Moscow’s moment

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Russia’s air cargo market remains dominated by Moscow’s Sheremetyevo and Domodedovo airports, which together account for most of the country’s international air freight volumes. Cargo traffic at Domodedovo grew by 1.8% to reach 200,000 tonnes in 2013, following growth of more than 4% in 2012. Asiana, AirBridgeCargo and Emirates all increased their cargo flights and Russian carrier Transaero launched freighter services from DME last April.

The airport handles more than 40% of Moscow’s air cargo traffic and expects further growth of 4.1% this year, thanks to development projects at its cargo complex. Efficiency at Domodedovo Cargo – which claims to be Russia’s largest international air freight terminal – was improved last year by adding more international cargo delivery bays and expanding the workforce. A new cargo reception facility opened, helping optimise the way freight flights are operated and serviced.

Further infrastructure development is under way, including the expansion of refrigerated facilities for perishable goods and short-term warehousing. In the fourth and final phase of reconstruction at the international cargo terminal, scheduled for the end of this year, a new 15,600 sqm warehouse is to be built, almost doubling Domodedovo’s capacity.

Installation of new software has allowed Domodedovo Cargo to transmit reports electronically to the customs authorities when freight goes into temporary storage or is shipped out. The next planned stage is to develop interactive services for airlines, cargo agents and exporters/importers, allowing them to order required services, prepare documents and track shipments online.

Rival Sheremetyevo handles most of the remainder of Moscow’s air cargo, with around 300,000 tonnes. SVO has seen a major revamp of its passenger facilities in the last few years, and also has plans to construct a new 20,000 sqm multimodal cargo complex, although the details and timeframes for this project remain unclear at present. In the mean time, airport handler Sheremetyevo Cargo has also been making progress in the last year with its electronic communication capabilities. Indeed, the company has spent a year testing and implementing an e-Freight programme for its domestic airlines and is now working on rolling out these capabilities to its international customers. Russia was one of the major locations targeted by IATA to start e-Freight pilots last year.

Elsewhere, St Petersburg Pulkovo airport has been under the international management of the Northern Capital Gateway consortium since April 2010, a grouping that includes Germany’s Fraport, and a new passenger terminal is expected to open some time this year. Meanwhile, cargo handling at the Pulkovo Cargo Terminal previously operated by Servisair is now under the flag of Swissport following the completion of its acquisition of Servisair late last year, giving Swissport Cargo a toe in the Russian market. Swissport will be hoping it has a smoother ride in Russia than it has had in neighbouring Ukraine (see Ukraine panel). However, for the time being St. Petersburg, despite being Russia’s premier seaport, remains, in relative terms, an air cargo backwater, with annual volumes of around 25,000 tonnes.

Eastern promise

Across in eastern Russia, and serving Russia’s third-largest city after Moscow and St Petersburg, Novosibirsk International Airport had a positive year in 2013, with volumes of cargo and mail increasing by 6.9% to almost 30,000 tonnes. The forecast for 2014 is to exceed 32,000 thousand tonnes, further growth of more than 6%. Growth has been mainly driven by the addition of new airlines – such as Transaero and Aviastar-TU – and increases in flight frequencies by AirBridgeCargo.

The majority of international cargo airlines using Novosibirsk do so as a tech stop, and these include Cargolux, Yangtze River Express and Nordic Global Airlines, although the Tolmachevo Cargo terminal is capable of handling up to 50,000 tonnes per year.

Last November, Russian Post opened an International Mail Processing Centre (IMPC) at the airport, expected to handle up to 60,000 parcels from China and south-east Asia for addressees in Russia’s Siberian, Ural and Far Eastern federal districts. In the long term, the airport plans to attract new logistics operators, positioning Novosibirsk airport as an accessible postal hub.

An e-commerce boom in Russia has seen the number of small parcels from China to Russia increase from 198,000 items in 2010 to 1.8 million items in 2012 – a 900% increase in two years. As a result, Russian Post and China Post signed a Memorandum of Understanding last year that will enable China Post to send sorted shipments destined for recipients in Siberia and the Russian Far East directly to international postal exchange points in Novosibirsk and Yekaterinburg without having to send them via Moscow, as was the case previously.

Sochi’s day in the sun

As the host city for this year’s Winter Olympics, Sochi has naturally been in the international spotlight of late, and its airport has seen a cargo boost as a result. One of four airports managed by Basel Aero in Russia’s southern Krasnodar region, bordering the Black Sea, Sochi International Airport almost doubled its cargo volumes last year, handling 4,200 tonnes of cargo as preparations continued for the Winter Olympics, according to Vasily Savinov, chief operation officer of Basel Aero.

In contrast, cargo volumes at the group’s Krasnodar Airport were 10% down, affected by an ongoing revamp there, while Anapa and Gelendzhik airports saw 20% and 30% declines respectively. The four airports combined saw total throughput of 12,000 tonnes of cargo in 2013, around the same as the previous year.

Sochi’s volumes may be small potatoes compared with the Moscow airports, but its extra volumes have provided some nice additional business for Russian carriers such as Volga-Dnepr Airlines. Volga has operated 18 Winter Olympics cargo flights to Sochi since 2009, when work started on new transport infrastructure and tunnel-boring equipment was required. Shipments carried since then have included broadcast telecommunications equipment, along with transformers and mobile gas turbine power plants to provide reserve electrical power. Sister airline AirBridgeCargo has also participated, for example delivering 30 tonnes of Olympic cargo from Moscow to Sochi last November on one of its B747-8 freighters, including eight pallets of broadcasting equipment.

