FROM MAGAZINE : Striving to stay at the forefront

With several major ports and airports in a dense area with multiple logistics providers and distribution centres, the Benelux has always been a traditional logistics gateway of the Europe. The air cargo community in the region has been at the forefront when it comes to taking innovative measures to keep the shippers satisfied.

Shreya Bhattacharya

When it comes to cross country collaboration, Benelux stands tall as the fitting example of a successful, intensive cooperation between the Belgium, Netherlands and Luxembourg, currently celebrating 60 years of their union.

The three neighbouring states have gone the extra mile to allow free movement of cargo by simplifying extensive administrative procedures before being allowed to cross borders. Along with the benefits of the politico-economic union of the three states that have eased trade, the region has also fully utilised the advantage of its geographical location to become the main facilitator for international freight transport from and to the European Union (EU). Due to the relatively limited surface area of the Benelux countries, freight transport in these countries is highly international and this is where the airports in the region Amsterdam Airport Schiphol, Luxembourg, Liège and Brussels have a significant role to play.

Giving an outline of the region’s performance in the past few years Steven Verhasselt, VP commercial, Liege Airport says, “The air cargo industry in the Benelux is doing great, and the growth of the air cargo industry outweighs the growth of other industries. This shows clearly that, thanks to the efforts of everybody involved, the Benelux is more than ever the logistics center of Europe. Benelux is ideally located to serve global partners entering the European market. The outbound growth rates show clearly that German, French and other European exporters believe in the efficiency of the Benelux logistics service providers and airports.”

Echoing similar sentiments, Steven Polmans, head of cargo and logistics at Brussels Airport Company says, “The Benelux cargo market has been strong in the past five years, and with several airports in a very small region competing with each other, this has resulted in a lot of new developments that benefit the cargo industry in our region.”

Identifying and registering the demands of shippers, airports like Brussels and Amsterdam Schiphol were among the first ones to construct the innovative air cargo logistics community initiatives like Pharma.Aero and Pharma Gateway Amsterdam, respectively, to keep shippers of key commodities satisfied – a model which other airports and aviation stakeholders are today trying to replicate.

Earlier in the year, the Brussels Airport Company also announced plans of investing €100 million over three years in ultra modern logistics buildings to strengthen its position as a vital logistics cluster in Belgium. The buildings are expected to cover 50,000 square metre on the west side of Brucargo. They will have direct apron connection for four different companies, with Kuehne + Nagel, dnata and WFS among the companies making use of these buildings for shipping, packaging and stocking cargo. The new infrastructure will be specifically suited for the handling of high-quality and temperature sensitive products including pharmaceuticals, products which are important to Brussels Airport and Belgium as a whole, said the company.

Giving an update on the same Polmans shares, “All projects announced are in the final planning stage or have already started. WFS is finalising a 10,000 square metre facility by the end of this year, the construction of a new vault storage warehouse started, the construction of the new animal inspection post was awarded and will start in the next few weeks. The new first line development of 50,000 square metre warehouse space is on track with the awarding to the constructor taking place at this moment and works starting by the end of the year. All onsite preparation works and land removal has been done already.

In terms of cargo transportation, Brussels Airport saw 8.7 percent growth in volumes in 2017, informed Polmans. “This year, so far, we are seeing the same result of more than eight percent growth. With three more months to go, we are not expecting big changes anymore. So 2018 will again be a good year for us as far as cargo growth is concerned,” he added.

Meanwhile, Verhasselt also expressed exuberance while speaking about the airport’s performance, in terms of cargo business. “Business is good in Liege. 2017 was an all time record for cargo throughput. The first nine months of 2018 were excellent. We consolidated the growth, and even added substantially. With the continuous support from the Liege Airport community, we are definitely on track to reach new heights in 2018. The cargo throughput will exceed 800,000 tonnes for the first time,” he said.

“As far as airline capacity is concerned, most of the growth comes from the expanding networks of our long term partners flying into Liege. We celebrated 20 years of CAL in 2017, 20 years of TNT / Fedex / ASL and Icelandair Cargo, as well as 10 years of Ethiopian Airlines Cargo in 2018. We are looking forward to more parties for Qatar Airways and NAS soon. In 2017, we welcomed Turkish Cargo and Air Bridge Cargo as new operators in Liege, and hope to celebrate their anniversaries 20 years later,” he further said.

