Special shippers: Pharma investment paces Benelux

  • August 28, 2013

Amsterdam Airport Schiphol, the third largest cargo hub in Europe, saw a 1-percent increase in throughput in the first six months of this year. But growth feels “sluggish,” according to Enno Osinga, senior vice president cargo.

“Nobody’s talking about the market picking up; it’s just changes in composition,” he says. “Inbound volumes from Asia grew a little in June, but a lot of it is capacity-driven. There is big growth from North America, but that’s partly because LAN was flying flowers from Bogota and is now going via Miami. Likewise, there are many shifts among SkyTeam alliance members where freighters are concerned.”

Schiphol’s belly-hold and combi volumes were up 2 percent year-over-year in June while freighter tonnage was fractionally down, continuing a pattern that began in 2011. Home carrier KLM is “one of the few carriers still running a large combi fleet,” Osinga says, and can carry 45 to 55 tonnes on its 747s.

The Air France-KLM-Martinair group has a 30 percent share of the flown cargo market to and from Europe. Following KLM’s transfer of its full-freighter activity to Martinair, three of KLM’s remaining B747-400 ERFs are operated by Martinair—though still in KLM livery—while a fourth is on lease to Etihad Airways.

Martinair also used to have four former combi B747-400 BCFs, two of which were operated for Air Cargo Germany until the carrier ran into financial problems. A spokesman for Martinair says these airplanes, plus a third that was operating in the group’s “Safari” livery, have gone back to their lessors (the Safari flight, linking Amsterdam, Sharjah, Guangzhou, Nairobi and Lagos, is now operated by one of the ERFs). With Martinair’s fourth BCF also due to be returned to its lessor, all four of the type will soon have been withdrawn from service.

The spokesman adds that Martinair has also disposed of one of its seven MD-11 freighters, “and there is a strong possibility a second may follow.”

The Benelux region’s strength in pharmaceuticals is relevant to this shift away from freighters. “Pharma customers have a strong preference for passenger flights because of their greater punctuality,” Osinga points out.

Amsterdam is a logical choice as a regional hub, he says.

“We have high-quality infrastructure and a more highly developed trucking network than anywhere else, especially in the direction of Germany,” he says. “The current business climate is right for single European distribution centers. Companies are consolidating their multiple locations, and the Netherlands is top of their list.”

Following its recent addition of warehouse capacity, Osinga says Schiphol Logistics Park is in advanced discussions with clients in the fashion and pharmaceutical sectors.

A recent example of the Netherlands’ appeal to major global brands came with Menlo Worldwide Logistics’ announcement in July that U.S. cosmetics company NYX had chosen to service its expanding Western Europe market through Menlo’s multi-user facility at Eersel, in the south of the country.

Menlo provides a range of services for NYX, from managing inbound air and oceanfreight to inventory control, order fulfillment and distribution. A media statement explained: “Although Germany is currently NYX’s largest market, Eersel was chosen for its high level of connectivity from an international and pan-European perspective.”

Helmut Kaspers
, chief commercial officer West Europe for Damco, says it was the Netherlands’ reputation for well-educated staff with longstanding freight forwarding expertise that prompted the logistics provider to relocate its global headquarters from Copenhagen to The Hague earlier this year.

“The language skills and infrastructure are important, and the administrations in both countries [Belgium and the Netherlands] are supportive,” he says.

The region’s seaports are well placed to serve shippers and forwarders requiring multimodal solutions, Kaspers adds. Damco has reduced its use of airfreight except for must-fly pharmaceutical and IT shipments, consolidating air movements through Amsterdam and Frankfurt, but there are signs of a return to air as the general economy improves.

A project called BioPortEurope, created in 2010 to help Indian life science companies expand into the European market, typifies the effort the Netherlands puts into attracting inward investment. The fixed term project, which provided specialist know-how in market access, finance, banking, certification, customs, logistics, warehousing, distribution, and technology transfer, has now been taken over by its two lead partners, Schiphol-headquartered logistics service provider IJS Global and health care financing specialist Seijgraaf.

