Central Asia beckons, but red tape still tangles

AsiaAs capacity growth goes, Turkmeni­stan is a hot mid-year contender to be crowned “shooting star of the year.” Admittedly, the Central Asian country did not require a huge influx of lift, given its relatively low stature as an international air cargo market so far.

The start of regular flights by Cargolux through Turkmenbashi, on the eastern shore of the Caspian Sea, at the end of June marked the second launch of in­ternational widebody freighter flights to Turkmenistan this year, following the in­troduction of Lufthansa’s all-cargo flights from Frankfurt to Ashgabat in March. Cargolux’s 747 freighters now touch down in Turkmenbashi four times a week – twice each eastbound from Luxembourg and westbound from Hong Kong.

A spokesperson for the airline listed Turkmenistan’s huge natural resources, related investments and an “interesting market” as reasons for the new service. Lower oil prices don’t necessarily help investment in the region, but Car­golux’s volumes into Central Asia have remained stable, she reported. “Fur­thermore, the geographic location of Turkmenbashi is advantageous for our flights going to or coming from South­east Asia,” she added.

“These are small markets. Fifteen years ago people hardly knew where they were; now they go in,” remarked Larry Coyne, CEO of Coyne Airways, which pioneered many airfreight routes into Central Asia.

While the Central Asian region is in the spotlight these days as the ideal way-station between Europe and Asia, the daily realities of doing business in the region have caused some misgiv­ings among many carriers. With difficult regulations, poor infrastructure, a weak­ened oil and gas market, and increased competition from rail, the bloom may already be fading for this region as an air cargo center.

For instance, Lufthansa, which has a weekly flight to Turkmenistan, using a 777-200F en route to Hong Kong, is eagerly awaiting a new airport for the capital city of Ashgabat, scheduled to open in 2016. Christian Becker, Lufthan­sa’s regional director for Russia and the Commonwealth of Independent States, said he is looking forward to the new cargo terminal, as the current facilities and available handling equipment are limited.

Lufthansa had opted for Ashgabat, rather than Turkmenbashi, as its hub.

Besides oil and gas – the mainstay of Turkmenbashi’s volumes – the capital also attracts other commodities, such as healthcare products, flowers and baby chicks. Becker noted, “We concentrate on Ashgabat because we want to offer a broad spectrum of products, not just oil and gas.”

Becker said he expects Lufthansa to move about 1,400 tonnes into Ashgabat this year. However, Turkmenistan is a pure import market for the carrier. Ex­ports are small and leave the country by truck, for the most part.

Coyne noted that one appeal for freighter operators in Turkmenistan lies in low kerosene prices, although they are also lower in Baku, the better-estab­lished Azerbaijani air hub on the other side of the Caspian.

More challenging than the infrastruc­ture can be the rules for operators. In 2013 the authorities loosened traffic re­strictions, but this was compensated by a steep rise in offloading charges levied on aircraft. If carriers brought in haz­ardous materials, the charge doubled, which famously produced a levy of US$86,000 for an An-124 that was carrying cars and ended up stuck in Ashgabat for a week in the ensuing dis­pute. “The joke is: They don’t offload. There is no equipment,” one industry executive said privately.

Those who look elsewhere in the Central Asian region are finding similar problems in nearby countries, as red tape stymies ambitions to move cargo beyond the designated gateways or build up regional flows. The complexi­ties are overwhelming, commented Luf­thansa’s Becker, adding that road condi­tions pose another challenge for road feeder service activities.

Lufthansa has a weekly freighter to Tashkent, capital of neighboring Uzbeki­stan. Like the Ashgabat flight, it contin­ues east, where it turns into a DHL flight back to Europe. And, like Turkmenistan, Uzbekistan is a pure import market for Lufthansa, albeit a growing one.

Kazahkhstan, on the other hand, provides both import and export op­portunities for the carrier, which serves Almaty and Astana with freighter flights. While Almaty’s market has been relatively stagnant, Astana is growing, Becker reported. But transit activities in Kazakhstan also face stiffening red tape. The customs union between Russia, Kazakhstan and Belarus has curbed the flexibility previously shown by Kazakh customs, due to pressure from Moscow to adopt the Russian customs codex, one operator observed.

Coyne regards the imposition of these customs standards as a road­block to broader flows through the Central Asian republic. “I cannot see Kazakhstan develop as a hub until these restrictions are removed,” he commented.

Meanwhile, competition is creeping in from an unlikely source: railfreight. Operators in the region are watching the evolution of DB Schenker and DHL rail services from China into Kazakhstan and further west. For his part, Becker said he sees opportunities for rail-air activities, saying that rail should boost overall cargo demand in Kazakhstan. But Coyne was less sanguine about the new Silk Road 2.0. “This is going to im­pact badly on the air cargo business,” he predicted.

The most functional hub for the Central Asian region has been Tbilisi, as the Georgian government has been quite liberal in granting traffic rights to international carriers. However, Georgia has become a victim of its own suc­cess. According to Coyne, as many as nine widebody freighters a week pass through Tbilisi now, which he said is far too much for this market.

“The China export business is down, so a lot of aircraft owners have spare capacity, and lower fuel costs have brought back some 747-400s,” he said. “Now you have a lot of capacity chasing little freight. Some get 12 to 15 tonnes on a 747, which does not make any sense at all.” Moreover, the region has been hit by the drop in oil price, which has led to the postponement of energy projects and weakened demand for air­freight.

Where this market is headed is dif­ficult to predict, especially with one huge factor looming on the horizon. “The big question in the region is Iran,” Coyne added. “If that opens up, it should be huge.”

 

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