Savinov says that even in normal times, Sochi is mainly an import destination. “Sochi is a resort city which doesn’t produce agricultural or industrial products. The local market is focused on providing services for tourists and the local population,” he says.

By contrast Krasnodar, Russia’s “breadbasket”, is seen as having good potential to supply agricultural products to the rest of the country – a role now mainly fulfilled by Moscow and Yaroslavl. As Krasnodar increases its flight connections with Russian regions, Basel Aero is planning to promote the idea of “general cargo in and fresh produce out”.

Budapest continues dogfight with Vienna over CEE cargo

Budapest’s cargo throughput shrank slightly to 92,000 tonnes in 2013, but the decline came in trucked cargo. Flown volumes were up 4% at 64,000 tonnes, of which freighters accounted for 54,000 tonnes.

Qatar Airways ceased a freighter service to Budapest in November after two years, blaming a slowdown in imports, although exports by Hungary’s pharmaceutical and electronics industries remain in good shape.

Cargolux, which calls at Budapest en route from Hong Kong to Luxembourg, accounted for almost 20,000 tonnes of last year’s maindeck total, says René Droese, the airport’s property director with responsibility for cargo.

Budapest is in a dogfight with Vienna, just 240km away, where Cargolux added a new service last year – a decision “driven by one customer in particular,” Droese says.

In Communist times, “everyone flew to Vienna” because of its better road infrastructure, he recalls. And passengers’ travel patterns have evolved ahead of the cargo community.

“Carriers ex-Asia still fly to Vienna for historical reasons and freight forwarders are well established there,” Droese acknowledges. “We have tried to attract Asian carriers here but we have a feeling that forwarders are not ready for it on the land side. We face a marketing challenge and we need proper facilities. They’re not old, but they’re not state of the art.”

A lack of warehouse capacity means cargo sometimes has to wait outside. The roof height is limited and the ramp position “not ideal,” Droese says.

The airport authority was ready to start work on a new facility prior to the collapse of Malev, and was negotiating lease terms with Çelebi, Malev Ground Handling and Menzies – which has only carried out passenger handling in the past.

The project was postponed, but construction is now set to begin at the end of next year, ready for opening close to passenger terminal 2 by early 2017. Celebi currently handles around 80% of cargo at Budapest while Farnair – with limited airside access – handles the rest. However, both Malev Ground Handling, which survived the airline’s bankruptcy and wants to diversify into cargo handling, and Menzies could have a presence in the new facility.

The four integrators will remain at terminal 1, where they have better parking space, and where new warehousing is also planned. Talks are under way about a new facility for TNT, and redevelopment plans are also on the table for DHL, whose volumes through Budapest grew by 25% last year.

“We have plenty of capacity, a parallel runway system and no curfew – only a limit on movements between midnight and 04:00,” Droese says.

Under a new incentive scheme set to be introduced in October, new customers will pay no landing charges in the first year and only 20% in year two. Budapest hopes this, and word that Vienna has put a proposed cargo development on the back burner so that it can upgrade its passenger facilities, will sway prospective cargo customers in its favour. l

Ukraine struggles under the weight of political, legal, bureaucratic and economic challenges

While Russia’s airports and air cargo facilities and processes are being modernised and developed, neighbouring Ukraine is making little progress, and the current challenges suggest this is unlikely to change in the short term.

Air freight and mail exports out of Ukraine are estimated to have decreased by up to 5% in 2013. The continuing economic recession in the country and the current civil unrest there leaves prospects for this year highly uncertain. Another 10% fall in exports is the best guess.

Air cargo sources in Ukraine say the country’s airports perform satisfactorily on a day-by-day basis, but the state is making little effort to invest in new facilities and there is “no apparent logic or strategy in airport development, either in passenger facilities or cargo”.

Bureaucracy is a problem at every stage from arrival of an aircraft through to cargo collection by the consignee after customs clearance. Local oddities include no apparent procedure for destroying cargo that is not picked up by a consignee in any of the country’s airports, which happens often.

There is also little competition between handlers in Ukraine’s strictly regulated operating regime, and the well publicised difficulties of the one major international player that tried to enter the market, Swissport, will doubtless serve as a warning to others – that normal international legal protections do not necessarily apply in Ukraine.

In 2006 Swissport acquired a majority share in Interavia, which was renamed Swissport Ukraine. Ukrainian International Airlines (UIA) was a smaller shareholder. Business grew at double-digit rates each year and the relationship remained good until 2011, when a discussion began as to how the investment needed to maintain future growth would be financed. UIA claimed discussions about a capital increase violated its minority shareholder’s rights and took legal action. In March 2013, after a brief hearing, a court in Kiev ruled against Swissport and transferred its shares to UIA. The name then reverted to Interavia.

Swissport initially expressed concerns that there appeared to be no effective protection of foreign investment in Ukraine, but last October – many months and several court cases later – the highest economic court in Kiev ruled in favour of Swissport, annulling the previous court decisions – thanks, no doubt, to the support of the Swiss and French embassies in Ukraine and the resumption of the activities of the government’s ‘Anti-raider Commission’.

Swissport described this “a good first step” and said it now expected to regain its majority ownership of the former Swissport Ukraine. It said the decision was “encouragement, not only for Swissport but for all foreign investors that are, or want to be active in Ukraine”. However, with the current political turmoil in Ukraine, the country may have other priorities for the time being.

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