AIRPORT FOCUS: Capacity crunch

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Slot restrictions at Schiphol and noise fines at Brussels are bringing fresh opportunities for other European cargo airports, report Stuart Todd and Will Waters

Buoyant air cargo and passenger demand this year and new environmental or slot issues at airports including Amsterdam and Brussels have raised concerns about capacity at Europe’s major airports – and brought some new opportunities for secondary cargo airports.

The most high-profile example has been Amsterdam Schiphol (AMS), where strong recent growth meant the annual quota of 500,000 Air Traffic Movements (ATMs) – a figure agreed in 2008 and applicable until 2020 – was breached well before the year end. The situation has led to a year-on-year reduction in the number of freighter flights at Europe’s third-largest cargo airport of almost 20% – roughly 30 per week – since the start of the current IATA winter season on 29 October.

The ‘squeeze’ on freighter slots at AMS has seen AirBridgeCargo (ABC) and Singapore Airlines (SQ) Cargo move flights out of the Netherlands to Belgium’s Liège and Brussels airports, respectively. Emirates SkyCargo has also joined the exodus, transferring eight of its 18 weekly all-cargo flights to Brussels, Copenhagen and Frankfurt. And Suparna Airlines (Y8), formerly known as Yangtze River Express, has reportedly shifted four or five weekly flights from Amsterdam to Frankfurt-Hahn.

Hahn gains

In addition to Hahn gaining the Suparna flights from AMS, Hahn will also gain some additional new flights from the airline, industry sources say. Since August 2017, Hahn has been majority owned by China’s HNA Airport Group – in turn part of HNA Group, majority owner of Suparna and 49% owner of fellow Hahn customer MyCargo Airlines. Brussels Airport is also expected to benefit from new Suparna freighter flights later this year.

Amid the European freighter shake-up this autumn, in October Hahn also launched a new initiative to promote itself as “the answer for logistics companies looking for alternatives to congested air freight hubs like Frankfurt/Main, Amsterdam and Paris”, via a task force led by COO Christoph Goetzmann. “In the upcoming months, we will introduce our improved service in a roadshow to all international airlines”, Goetzmann says, while a new “hotline” will allow clients to explore alternative options for air freight via Hahn.

The initiative follows a very positive start to 2017 for the German airport. With a turnover of more than 58,000 tonnes between January and July 2017, Hahn has more than doubled its movement of goods compared to the same period in the previous year. More than 80,000 tonnes of air freight was handled there in 2016.

Belgian benefits

Although new noise fines imposed on carriers this year at Brussels Airport (BRU) led to the loss of some freighter flights, BRU has still seen cargo growth of 9.5% compared to 2016 in the first 10 months and expects to end the year with double-digit growth. Meanwhile, anticipating the withdrawal of slots at AMS, SQ Cargo transferred four of its eight weekly freighter flights from Schiphol to Brussels in October, increasing SQ’s freighter flights at BRU from four to eight weekly. Asked if BRU was surprised that SQ had chosen to increase its freighter flights at Brussels when it was among the companies fined for infringing noise pollution regulations, Steven Polmans, head of cargo and logistics at BRU, replies: “It’s not that much of a surprise to us. For many years, both Amsterdam and Brussels have been the main hubs for SIA Cargo in Europe.”

He says it was not a simple matter for carriers to set up a new station at an alternative airport at very short notice in response to the slot restrictions in Amsterdam, a challenge faced by a number of carriers after the slot problems at AMS emerged in September. “Having handling, offices, staff, etc. available in Brussels is thus a big advantage for SQ Cargo and moving flights here is a logical decision,” Polmans explains.

But Liège airport initially appeared to be the biggest beneficiary of the reduction of all-cargo flight slots at AMS, with ABC alone announcing in October that it would move up to 12 weekly B747 freighter flights to the Belgian airport, after being forced to reduce its weekly flights at AMS from 23 per week to 13 per week.

