FROM MAGAZINE: Staying competitive across Atlantic

US and Europe are prime trading partners and the air cargo industry plays an important role in facilitating trade between the two regions. In order to stay competitive, industry stakeholders are investing in newer routes, new flights as well as modernizing infrastructure.

Shreya Bhattacharya

Trade between the United States (US) and Europe accounts for nearly a third of world trade flows. It wouldn’t therefore be incorrect to say this transatlantic relationship defines the shape of global economy to a large extent. The airfreight industry therefore, for evident reason, sees immense opportunities in the transatlantic trades. From machinery to fashion products, the air freight industry is instrumental in exchange of a wide variety of goods between the two regions supporting their respective economies.

Although trade between the two regions has remained stagnant over recent years, a lot can yet be done to reach its full potential. Between US and Europe there is already an open sky policy in terms of traffic rights, which allows a level playing field. Furthermore keeping a mostly unrestricted trade between Europe and US would be valuable for both sides. The proposed Transatlantic Trade and Investment Partnership (TTIP) Agreement could remove barriers to US-EU trade across a wide range of industries.

“Most forecast call for trade to remain pretty stagnant between the US and Europe, with limited capacity increases in the short term. Longer term developments like Brexit could be a positive gain for US-UK trade depending on the outcome of negotiations-whether a new free trade agreement or a hybrid arrangement between those markets. The rest of Europe is a mixed bag with gains in some markets: Germany, Italy, France, and losses in others: Norway, Spain, and Switzerland,” opines Emir Pineda, manager aviation trade & logistics (Marketing), Miami International Airport.

According to the latest report by Boeing on world air cargo, “Total Europe–US air cargo volumes grew 6.5 percent in 2014 and 1.0 percent in 2015. In the Europe-to-US direction, air trade expanded 7.9 percent in 2014 and 4.2 percent in 2015. Monthly growth in Europe-to-US air trade was mostly positive, year-over-year, throughout 2014 and 2015. During the first six months of 2016, however, Europe-to-US flows continued to expand, growing 3.7 percent, compared to the first four months of 2015.”

The report further says, “In the US-to-Europe direction, annual air trade grew 4.9 percent in 2014 and fell 2.6 percent in 2015. Year-over year growth remained through third quarter 2014, only to weaken again during fourth quarter 2014 and throughout 2015. For the first six months of 2016, US-to-Europe air trade fell another 2.9 percent compared to the first four months of 2015.”

Noting this latent market situation, while some stakeholders do express their doubts for 2017, many are hopeful as well.

“We believe there is still growth in this market segment. For Liege Airport in particular, since the acquisition of TNT by Fedex, we believe that the scale of products and services for airfreight via Liege will grow significantly. Therefore, we expect growth in this market segment. Liege Airport is managing growth in two ways, increasing the efficiency of the existing infrastructure and expand by investing in runway, taxiway, aircraft parking and warehouse capacity,” says Steven Verhasselt , commercial director, Liege Airport.

Markus Heinelt, director, traffic development cargo, Munich Airport, says, “At Munich Airport we see a growth of 16.7 percent of US cargo traffic in the first quarter 2017 in comparison with the same period in 2016. In terms of whole European traffic - it´s hard to say, but we hope for further growth, of course.” The airport currently offers 123 weekly flights directly to the US.

Many players see the need for optimization and simplification to ensure a sustainable growth of airfreight, which otherwise is an unpredictable industry. “It is very hard to have any prediction in the airfreight industry. The first quarter in 2017 has followed the same trend as the end of 2016 in terms of volume, and this is good news. We do see the need for optimization and simplification in our industry. Making use of belly capacity and freighter capacity whenever needed is our priority. We are taking many initiative to get digital and ease our way of doing business,” says Nicholas Saignat, vice president USA, AFKLMP Cargo.

