s there any future for the United Kingdom air export market? It has long been one of the world's liveliest cargo markets, but the way many of the country's air cargo managers talk these days, one might wonder. Industry executives in the U.K. are more comfortable talking about industrial decline, plunging yields and cut-throat competition than identifying opportunities for growth.

"It is hard to get excited about an air freight market like the U.K.," says Dan Parker, head of commercial for Virgin Atlantic Airways, which gets 37 percent of its revenue from the home market.

"We do rather talk ourselves into doom and gloom," says Alastair Cairns, U.K. air freight development manager for Kuehne + Nagel.

In fact, the official figures support the general view that the United Kingdom isn't a place to generate much optimism. Figures from the Cargo Network Service CASS settlement system show a 5.8 percent rise in U.K. export revenue for the first five months of 2005, but this followed something of a decline in 2005, itself a hangover from a relatively strong 2004.

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On tonnage, the picture is one of slow decline. The U.K. Civil Aviation Authority shows tonnage for the 12 months to April 2006 down 0.6 percent to less than 2.4 million tonnes, and for full year 2005 down 0.4 percent to 2.36 million tonnes. Although 2004 - a good year for air cargo worldwide - showed a 7.4 percent rise, from 2000 to 2005, U.K. airports saw a 2.1 percent decline in tonnage.

These tonnage figures include both exports and imports, and since imports are generally agreed to have grown, it follows that air exports have declined significantly. And the contrast with other key global airports is revealing: over the same five years Frankfurt saw 15 percent increase in tonnage, Amsterdam an 18 percent increase and Hong Kong 38 percent.

It is not surprising, then, that U.K. players are anxious about the future.

"It is difficult to put a finger on it, but I would say the pulse has weakened in the U.K. air freight market," says Roy Douthwaite, managing director of ACT, a Heathrow-based cargo general sales agent. "At one time one could distinctly feel that pulse. Now I am not so sure. We are not seeing the quantities of U.K. exports we used to see."

Despite such downbeat thoughts, however, the U.K. air freight market is not on its last legs yet.

"The market may not be growing, but it is still a large one," says Chris Fahy, chief operating officer for DHL Global Forwarding and formerly head of Danzas U.K. and then its European operation. "If you look at the number of freight forwarders in the U.K., it is still a huge penetration for such a small island."

Adam Carson, area manager U.K. and Ireland for British Airways World Cargo, says there still are areas of growth. "Growth to the Middle East has been strong in the past 12 months and also to Africa and South Asia," he says, again looking at the CASS statistics. "Exports to Greater China, Southeast Asia and Korea are also holding their own. So all in all, it has not been a bad 12 months."

At Virgin, Parker also points to something the self-deprecating Brits tend to forget - that their economy still has its strengths.

"We make a lot of high value components that can't be built by less technical workforces, such as those in Eastern Europe or China," he says. In the aerospace business, for instance, U.K. companies are still producing cutting edge technology.

This has been a particular area of development for Kuehne + Nagel.

"It is not just the big players like Airbus, BAe and Rolls Royce, but the many smaller organizations that support the aviation business," says Cairns. "For example there are a lot of serving and repair facilities in the U.K., and these organizations need to transport parts around the globe to support aircraft."

Pharmaceuticals is another area identified by all parties as a growth area. With major global players such as AstraZeneca and SmithKline Beecham based in the U.K., as well as many emerging biotechnology companies, the sector is showing good growth, according to Fahy.

"There is a question of whether this production will shift to cheaper parts of Europe, but there are reasons why that might not happen," he says. "For example, regulatory authorities such as the FDA are taking greater interest in the warehousing and distribution conditions of pharmaceuticals. We also have an aging population, which means we are a good market for new products."

Pharmaceuticals point to one strategy that all agree is vital for success in the U.K. export market: added-value products.

It is no accident British Airways World Cargo has just opened Premia, a new premium products facility at Heathrow, and will be offering Constant Climate, a cool chain service, starting this month.

"Pharmaceuticals is an area that really excites us," says Carson. "We pride ourselves on being a specialist cargo mover and it is one of the fastest growing sectors of the business at the moment."

In general, he says, there is a shift from mass-produced products to smaller, more niche cargoes that require specialist handling such as ship and air parts, fashion samples and high-tech products.

Both Virgin and Kuehne + Nagel also stress service as a key differentiator.

Parker points to Cargo 2000 and investments in IT technology as critical to winning business, and Cairns agrees. "Shippers from the U.K. now require a more specialist approach. They need assurance, predictability, security of delivery. We are the only forwarder which is fully Cargo 2000 Phase Two-compliant and that allows us to pre-plan routes with clients - planning for what will happen rather than just reporting back when it did not happen."

Specialized strategies such as this enable key players in the U.K. market to get a bigger slice of the cake.

Fahy says DHL Global Forwarding expanded its export tonnage 15 percent in 2005, and says it saw a 7 percent increase in air freight spending. "Our aim is to grow a minimum of 3 percent over the market," he says.

As well as targeted strategies for particular customers, he says a strong sales presence and branding has helped the company achieve that. "Having yellow trucks everywhere in the U.K. definitely helps," he says, referring to DHL's express operations.

Carriers too can find growth.

Emirates has successfully managed to get growth out of regional markets that other operators previously ignored. An example is Glasgow, where it started daily A330-200 services in 2004, and has now upgraded to 777s. "We have no trouble filling that capacity because we are satisfying local demand," says Phil Rawlings, the carrier's cargo manager U.K. and Ireland.

"Prior to our operation to Glasgow, no carrier was flying longhaul eastwards from the airport. We now offer Scottish shippers a direct service via Dubai to Asia, the Middle East and Africa, and we have seen a 22 percent increase in demand for the service year on year."

The presence of carriers such as Emirates may also be part of the problem for other U.K. operators, however. Driven by demand for imports from Asia, as well as continually growing passenger traffic, cargo capacity into the U.K. market has continued to grow, sparking a sharp rate war for export business just as that trade is wavering.

Douthwaite at ACT says one reason export cargo seems scarcer may be that there is simply more competition. "The tonnage is there, but at a lower yield," says Rawlings. "You have to work harder to keep still revenue-wise."

Longer term, the extra competition will sort out the winners and losers: there are consistent signs that larger forwarders are gaining share at the expense of smaller ones, for example, while carriers will continue to try and differentiate themselves on service.

In this, at least, the U.K. air freight business has all the typical mature market characteristics familiar from other industries

One thing that worries Fahy, however, is what impact the lack of growth might have on the human capital of U.K. air freight companies, which have traditionally been world leaders in innovation and new ideas.

"I worry that it will be hard to attract new people to a market that is not booming," he says. "A lot of companies judge managers on how much they grow the business, but in the U.K. the opportunities for that are limited."

Already, he says, foreign companies tend to put their nationals in the U.K. for two or three years, before posting them somewhere more dynamic.

"So there is a question of where the future talent will come from and how companies will develop their strategies," he says. "You can't develop strategies if a manager is only here for two to three years."