2017 was also the most successful year for the Luxembourg Airport which handled 938,000 tonnes of airfreight, a 14 percent increase from the previous year, which allowed the Europe’s sixth largest cargo hub to break through the 900,000 tonne barrier for the first time. The airport, in order to meet the growing requirements, started the construction of the extension of its apron in early 2017, which is expected to increase the total capacity of the cargo apron from 8 to 12 parking positions, all capable to accommodate Boeing 747-8F aircraft. These works represent an investment of approximately €40 million, the airport has informed.

Apart from the community initiatives and massive infrastructure expansion plans, the airports are ensuring a smooth supply chain by embracing automation and digitisation. Bart Pouwels, head of cargo, Amsterdam Airport Schiphol previously in an interview mentioned, “Our vision is to be digital and transparent, and we have launched our Smart Cargo Mainport Programme (SCMP) with the community, including airlines, forwarders, handlers, and truckers. In this programme we look at how to make Schiphol the most innovative, efficient, and smartest cargo hub in Europe. This means looking at digitisation and a way of redressing any areas that may need updating.”

He further said, “The Smart Cargo Mainport Programme, together with the network on offer at the airport, will help to attract fast-growing e-commerce traffic to Schiphol. E-commerce companies look for a strong network and a reliable service, so those requirements are essential for us in terms of who operates out of Amsterdam and connects with the rest of the world.”

Meanwhile, the airlines in the region have also shown strong growth rate. According to the latest data released by International Air Transport Association (IATA), European airlines posted the fastest growth of any region in August 2018, with an increase in demand of 3.7 percent compared to the same period a year earlier. Despite a weakening in manufacturing firms’ export order books in Europe, particularly Germany, international air cargo demand has trended upwards at an annualised rate of eight percent over the last six months. Strong conditions on the transatlantic market and a pickup in demand between Europe and Asia have driven this growth. Capacity increased by 5.2 percent year-on-year.

According to the latest figures from European airlines, the Air France KLM, a merger between Air France and the flag carrier airline of the Netherlands KLM, saw cargo traffic increase by 4.8 percent year on year in August to 741 million revenue tonne kilometres. Over the first eight months of the year demand at the group was up by 0.3 percent. Capacity was up by the lower amount of 3.4 percent and as a result its August load factor reached 56.8 percent against 56 percent last year. This is the airline group’s largest percentage increase in cargo traffic since November 2016 and the first time for a while it has really maintained a streak – this is its third increase in a row – of outgrowing major competitors.

Meanwhile, the Brussels Airlines and its parent carrier, Lufthansa recently entered into a cargo sharing agreement that will allow Lufthansa to market belly-hold capacity on the Belgian subsidiary carrier, while offering Brussels Airlines access to Lufthansa’s portfolio of international destinations.
Reinout Puissant, the global platform manager at Brussels Airlines Cargo, said the agreement will allow Brussels Airlines “to make even better use of our freight capacity,” which includes 10 wide-body and 42 narrow-bodies, while utilising Lufthansa Cargo (LC) air waybill system. The agreement will enable Brussels to access Lufthansa Cargo’s network of some 300 destinations across 100 countries, while LC will gain access to Brussels’ African destinations.

While the airlines in the Benelux region are constantly expanding their network of destinations and are engaging in collaborative approach, quality and enhanced services also remain a priority. One of the largest scheduled all-cargo airlines in Europe Cargolux was the world’s first GDP certified airline in January 2014, confirming its compliance with EU GDP/WHO requirements. This year also the Luxembourgish cargo airline successfully passed its GDP Surveillance Audit, attesting that the company’s management system fulfills the requirements of the EU directive ‘Guidelines on Good Distribution Practice of Medicinal Products for Human Use’ and of WHO guidelines.

The airline earlier announced that 2017 was an exceptional year for them. Net profit after taxes for 2017 totaled $122.3 million (compared to $5.5 million in 2016) whilst FTKs increased by 12.3 percent. Consequently the load factor of the airline increased to 70.1 percent for the year. For the first time in its history, the Cargolux Group exceeded 1 million chargeable tonnes flown. Its worldwide market share grew to reach four percent and it ranks as the sixth largest airline in respect of international scheduled freight operations.

