment.”
With Helsinki as its hub, Finnair has 14 long haul destinations, with over 80 long haul flights departing Helsinki every week in its network operated by A330s and A340s. The airline’s network connecting Scandinavia to its Helsinki-Hub includes narrow-body flights from top Scandinavian cities into Helsinki, freighter connections from Mälmö to Helsinki as well by its broad RFS network into Helsinki.
“After the sharp decline in 2011, Scandinavian markets are recovering, not very fast but still in a continuous manner. We expect again a slight gain in comparison with 2014 in the region, but increasing competition is pushing the unit prices down,” observes Burak OMEROGLU, Regional Cargo Director (Eastern Europe & Russia), Turkish Cargo.
For the region, Turkish Cargo’s biggest capacity is offered in Finland, Helsinki with four weekly freighters apart from the daily three passenger flight capacity, followed by Stockholm with weekly two freighters and daily three passenger flights.
Europe’s biggest oil exporter, falling oil prices have been weighing on Norway, although its reserves are bolstered by a sizeable sovereign wealth fund. The Norwegian krone, whose performance is strongly tied to oil prices, has steadily weakened against the U.S. dollar since mid-August last year, and is down around 2.5 percent since the start of 2015—providing a possible spur to exports.
“For 2015, the outlook however is rather positive, looking on the lower oil prices and also the weaker Scandinavian currencies, it is expected that this will support exports from Scandinavia. The oil price however delivers also a challenge, especially for Norway, which is depending on oil and gas production. Here a dip of the growth rate is widely expected,” said Alexander Kohnen, Director Nordic and Baltic Countries at Lufthansa Cargo.
In general, there has been a rather weak development for the air cargo industry across the Nordic region. All economies are growing slowly and airfreight volumes declined in general over the few last years. Kohnen attributes this decline to the economical development itself, but also the mode-shift of goods from air to sea. Furthermore, large quantities of air cargo are now consolidated by freight forwarders at their European gateways such as Amsterdam Airport Schiphol and Frankfurt, business which is not visible on the local market any longer.
The Scandinavian population and industrial production is scattered over a large landscape. Distances are long and frequent use of ferries is required. The major challenge is the lack of a large natural air cargo catchment at one major airport. Therefore, no real air cargo industry clusters exist, which means logistic cities similar to what you find in Cargo City South Frankfurt or at Amsterdam Schiphol. “This makes it different to position cargo aircrafts at one spot, as always feeding over long distances for majority of the business is required. The air cargo industry will need to meet this challenge by agreeing on best possible spots for the build-up of an air cargo cluster and to bundle activities in this area. Based on the close proximity to the European mainland and as the natural melting point for Scandinavian traffic this could be the Oeresund Region,” Kohnen explains.
Talking about infrastructural changes that are needed in this region, industry players are of the opinion that the first step should be the definition of one Scandinavian Air Cargo Cluster, ideally located in the Oeresund region.
“Since the main PER product in the region is fish, offering reliable and appropriate capacity is the key for a better cooperation with the customers, which cannot be realized at all times. More and more handling agents coping with already defined GDP regulations will help everyone to transport pharmaceutical products. Providing active solutions as an airline can also be an additional value. Having a strong hub, in terms of operational capabilities, is of course the main requirement,” said Turkish Cargo’s Omeroglu. 