Partly a result of what Liège Airport’s CEO, Luc Partoune, described as the “saturation of Amsterdam”, the Belgian airport in October announced an “acceleration” of its plans to enhance its cargo capabilities with a €20 million investment in additional warehousing and handling facilities in 2018.

However, the apparent huge windfall of flights for Liège may be shortlived. In early November, ABC reached a co-operation agreement with KLM that will allow ABC to share some of KLM’s slots at Schiphol during the current IATA winter season. Russia had threatened to close its skies to Dutch airlines from 4 November unless ABC’s landing slots at Schiphol were returned.

ABC says the agreement “will allow ABC to fully re-establish its operations to AMS as per its request”, with ABC expected to resume its AMS operations in November or December. It appears also that the agreement will continue beyond the current winter schedule, with ABC stating: “Both airlines will continue cooperation in order to avoid such situations in the future.”

It was unclear at the time of writing, in early November, whether ABC will cease operating at LGG when it resumes its full schedule at AMS, although Liège Airport’s VP commercial Steven Verhasselt was hopeful that the airport’s relationship with ABC would continue. Speaking in early November, while talks with ABC were still ongoing, he says: “Liège Airport has been talking with ABC for a long time, as both companies feel there is a natural reason to cooperate. As an airport, we prefer to be the first choice for an airline, rather than an alternative when the first choice is not available.

“We believe the cooperation between ABC and Liège Airport is a long-term cooperation. The first weeks have been hectic for all parties. We do believe that a long-term cooperation, with a long term planning and preparation, will be in all parties’ best interest.”

Euther way, Verhasselt says the airport’s recently announced acceleration of €20 million of investment in additional cargo capacity, aircraft parking and first-line and second-line warehousing, would go ahead as planned. “Liège Airport is preparing for growth, from both our long-term loyal operators, as from new operators joining in,” he explains. “The Liège cargo community needs room for expansion, and the investments are there to provide this.”

On whether the challenging slot situation at AMS and capacity or environmental issues at other European airports cause Liège to be optimistic about the opportunities for secondary cargo-specialist airports, he responds: “From our point of view, our strategy remains the same. We believe that the combination of 24/7 operations, no night curfew and no slot restrictions, combined with a minimum time to market thanks to our infrastructure and dedicated specialised services, are the assets freighter operators are looking for. We are positive about the future thanks to our assets, not because of external issues.”

The airport has seen growth throughout the last three years, from 590,000 tonnes in 2014, to 649,000 tonnes in 2015, 660,000 tonnes in 2016 – and a further 8% year-on-year increase in the first 10 months of 2017. Although customer confidentiality prevents the airport from indicating how much of that growth in recent years has come from its biggest customer TNT/FedEx, and how much from general cargo, Verhasselt says: “The investment is there to accommodate the growth of our existing partners, who are all enjoying healthy growth in today’s market. We also hope that with more capacity, the LGG Cargo community will grow with new partners from every part of the logistics chain.”

Cargolux retains AMS slots

Meanwhile, Europe’s biggest all-cargo player, Cargolux, is retaining its flights at Schiphol, at least for the moment. “Amsterdam is important for our flower flights from South and Central America. For Cargolux, there is no immediate problem, especially for the winter schedule, but we don’t know what will happen next year, when AMS introduces its summer schedule,” a company spokesperson said.

“Based on our historic flight schedule to AMS, we expect to keep those slots. However, there is naturally very limited room for growth right now (at Schiphol). For Cargolux, the focus lies on our efforts to retain our flexibility in the interest of our customers.”

The spokesperson underlined that 2017 had seen a significant growth in air cargo demand in general and that Cargolux had responded by introducing additional flights and operating additional charters. “Asia exports have seen a healthy demand, but other areas of our network have benefitted as well.”