IJS Global’s Rene de Koning, business development director of the new-look BioPortEurope, says: “Compliance, local regulations and fully transparent supply chains are an essential part of how we as an organization can add value to companies looking to enter Europe. We are planning a series of roadshows and seminars in the U.S. to attract new business.”

In Luxembourg, meanwhile, Luxair Cargo opened a dedicated Pharma & Healthcare Centre within its existing cargo center at Luxembourg Findel Airport in March. The new 2,800-square-meter (30,000-square-foot) facility has chilled and ambient zones, plus 70 individually temperature-controlled ULD positions. Build-up areas and six dedicated truck docks are also temperature-controlled.

The development came in response to a steady fall in volumes at the cargo center in the last three years. Its annual capacity is 1.2 million tonnes but throughput fell to 638,000 tonnes last year, taking Luxair Cargo into the red. The new facility, whose users include Expeditors, Kuehne + Nagel and Panalpina, is aiming for European Commission Good Distribution Practice certification, assuring supply chain integrity for pharmaceutical and health care products.

Luxembourg-based Cargolux will likely see a capacity increase of more than 10 percent by the end of this year, with a ninth B747-8 set to join its fleet. This may appear counter-cyclical in such a tough market, admits interim president and CEO Richard Forson. Yet the carrier achieved 13-percent tonnage growth in the first six months of this year.

“Load factors were up on the same period in 2012 and yield was in line with the market, showing we have deployed the capacity effectively,” Forson says. “We made a small net bottom-line profit in the first half against losses for the same period in the previous two years.”

Two more 747-8s will be delivered next year, though the carrier pulled some older capacity, returning one of its 10 747-400s to the lessor at the end of August. Three of the -400s remaining in the fleet operate on a power-by-the-hour basis.

Cargolux introduced a seventh weekly round-the-world service in July, prompted in part by an increase in exports to the U.S. The market from the U.S. back to Europe has recently softened, but Forson says schedules are fulfilled wherever the flight can make a positive contribution against overhead.

Forson judges southbound volumes into Africa, where Cargolux has expanded its network, to be “reasonable,” but cautions that northbound perishables flows by their nature are seasonal—and a lot of new capacity has entered this market.

“Everybody is chasing the same freight,” he says. But he reports that newly introduced West African markets, fueled by oil and gas traffic, are performing strongly.

Findel Airport suffers no congestion and its infrastructure “compares with anywhere,” Forson claims, meaning goods can be moved in and out very quickly. Luxair’s pharma investment is benefiting Cargolux in respect of both inbound traffic from manufacturing areas and shipments back out to the Middle East, Africa and Asia.

Expedited and temperature-controlled cargo became a similar focus for Brussels Airport when it created a dedicated cargo business unit two years ago.

“A lot of attention has gone into this, from joining the IATA time and temperature task force as a strategic partner to investing in infrastructure,” Steven Polmans, head of cargo at the airport, says. “We also reached out to the pharma industry to better understand their needs and requirements. We have more than doubled GDP-certified cooled storage both in direct ramp-connected warehouses and second-line warehouses.”

BRU has worked closely with the Flemish Institute for Logistics to assess where the bottlenecks are in the transportation of time-critical and temperature-controlled cargo and to test the use of different GPRS devices across multiple trade lanes.

The flatlining Belgian economy led to disappointing first-half cargo tonnage for the airport.

“However, we managed to sign four new customers in the last 12 months: Cargojet from Canada, Demavia/Magma to Africa, Finnair making BRU its second European hub, and Ethiopian Airlines adding full cargo flights in cooperation with DHL/StarBroker,” Polmans says. “We are optimistic that the economic situation is more stable but improvement will be slow, with China slowing down and the U.S. not really growing that much.”

Ernst Cuppens, managing director of Kuehne + Nagel Belgium, confirms the decrease in inbound airfreight volumes into the country this year, in terms of both general consumer goods and supplies to industry.

“There are no signs that current conditions will change in the near future,” Cuppens says. But specialist niche markets such as pharma and perishables are outperforming the general airfreight market.

