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Asia-Europe air cargo shippers locked into congested hubs    11/05/2018
Shippers importing air cargo into Europe can expect to face costly peak period congestion and delays at airports in the next few years as a series of factors converge to lock them into services calling at the slot-constrained gateways.

The number of airplanes in the worldwide freighter fleet will increase by 70 percent during the next 20 years as air cargo traffic more than doubles, Boeing has forecast. Photo credit: Shutterstock.com.


Additional costs of using secondary airports, the logistics infrastructure and service shortcomings at the smaller airports, a lack of airline investment in freighters during the past decade, and the need to feed all-cargo planes with freight from the below deck bellies of passenger aircraft will make shippers’ lives difficult.

While there are secondary airports in Europe that can serve as alternative entry points to the congested hubs for full freighter aircraft arriving from Asia, Sebastian Scholte, CEO of Jan De Rijk Logistics, explained the difficulties this option presented.

“If you go with a freighter from Hong Kong to Frankfurt, or Amsterdam, or London, then you have a big catchment area and a lot of origin-destination traffic to fill the plane, but if you have to go to Liege, Luxembourg, or Marseilles, then it is more difficult,” he told JOC.com. 

“Yes, these airports are cheaper than the main hubs but it is a calculation. Probably the extra cost of trucking will not offset the lower cost of landing rights, and freighters calling at alternative airports will mean a lot more trucking and offline handling and that will increase the costs.”

Scholte, who is also the current chairman of The International Air Cargo Association (Tiaca), said another problem with using secondary airports was that even if the infrastructure was there, with no large catchment area and no home carrier, the big handling agents had little incentive to invest in handling facilities when the big airlines could pull out at any time.

“It is difficult for them to see where the return on investment will be, how long the business will last and how loyal will their customer base will be. An airport can be dedicated to freighters, such as Luxembourg and its strong home carrier Cargolux, but that is an airport where the supply creates the market. It usually happens the other way around. When you have a lot of capacity the forwarders step in and critical mass is reached.”

Lack of air cargo capacity contributes to woes

Another key factor that will lock cargo into choked hub gateways is the lack of investment in freighters that have generally been making losses for airlines for the last decade. Scholte said this meant most growth in the next five years would have to come from the bellies of passenger planes. 

“But to make freighters viable, you need to feed them with belly capacity, so there is still a need to operate freighters to origin-destination hubs where there is also a lot of belly cargo.” 

While the double-digit volume growth of 2017 driven by restocking and e-commerce demand is unlikely to be repeated in 2018, the International Air Transport Association is still expecting air cargo to post solid growth. 

“It’s normal that growth slows at the end of a restocking cycle,” said Alexandre de Juniac, IATA director general and CEO. “That clearly has happened. Looking ahead we remain optimistic that air cargo demand will grow by 4-5 percent this year.”

The steadily rising volume of cargo will keep the pressure on most of Europe’s hub airports, particularly Amsterdam Schiphol, where slot controls to manage flight numbers cut freighter calls by 12 percent in the fourth quarter. Those controls at Schiphol will be in force until 2020 and the airport is continuing to feel the effects of the limited space. Cargo volume at Schiphol declined 4.7 percent in March to 146,249 tons with the number of full freighter flights falling from 1,582 in March 2017 to 1,411 in the same month in 2018. 

C.H. Robinson said capacity in 2018 will become harder to find as airlines try to engage with large shippers in a variety of industries and negotiate directly for their air freight needs.

“There is only so much air cargo space available,” the third-party logistics provider said in a report on air trends in 2018. “If large shippers absorb a larger slice of the available capacity, small- and medium-sized shippers will probably find it a lot more difficult to secure air space for their freight. Generally speaking, the longer the lead time you can allow between pickup and delivery to customers, the more able you will be to find available space and contain your costs.”

It was not only the European end of the air cargo supply chain that was experiencing congestion in 2017. Delays of 15 to 20 days were reported out of China airports during the peak NovemberDecember season as fast-growing e-commerce combined with general cargo to generate high levels of traffic, and air freight rates on the busy China-North America routes shot up to $12 per kilogram.

 




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