“The year 2017 was a record year for Cargolux and the strong results continued during the first half of 2018. In Q3 2018, however, demand has somewhat softened and we are witnessing a slow-down in the trade. The industry is however expecting an upward trend ahead of the peak season,” said Chris Nielen, vice president Europe, Africa and Middle East, Cargolux.

“The strong market conditions we experienced over 2017 and Q1/Q2 2018 were partly driven by the Benelux countries. Pharma products have experienced a strong resurgence in the Belgian market while the Netherlands have seen growth in perishables. Our customised product, CV precious, that specialises in engine powered shipments has also witnessed a resurgence on the Dutch market. Both countries are also showing a very strong increase in our CV alive products, with increased demand for horse movements,” Nielen added.

Cargolux, which remains by far the largest cargo airline at Luxembourg Airport, also signed a cooperation agreement for air cargo with Emirates SkyCargo in May 2017. This was followed by Emirates SkyCargo starting flights to Luxembourg in June with modern Boeing 777F aircraft.

Speaking about its own fleet expansion plans Nielen said, “Cargolux has invested in three additional 747-400 freighters to enhance fleet capacity and provide flexible available volume to meet market fluctuations. One of these aircraft is currently leased out and will return to the Cargolux fleet in 2019 along with the other two airplanes. The additional aircraft can be used either to replace those that are nearing the end of their lease, or if the market continues to remain strong, they can be operated as an addition to our existing fleet. They also provide the opportunity to expand the charter capacity offer. The charter service includes worldwide coverage so it is essential that we are in a position to offer capacity quickly and efficiently to our customers.”

Recently the airline also received $155 million credit line from Bank of China. The strategic partnership contains several phases of implementation, with a first phase of about $45 million immediately implemented with the signature of several agreements. “We are happy to strengthen our cooperation with Cargolux through this strategic partnership which is a significant step in our support for the ‘Silk Road in the air’,” stated Zhou Lihong, chairman of Bank of China Luxembourg.

Even though Cargolux sees great prospects for expansion in the air cargo business in China, the carrier is finding itself at the crosshairs of a deepening trade conflict between China and the US, a sticky situation which might have spillovers that can hurt growth prospects.

While the trade tensions have not affected air freight between China and Europe, potential risks exist for flights the company runs between China and the US, stated Richard Forson, CEO of Cargolux Airlines while speaking with media. He further expressed concern saying if the trade dispute escalates and involves more products traded between the two countries, especially electronic products made in China, then it might exert a spillover effect on the air freight sector.

This also comes at a time when the region is yet to see the impact of Brexit. Although the industry stakeholders claim of no major impact on their business, the move does bring a sense of uncertainty with it.

“As the Brexit is not in place yet, I don’t think it is appropriate to discuss the current impact. It definitely brings uncertainty, as six months ahead, there are no rules, regulations or even guidelines in place. For the Benelux, it is clear that there is potential gain and potential loss. Global companies serving Europe from the UK will have to adapt their flows, and are already looking for new gateways in the Benelux. On the other end, Benelux exports a lot to the UK, and a lot of airfreight transits in Benelux airport, with the UK as final destination. For now, we have no indication on the impact. We do know that uncertainty is never good for business,” said Verhasselt.

Apart from the international policy conflicts, some of the domestic issues like the slot constraints at the Amsterdam Airport Schiphol, which rather came unexpected, had a huge impact on the cargo operations at the airport.

In a major relief to the industry stakeholders, freighter services at Amsterdam's Schiphol airport could now be increased as the Dutch government reversed its previous rejection of the ‘local rule’ proposal. The rule would give freighter operators priority for the first 25 percent of any unused slots that are returned for re-allocation and was devised as a way to help overcome the Amsterdam airport’s slot shortage earlier this year. The Ministry of Infrastructure and Public Works recently checked the proposed local rule for legal aspects and effectiveness and “in principle, no objections were found to the approval of the local rule”, said the Air Cargo Netherlands, the industry association. It said that the ministry has now asked Airport Coordination Netherlands (ACNL) to carry out a check on the practical feasibility of the scheme and report by November 30. The ministry will then make a final decision.