Air France KLM Martinair Cargo confirmed that it had not lost any of its freighter flight slots at Schiphol for the current winter season. The new schedules see the Franco-Dutch carrier launching new passenger routes from AMS to San José, in Costa Rica, Port Louis, in Mauritius and Mumbai, in India and its cargo arm will be utilizing the belly cargo capacity offered by the B787 aircraft operating the flights.

Customer concerns

But the underlying concern for the air cargo community in the Netherlands, represented by trade body Air Cargo Netherlands (ACN) and supported by the national shippers council Evofenedex, is that the freighter cutbacks at AMS could seriously damage Schiphol’s standing as a major European air cargo hub alongside Frankfurt, Paris and London, and also lead to a loss of credibility in the eyes of all-cargo airlines – especially given the prospect of the slot shortfall continuing over the next three years.

The Netherlands’ outgoing secretary of state for infrastructure and the environment, Sharon Dijksma, is supporting a joint lobby by ACN and Evofenedex for the introduction of a ‘local rule’ giving preference to full freighter operations if a pool of unused air traffic movements (ATMs) become available in the current capacity squeeze at Schiphol. A proposal along these lines was previously rejected by the airport’s co-ordination committee, an advisory body of all the airlines operating at the airport, on the grounds that it was unfair to have a separate regime for all-cargo flights – a decision the minister did not have power of veto over.

In a letter to the national parliament, Dijksma stressed the importance of Schiphol as an air cargo hub and also the significant number of jobs the sector generates, urging that a fresh proposal on a local rule, which would have to meet EU regulations, be drawn up before the end of November 2017 and put to the vote by the coordination committee.

She called on the Schiphol Group, the management company running the airport, “to look into a solution for the current situation.” Schiphol responded: “We will investigate this request in the coming weeks and will communicate when we have more information.”

Meanwhile, several major forwarders have played down the impact of fewer all-cargo flights at Schiphol.

“Schiphol is an important perishables hub for Panalpina, especially for imports from Kenya. But we do not expect these operations to be disrupted, because the reduction in freighter flights affects other trade lanes,” explained Panalpina’s global head of air freight, Lucas Kuehner.

“What’s more, our strategic partnerships with all leading carriers that serve Schiphol give us plenty of flexibility. Our scheduled charters do not fly via Amsterdam, Luxembourg being our European hub for this network. Overall, the impact for us and the companies that ship with us will be minor.”

Kuehne + Nagel CEO, Detlef Trefzger, commented: “We have a couple of (air) hubs in Europe and we can change the hubs we use depending on the capacity. We have not experienced any surprises in terms of capacity shortages in Europe so far.”

Dutch affair

These views give the impression that the freighter cutbacks at Schiphol are largely a national issue in scope, with only limited implications for the wider air cargo market. However, the European Shippers Council (ESC) sees it very differently. The ESC argues that the situation is far from being a Dutch-only affair, but instead raises fundamental questions about the future of all-cargo flights at major airports − and the danger of them being pushed out by the leisure or low-cost segment, which is growing at a spectacular rate.

“This is exactly the case at Schiphol: full freighters, with load factors of 95%, are now forced to move out because they have lost their slots,” a source at the ESC said. “The slots that have become available are picked up by the leisure or low-cost segment. So, flights with a large economic footprint are being replaced by flights with a much smaller one.”

The ESC claims that Frankfurt, Beijing, Mexico City, and Hong Kong are already facing the same issues as Schiphol, noting: “If the number of full freighter flights drops, this will immediately hurt the rest of the supply chain, hamper the economic investment climate, and result in a loss of jobs.” It also warned that if full freighters had to rely more and more on what it called “secondary” airports, “air cargo handling will deteriorate to a mediocre level”.

The shipper body is calling for a modification of the EU-IATA 80:20 slot allocation rule, which stipulates that in order to retain their historic rights to slots, airlines need to fly 80% of their slots according to the requested flight schedule.

