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A balancing act

While some freighter operators see opportunities on the transatlantic trades, belly overcapacity plus currency fluctuations, especially in Europe, make it a tough market to succeed in. Ian Putzger investigates

CAL Cargo Airlines is bullish on the transatlantic market. In September the all-cargo outfit inaugurated a weekly flight from Liege to Atlanta via New York with a Boeing 747-400F. Not long after the launch, management signalled plans to mount direct flights to Atlanta and ramp up the frequency to three weekly runs.


Originally, CAL had intended to start twice weekly flights to Shanghai, but the recent weakness of the China market prompted a re-think.


Others also find the transatlantic sector tempting for freighter operations. In March, Qatar Airways announced that it would be launching all-cargo flights to Los Angeles, the fourth US destination for its cargo aircraft. On the passenger side, it intends to mount LA flights next year. From the western end of the theatre, KF Aerospace launched freighter flights from the Canadian Maritimes to Brussels, flying four times a week with McDonnell Douglas DC-10-30Fs, hoping to scoop up fish and seafood.


Some large forwarders have also seen cause to boost their maindeck capacity to the US, but across the Pacific. Having converted one ACMI contract with Atlas Air into a charter agreement, Panalpina started a transpacific link from Hong Kong to Huntsville, continuing to Viracopos in the spring. Shortly afterwards, DB Schenker announced an agreement with Etihad for a dedicated freighter service from Hong Kong to Chicago and Houston.


For other European forwarders there is more of a shift from Asia to North America in the wake of weakening flows between Asia and Europe. "The transatlantic sector is the market to concentrate on," comments Stephan Haltmayer, general manager of German forwarder QCS Quick Cargo Service. "Our business to the US is going very well. Other markets, like Brazil, are stagnating. We want to establish ourselves more in the US."


Transatlantic flows to the US have been going well. "Europe has been strong westbound," confirms Jan Krems, president of cargo at United Airlines.


"We have witnessed increases in our volumes of garments and home furnishings, as well as automotive and other manufactured articles. A gradual increase has been seen in the value and volume of consignments," reports David Mallinson, general manager, UK air division of Kerry Logistics.


Several verticals have pushed the growth in westbound flows across the Atlantic; the automotive industry has been a major driver of this momentum. QCS flew a number of Porsches to North America earlier this year, Haltmayer reports, but the main action has been in the auto parts sector.


"Automotive has been very good this year. We have had very good business both in and out of Detroit," reports Rich Zablocki, vice president global product development North America at CEVA Logistics.


Matthias Frey, global head of the Panalpina Charter Network, says that besides automotive traffic, the pharmaceutical industry has been another powerhouse. For American Airlines, this has been a major focus. "Our business is up substantially there," says Joe Reedy, vice president of cargo sales. He adds that the 25,000ft2 dedicated pharma facility that the carrier opened at Philadelphia airport in June was an important step there.


"Pharmaceuticals and express have held up nicely," remarks Joe LeBeau, vice president commercial for North America at IAG Cargo, "Our primary focus on premium products has helped us."


To boost its appeal to these sectors on the European side, IAG is moving to use its shorthaul network out of London more. As this consists mostly of narrowbody aircraft, small shipments with high yield – such as express and pharma traffic – are the main targets.


Achim Martinka, vice president for the Americas at Lufthansa Cargo, says that macroeconomic developments, particularly the strength of the dollar, have been a significant driver of traffic. Demand for westbound lift has been buoyed by the rampant dollar. "The dollar had a pretty big impact on the industry, especially on flows to and from Europe," agrees LeBeau.


In the opposite direction, the high cost of imports from the US has combined with economic weakness and political instability at the European end to undermine demand for eastbound lift. "There has definitely been a slowing down in US exports," confirms Zablocki.


Naturally, given the diversity of the European markets, there has been some variation. Germany has remained one of CEVA's best markets, Zablocki reports. The company has also fared very well in Italy, likely because of its automotive business. The UK, on the other hand, has been disappointing, which has prompted CEVA to develop special programmes to address this market.


Business with the Netherlands has been a mixed bag, with strong activity in the pharmaceutical sector. Customers appear to be well tuned into air cargo pricing developments. "We see a lot of people put business up for bid. Usually we do not see that in the third or fourth quarter. I think they try to read the tea leaves where rates are going," Zablocki says.


LeBeau finds two-way deals very important and asserts that IAG is always interested in these. However, most players seem to be in no hurry to avail themselves of this option. "Nobody has been knocking on the door," Zablocki says.


Given the drop in oil prices, the energy business has shown a downturn in eastbound traffic, Frey notes. Alongside the automotive and industrial sectors, this has been one of the targets of Schenker's freighter to Houston. The logistics firm recently opened a 14,000m2 facility and a two-hectare laydown yard in the Houston area.


Lufthansa also reinforced its focus on the oil business with a freighter link between Houston and Stavanger. The move prompted some speculation that the German carrier was about to change its strategy and increasingly deploy freighters on routes that do not touch its home market, but Martinka dismisses this as overblown.


"The Houston-Stavanger service shows that we are no longer just a classical German carrier that only flies to Frankfurt. However, this is not a strategic re-orientation," he says. "These are niches. We may do another one, but some 95% of our business is to Germany. There is no strategic plan that in the future one-third of our flights would be outside Germany."


There is also speculation that the sharp decline of the Canadian dollar vis-a-vis the greenback (it dropped over 20% from parity last autumn) could prompt forwarders in the US to route exports over Canadian gateways. "If the rate is one dollar on both sides of the border, you get a nice saving if you pay Canadian dollars," one forwarder remarks, but adds that his company is not prone to shifting its gateways in response to currency fluctuations.  >>

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