Europe hits doldrums

European airlines saw air cargo demand fall by 0.7 percent in April compared with 2013, according to the International Air Transport Association, partly a result of GDP growth of 0.2 percent in the Eurozone in the first quarter.

Analyst WorldACD shows that Europe recorded the lowest growth among the world’s major regions in terms of April export tonnage, just 2 percent higher year over year, although it ranked better for import cargo with growth of 9 percent. And forwarders in Europe were expecting to shift lower volumes of airfreight in May and June than they did in April, according to Danske Bank’s monthly survey.

This leveling off in activity will come as a disappointment following a strong start to the year. London Heathrow recorded a 4.4 percent volume increase in the first quarter, and cited China, Russia and Mexico as the fastest-growing routes.

Frankfurt, Europe’s largest cargo airport, maintained its first-quarter growth trend at 4.5 percent in April, driven by increases in volumes to and from China, Hong Kong, the Middle East, eastern Europe and North America.

However, Lufthansa Cargo confirms a slowing trend.

“We saw a good start into the year in both directions across the Atlantic,” Achim Martinka, vice president Americas, says. “This halted in April, with a very low increase ex-U.S. to Europe and even a decline into the U.S. The market has been difficult especially on the East Coast, and we also see declining numbers in Canada and Argentina.”

Lufthansa has opened up Guadalajara, Mexico, and Lima, Peru, as freighter destinations in recent months, but has withdrawn its Detroit freighter, though it still has a daily passenger service.

Continuing moderate demand and surplus capacity is keeping yields under pressure, Martinka says. “Due to this unsatisfactory situation, we will continue to review freighter capacity.”

Harry Hohmeister, Lufthansa’s chief officer group airlines and logistics, told a media briefing in May that future freighter requirements are under review as new cargo-friendly passenger aircraft take a greater market share.

The group is taking delivery of five B777 freighters, with options for five more. “Given the current cargo markets, it will be a stretch to reach midterm financial goals,” Hohmeister says. “We have to consider how cargo markets are changing.”

Munich is Germany’s second-largest passenger airport after Frankfurt, but fails to attract its share of cargo, believes airport CEO Michael Kerkloh, despite a large catchment area covering Switzerland, northern Italy, Austria, the Czech Republic and the Balkan states.

Major manufacturers including BMW, Audi, Adidas, Siemens, MAN and Airbus Helicopters are based close to Munich. Yet goods produced in this industrial heartland are routinely trucked to Frankfurt, Amsterdam or Paris, and the only freighter operators calling at Munich, aside from the integrators, are AirBridgeCargo (ABC), its sister airline Atran and Cargolux.

“We are determined to put more emphasis on the development of cargo,” Kerkloh says, pointing out that Munich is one of the few central European airports with space to develop its infrastructure.

ABC has certainly got the message, introducing a weekly Moscow-Munich B747 freighter service in May to complement Atran’s four-times-weekly B737 feeder services on the route.

Denis Ilin, ABC executive president, says the eastbound B747 departs Munich at midday Friday, giving European exporters end-of-week connectivity to Asian destinations such as Shanghai, Beijing, Chengdu, Zhengzhou, Hong Kong, Seoul and Tokyo.

Trade between Russia and the rest of Europe was worth US$567 billion (418.3 billion euros) in 2013, with the Netherlands, Germany and Italy leading the way. ABC flies almost 60 percent of the airfreight heading in and out of Russia, and in addition to Munich has launched scheduled services this year to Leipzig, Germany, and Malmö, Sweden.

Building on its Europe-Asia growth, ABC has also begun a Dallas-Moscow service via Amsterdam and has added a weekly Frankfurt-Chicago service to its five-a-week Moscow-Chicago rotation. Ilin sees the Frankfurt-Chicago route growing quickly to two or three services per week.

Despite the weakness of the French economy, ABC is also targeting Paris for an increase of at least one more freighter per week in addition to the present three. The carrier is closely watching Air France-KLM’s cutbacks to its freighter fleet and is keen to offer French exporters continued main-deck access to Asia.