K+N is extending its premises at Geel, in northern Belgium, by 70 percent to 70,000 square meters (750,000 square feet) following an increase in its contract logistics business in the country. Geel is gearing up to meet the requirements of the pharmaceutical and health care industry, but the company is meeting the needs of a wide range of new clients from the facility, including suppliers of printers, toners and coffee machines and a leading toy manufacturer.

Ferwin Wieringa, vice president for freight and transport management Benelux for CEVA Logistics, says economists predict further shrinkage in the Dutch economy this year and “very modest growth” of no more than 1 percent for both Belgium and the Netherlands in 2014. Customers have shifted to seafreight except where they are making a real effort to differentiate, for example around high-tech product launches, he says.

CEVA’s main activity in the Netherlands revolves around imports of electronics, while the pharma sector generates the main export flows out of Belgium—and is “not so impacted by the crisis,” Wieringa says. With clients so focused on cost reduction, he expects further moves toward single West European DCs, to the likely benefit of the Benelux region.

Brussels is an important gateway for valuables due to the proximity to Antwerp, the world’s biggest hub for diamond trading, and Swiss WorldCargo claims a major share of this business.

Geert Nolf, Benelux cargo sales executive for Swiss, says cut diamonds represent
 80 percent of the carrier’s valuables traffic out of Brussels, though it also transports gold, jewelry, watches and banknotes. Main markets are Hong Kong, Mumbai, Tel Aviv and New York.

However, the Fokker 100 feeder flights to Zurich can only be bulk loaded, a weakness that was exploited last February in a daring raid on a subcontracted Helvetic Airways service as the plane prepared for takeoff from Brussels.

“A gang drove up moments after the aircraft was closed,” Nolf says. “They’re too easy to get access to. It was all over in five minutes.”

Swiss operates two to three times per day on the Brussels-Zurich route and is likely to upgrade to an A319 or A320 for the winter season. However, despite recent investment in its temperature-controlled product, the carrier will still have to truck to Zurich to access consumer markets in Japan, Israel, the U.S. and South Africa because the narrow-body Airbus, like the Fokker, cannot accommodate Envirotainers. The 10-11 hour transit time by road to Zurich puts Swiss at a commercial disadvantage to Air France and KLM, whose respective Paris and Amsterdam hubs are only two or three hours from Brussels, Nolf says.

TNT Express saw profit decline in its restructured Europe Main region (Benelux, France, Germany, Italy and UK/Ireland) in the second quarter as a result of 
pricing pressure. The Benelux market outperformed France and Italy, but overall revenues for the region were 2.1 percent down and operating income fell a hefty 21.3 percent.

Average daily parcel numbers were up 5.5 percent, but weight and revenue per consignment was lower as a result of down-trading and a change in the customer mix. TNT’s new CEO, Tex Gunning, admits the European economic environment remains challenging.

Export business is still holding up for leading Dutch GSA Active Airline Representatives, though not at the margins seen in the past, admits managing director Ton Smulders. Active Air lost its opportunity to fly larger cargo out of Frankfurt-Hahn Airport when Russia’s Aeroflot grounded its three MD-11 freighters in July. The daily freighter service to Moscow provided useful onward connections to the Far East.

Aeroflot’s twice-daily Amsterdam-Moscow passenger services continue to fly fully laden. Depending on the passenger load, Active Air can load up to 3.5 tonnes on the midday service, operated by an A321, while the evening flight uses either an A319 (800 kilogram or 1,764 pound capacity) or A320 (up to 2.5 tonnes).

Another Active Air principal, Olympic Air, has ceased international operations but there is happier news from ArkeFly, part of the Leisure Cargo Group, which operates daily from Schiphol to the island Curacao and connects to the rest of the Dutch Antilles. The seven-tonne payload comprises mainly perishables for hotels and Albert Heijn supermarkets.

Other long-haul destinations such as Cancun, Mexico, and the Dominican Republic are growing and ArkeFly also flies three times per week to Sanford in Orlando, trucking cargo from there to Miami. The carrier mainly operates B737s but once a week runs a B767, giving up to 10 tonnes capacity. The larger plane also serves San Francisco and Los Angeles, but is restricted to two tonnes of cargo and no perishables, owing to Sanford’s limited facilities.

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