Primary products traded
US and Europe exchange a wide range of commodities, of which machinery and transport equipments are by far the most traded products. The demand for automotive and aerospace parts are particularly high. Logistics and haulage company Senator International CEO Tim Kirschbaum says, “Since Europe, especially Germany, is a well known manufacturer of high quality machinery and the intention of the US government is to increase local production in US, the supply of machinery will get a boost.” Apart from this, there has been steady growth in specialised handling for temperature-sensitive pharmaceuticals. Also there is a strong growth in fashion traffic from Spain and Italy. With the continued growth of online retailing, a strong demand is being seen in mails and small packages in both European export and import flows to the US, said the air cargo players we spoke to.

Staying competitive
In order to stay competitive, industry stakeholders are investing in newer routes, new flights as well as modernizing infrastructure. Recently the United Cargo and Lufthansa Cargo entered into a joint venture, covering a wide-range of cargo cooperation on routes between the United States and Europe. The trans-Atlantic deal was first proposed in 2015. The carriers together have more than 600 direct connections per week between the two regions. The joint venture partners plan to provide a wide range of benefits to customers by cooperating on the availability of their capacity and aligning booking and handling processes.

Another American airline Delta says it is set to include three new markets in Europe. “This year Delta will launch seven new routes with three new markets from New York-JFK including Lisbon, Berlin, and Glasgow, plus new service between London Heathrow and Portland. We will also see expansion of service and frequency from our hubs in Paris and Amsterdam providing extensive cargo opportunities. We have also resumed service between Atlanta and Brussels and this is a strong cargo market for Delta,” says Gareth Joyce, president-cargo and senior vice president airport customer service, Delta Air Lines. Delta is also a founding member of the SkyTeam Cargo global alliance and participates in the industry’s leading transatlantic joint venture with Air France-KLM and Alitalia, as well as a joint venture with Virgin Atlantic.

Commenting on capacity addition plans, Saignat of AFKLMP Cargo says, “We keep on extending our network. For the USA, some examples are the Paris to Minneapolis flights or the Amsterdam to Miami or Salt Lake City flights.” Cal Cargo Airlines also looks forward to increase its frequency and destinations as required. Navot Hirschorn, Temperature Controlled & Special Products Manager at Cal Cargo Airlines says, “We expect continued growth between the EU and the US. With our daily scheduled service to JFK, and now two weekly Atlanta Airport (ATL) flights, we are set up to take advantage of the growth.”

The AirBridgeCargo Airlines revealed it is investing in the size and capability of its modern freighter fleet. Vince Ryan vice president, North and South America, AirBridgeCargo Airlines says, “AirBridgeCargo has just taken delivery of its 10th Boeing-747-8F bringing its fleet to 17 Boeing 747 freighters. It’s not a secret that belly capacity dominates EU-US lane, but by operating freighters our network is being developed based purely on cargo customers’ demand. We will continue to increase our focus on higher value products that need special handling procedures, such as out-size cargo, dangerous goods and pharma shipments. We have recently moved to a brand new facility in Chicago in order to further improve the quality of our services.”

Airports on their part are also attracting more airlines and are improving their infrastructure in a bid to facilitate trade. Munich Airport revealed that United Airlines will start on May24th with a new destination of San Francisco, with daily seasonal flights from the airport. The airport also plans to offer additional main deck capacity between Munich and US.

Similarly, Liege Airport says it is investing in capacity growth on different levels. “For runway capacity, we are upgrading the existing main runway, extending the second runway and adding taxiway capacity as well. For airside operations, we are investing in additional parking for widebody freighters, as well as first line warehousing. By the end of 2018, the first line warehouse capacity on Liege North will double. Liege Airport is also investing in second line warehousing, an industrial logistics zone of more than 400 hectares is being developed, to support the logistics industry,” explains Verhasselt.

From the US, Miami Airport has services to 23 destinations in Europe. Further it is also adding more European services like WOW-Iceland, Aer Lingus-Ireland and Qatar Airlines with service to Belgium from Miami.

A wide range of joint ventures, trade agreements and investment in infrastructure are gradually untangling complexities to ease trade across the Atlantic. However, considering the changes in US policies and Brexit, a sense of uncertainty still exists. It would be interesting to see how the air freight market evolves in the coming days.