Cargolux’s full-year figures for 2013 show that maintaining yields is the primary challenge for all European carriers. Although it returned to profit during the year, the company’s revenue growth of 14.4 percent significantly trailed the increases of 16.7 percent in tonnage uplifted and 18.7 percent in FTKs. Cargolux president and CEO Dirk Reich said, “We don’t expect market conditions to improve significantly in 2014.”

Average load factor softened by 0.9 percentage points to 67.7 percent last year, though this partly reflected the three new B747-8Fs that joined the Cargolux fleet. The carrier also retained a 747-400F on a power-by-the-hour basis that it had originally planned to dispose of, and added a 747-400ERF on the same basis. This brought its freighter complement to 20, against the 16 budgeted.

Chris Nielen, regional commercial manager Europe for IAG Cargo, says the trans-Atlantic market, although meeting volume expectations, is “still challenging” thanks to excess capacity. Cargolux’s expansion, Emirates’ new freighter service to Atlanta via Frankfurt and the seasonal increase in passenger services by U.S. carriers are all pressurizing rates.

Germany has been the best-performing export market in mainland Europe so far this year, ahead of France and Italy, Nielen says. IAG is generating good loads for South America, served from Iberia’s Madrid hub, and he says yields are healthier than on the north Atlantic.

Iberia has increased its Panama service to daily and is launching services four times a week to Montevideo, Uruguay, and five times a week to Santa Domingo, Dominican Republic, from September, taking IAG Cargo’s Latin America network to 16 stations.

The new routes will be served by A330 and A340-300 aircraft, offering up to 12.7 tonnes of capacity on the Santo Domingo route, and up to 11.7 tonnes to and from Montevideo. Main cargo is expected to be meat, fruit, vegetables and leather goods.

IAG is promoting its Constant Climate temperature-controlled service to pharmaceutical exporters in Belgium, Switzerland and Italy, with the U.S. East Coast the major destination. Increased belly capacity out of Tel Aviv, Israel, which has gone up from an A320 to a B777, has also been helpful in this regard, Nielen says.

Global airfreight yields were down by 5.7 percent in the first quarter compared with Q1 2013, according to the Cass Freight Index. Air France-KLM suffered erosion of “only” 3.5 percent, helped in part by a focus on higher-revenue express and temperature-controlled products, Erik Varwijk, executive vice president of cargo, says.

Three years ago, AF-KL carried 42 percent “special” cargo, which it categorizes as express, mail, pharmaceuticals, perishables, live animals, valuables and aerospace products. That ratio is now up to 51 percent, largely because of increased pharmaceutical volumes, Varwijk says.

The group has new pharma centers at its two home hubs Amsterdam Schiphol and Paris CDG. Meanwhile, international express operator Sodexi, majority-owned by AF-KL with French post office Geopost also holding a stake, is set to complete a new handling facility in Paris next year.

Like IAG Cargo, AF-KL is trying to exploit opportunities in Latin America. It now operates a weekly freighter from Schiphol to Curitiba, Brazil, and has added belly-hold capacity to Santiago, Panama City and Brasilia, Brazil, in recent months.

To help further its ambitions in the region, the group is intensifying its partnership with Delta Air Lines. “Not every Skyteam carrier has exactly the same range of [cargo] products, but we want to improve our interline capability on express and pharma, in line with how the passenger alliances function,” Varwijk says.

Virgin Atlantic saw a 3 percent increase in tonnage out of the EMEA region in “a challenging market,” John Lloyd, director of cargo, says. “So far this year, we have doubled our perishables traffic from Amsterdam and seen a healthy increase in general cargo from Frankfurt, Paris and Vienna.

“Inbound from New York to London, we are also carrying more cargo destined for markets such as Amsterdam and Brussels,” Lloyd says. “We expect the upwards trend on these routes to continue.

“Overall, our origin traffic from Europe to the U.S. and from the U.S. to Europe has increased considerably so far this year. Yields, however, remain a concern given the amount of capacity in the market.”