Economic troubles depress European airfreight
Geodis Wilson’s airfreight volumes in southern Europe were down 3 percent in the first six months of this year, says Nikolas Dombrowski. Results for this region, comprising Spain, Italy and France, contrasted with central Europe and the Nordic region, which performed well for Geodis. Central Europe (Germany, the Netherlands, Belgium and the UK) was up 24 percent, confirming the two-speed Europe.
Italy has seen a 9-percent increase in air exports so far this year, led by fashion, leatherware and luxury goods, but with a solid underpinning of auto and motorcycle parts. However, a slowdown in industrial projects in markets such as Turkey and the Middle East has hit Geodis hard; its share of what remains a highly fragmented market has fallen back from 1.6 percent to 1.4 percent.
Lack of local capacity meant that 80 percent of Italian export airfreight was once trucked to airports such as Frankfurt, Paris and Brussels. The figure is currently less than 45 percent, with carriers such as Korean Air, Singapore Airlines and Emirates now operating freighters directly to Milan. This, and the fact that airfreight rates are lower than in Germany, has helped prevent modal shift. It’s feasible for exporters in eastern Europe to truck to Italy instead of using local airports such as Prague, Dombrowski says.
Geodis has also lost airfreight market share in Spain, suffering a 19-percent volume decrease in the first half, while the overall market grew by 9 percent. “We lost some business controlled from Latin America and Asia,” Dombrowski says. “Now, we’re coming up again, and I’m positive we can end the year level with last year.”
Spanish importers with a poor payment record will happily change suppliers in a bid to extend their credit line. Forwarders buying their capacity from airlines on fixed contracts were badly wounded by falling spot rates that would have meant taking a loss of anything from HK$6 to HK$9 per kilo, and this forced Geodis to reject textile import traffic.
In happier times, carriers were similarly lured by the prospect of massive fashion imports into Spain and tried operating freighters direct into Zaragoza, Dombrowski says. Some have been forced to withdraw from this superficially attractive market.
Problems look set to continue for the Eurozone if strong economic recovery doesn’t happen soon. There is no appetite, or funding mechanism, for bailing out larger economies should they fail.
A full fiscal union of EU states is unacceptable to voters in those countries with stronger balance sheets, but the behavior of the money markets suggests this is inevitable for the euro to survive. If even one Eurozone member defaults or is forced out, then surely the great euro project will go the same way as all history’s previous attempts at currency union.