Cologne capacity boost buoys UPS

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Integrators’ parcel volumes and revenues continue to accelerate in Europe in sharp contrast to the trend in air cargo, where the established carriers are suffering from weak demand and rate stagnation.

UPS is specially well placed to benefit from the uptick in the small package market after massively expanding its European hub in Cologne for the second time in eight years. Sorting capacity was doubled to 110,000 packages per hour in 2006. In March of this year, the opening of the North Facility took capacity during the critical 11 p.m.-2.30 a.m sorting window to 190,000 packages per hour.

U.S. domestic packages currently account for 62 percent of UPS’s business, a figure that has decreased by a couple of percentage points over the last five years as international packages (22 percent) and freight and supply chain services (16 percent) have expanded.

International package movements accounted for 25 percent of UPS revenue in 2013 and are now the fastest growing segment. “We’re not just enablers but facilitators of global trade and emerging-market growth,” said Carsten Helssen, Brussels-based public relations manager, during a tour of the integrator’s extended hub.

Europe accounts for half UPS’s international package business. It has more than 400 facilities across the continent, serves 65 airports and employs 44,000.

Unexpectedly rapid volume growth in the April-June period nevertheless caught the company unawares. Following UPS’ $200 million investment in the hub, Cologne was not the pinch-point so much as a lack of air and road transportation. Management was forced to charter in additional resource – a nice problem to have, though it pushed up second-quarter delivery costs.

Q3 figures will not be released until late October, but Air Cargo World understands that parcel traffic is maintaining its earlier growth rate. Cologne’s busiest-ever night was the 400,000 packages it handled on December 18, 2013 – ahead of the latest expansion. Given the recent spate of electronic launches and Europe’s apparent return to economic health, UPS will expect to set new records in the run-up to this Christmas.

Cologne is positioned at the center of the so-called “blue banana,” the portion of Western Europe stretching from northwest England to north Italy that includes the continent’s industrial and commercial heartland.

The city’s airport is less affected by fog, ice and snow than the rest of Germany and, crucially, there is no talk of the curfews that have constricted night operations at Frankfurt and other locations across the region.

The state government in North Rhine-Westphalia has guaranteed night flights at Cologne until 2010, Helssen said. “The number of planes hasn’t changed much in the last 10 years. We have achieved growth by regularly upgrading our fleet. The planes not only have greatly increased capacity, but are quieter than before,” he added.

UPS has been able to adopt a continuous descent approach at the airport, further reducing its noise footprint. Instead of dropping rapidly to 2,000 ft (with engines operating at 85 percent of full power) in preparation for landing, Helssen explained that the airplanes now glide down from cruising altitude on 55 percent power, cutting fuel consumption as well as noise.

Globally, UPS operates 237 of its own aircraft – this portion of its capacity alone putting it in the world’s top 15 cargo carriers – but also charters an additional 388 planes, bringing all-important overflying rights, Helssen explained.

In Europe Star Air, the A.P. Moller-Maersk group airline, now operates its 11 airplanes exclusively for UPS. Turkish operator MNG flies nightly to Istanbul and on to Tel Aviv, while Atran, part of the Volga-Dnepr Group, flies the Cologne-Moscow route.

Charter capacity also makes operations more flexible, allowing UPS to achieve load factors of around 90 percent.

 

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