Rogier Spoel, policy adviser at the Dutch shippers council, Evofenedex, and who also represents the ESC at EU level, explains: “Because the business is often ad hoc and seasonal in nature and heavily-dependent on cargo flows – in contrast to the highly scheduled air passenger market – freighter operators find it very difficult to comply to the 80:20 rule. There should be ’70:30’ provision made for full freighter flights due to their complexity.”

DHL Global Forwarding (DGF)’s global head of air freight, Ingo-Alexander Rahn, emphasises that AMS is not the only European airport suffering from an air capacity squeeze. “Currently, all major airports in Europe face capacity shortages and slot restrictions,” he notes. “We see regional cargo airports like Liège and Hahn, with no night curfew, benefiting most, while Brussels will host additional flights from its regular customers.

“We will see whether this will lead to problems for these airports in the short term from the point of view of having enough ground handling capacity and qualified staff in place.”

Frankfurt situation

Turning to one of Schiphol’s major rivals, Europe’s largest cargo airport Frankfurt/Main, its latest air freight and airmail figures, for September 2017, showed a rise in traffic for the tenth consecutive month, “driven by the ongoing strong growth of the global economy”, albeit at a lower rate than the average 10% global air freight growth this year. Cargo volumes grew by 4.7% to 1.7 million tonnes in the first nine months of 2017, and total aircraft movements increased by 1.1%.

“In contrast to Schiphol, Frankfurt Airport still has available slot capacity per hour,” a spokesperson for the airport explained. “With the winter schedule, we’ve increased our slot capacity per hour from 100 to 104. Especially for freighter operators, we have suitable slots in morning and late afternoon periods. That’s why our sales people are involved in many interesting discussions with freighter operators about expanding or starting business at Frankfurt Airport. For the winter season, we expect moderate growth for cargo.”

Lufthansa Cargo does not appear to be facing any slot issues at Frankfurt, with a spokesman describing operations as “stable” at the company’s main hub. “We are happy to have introduced from Frankfurt two additional weekly freighter flights to China and three additional weekly freighter flights to the United States with the winter schedule,” he notes.

“Lufthansa Cargo’s worldwide operations are basically stable (too) and we are not encountering any outstanding airport capacity issues, nor do we expect to do so.”

Any effect from the reduction in freighter flights at AMS on the German cargo carrier’s business “remains to be seen”, the spokesman commentes, adding: “We are happy to offer our Lufthansa Cargo network, including our extensive road feeder services throughout Europe, to customers all over the world.”

Heathrow headaches

London Heathrow has also seen strong cargo growth this year, with traffic rising by 10.5% in the first nine months of 2017 to 1.25 million tonnes. As for air capacity constraints on freighter traffic, a spokesperson said: “It’s widely known that Heathrow has been at capacity for almost a decade. Slots are hard to come by and we are governed by the same EU rules as AMS, which is why expansion and a third runway are so crucial to our ability to add capacity. A third party body, ACL-UK, allocates all slots at Heathrow.

“Freighters, like all airlines, have to apply for slots through ACL-UK and our slots are governed by applicable EU rules. There’s no specific restriction on the ‘number’ of freighters – it’s just that under local slot rules, they can only access ad-hoc slots, which are allocated after the passenger airlines have confirmed their schedule for the season.”

The UK government recently committed to a final vote in the first half of 2018 on the expansion of Heathrow.

Game changer?

With several of the major airports in Europe facing capacity shortages and slot restrictions, regional cargo airports like Liège and Hahn seem set to benefit from a period of renewed growth. Whether they become preferred long-term cargo hubs for the top-tier cargo airlines or merely temporary alternatives while capacity is tight in the big metropolitan airports, remains unclear. Polmans comments: “Cargo in general is growing strongly, causing problems at most airports at the moment. Lack of capacity in slots, warehouses, or even on board aircraft are part of the business again, something we have not seen for many years. The question will indeed be if this is temporarily or really a game changer. We have said this in the past as well, and many major hubs have since that time increased their capacity and facilities, growing strongly and remaining in the lead. I do not think this will change that easily or quickly.”