Vol. 11 No. 33                                                                                                                         Wednesday April 4, 2012




 Whether the results are as expected or against all hopes, in its hearing today, the German federal superior administrative court in Leipzig has let stand the FRA night flight ban order, as issued by the Hessian court. The time for whipping up protest and painting the picture of dire consequences is over, as real as those consequences are.
     FlyingTypers recently reported on the Lufthansa Cargo annual press conference held two weeks ago, and the categorical statements by its executive board that the company’s success depended on express shipments processed at FRA hub; as Herr Garnadt said, FRA is “indispensable and irreplaceable for the carrier, as viable alternatives cannot be replicated in the short term, nor freighters separated from cargo carrying passenger aircraft.”
     In soccer, one talks about an own goal, or ‘eigentor’, in German, when a defender inadvertently kicks the ball into his team’s goal to its obvious detriment; has Germany just done that with FRA? Or is Lufthansa Cargo the ultimate unintended victim in this case because of its reliance on FRA?
     A number of options have been mentioned and, according to its press release, Hahn Airport, some 115 kilometers from Frankfurt, hasn’t been shy to again offer itself as a viable alternative. Let’s look at the facts: Aeroflot Cargo has been using Hahn as its European hub for the last ten years and Etihad Crystal Cargo since 2007, but their respective passenger flights are at Frankfurt’s Rhein Main airport. While that may indeed work well for those carriers, the physical separation between cargo and passenger flights and additional time to cover the distance will definitely add cost at a critical time and amid a competitive landscape for Lufthansa Cargo.
     Hahn rightfully touts its accomplishments as a major airport: the 10th largest passenger and 4th largest German cargo airport, a newly completed four lane expressway connecting it to the German interstate network, 200 million Euro investments in airport infrastructure, and significant further expansion potential backed by bipartisan support in the state house. It all makes sense, but is it a fools’ errand? Will airlines, forwarders, handlers, and private investors rush again to build up a sophisticated cargo hub, only to see it all go to waste in a few years’ time? Because it is no longer the government deciding on what goes and what doesn’t; in the days of citizen protest (seen almost daily at FRA), it is the courts that have the last word. Not a good situation if you are trying to run a world-class business in a public climate that seems to be impervious to the economic impact—and, apparently, the national interest along with it.
     Airport noise is clearly a factor, but does someone really benefit from a quiet night’s sleep and no job in the morning? Is that the trade off in the 21st century? It seems many things have gone wrong over the years, and politicians and business in equal measure have evidently underestimated the PR work and dialogue with the citizens living around the airport. For now, it doesn’t look like there are any winners.
     No surprise then that Lufthansa German Airlines’ CEO, Christoph Franz, and Karl Ulrich Garnadt, CEO of Lufthansa Cargo, conducted a press conference with ample TV coverage shortly after the Leipzig verdict was announced. In a first assessment, Christoph Franz said that the court decision represents a significant economic hit for Germany in general and the Rhein Main area around Frankfurt in particular— today is clearly a dark day. It remains to be seen how the customers will react, a sentiment reinforced by Mr. Garnadt. The effect is seen more as a body blow than any kind of crippling ailment, in as much as the carrier has been living with the FRA curfew for a number of months, yet continues to generate positive results. Not quite as good as they could be without the curfew, but nevertheless, the machine carries on.
     Admittedly, there are concerns about other European airports (such as Amsterdam and Paris) siphoning off some cargo that would otherwise be handled in Frankfurt, but no panic. Any talk and speculation about moving the freighter operations elsewhere are not only premature, but have absolutely no substance in light of the unique capabilities which exist at FRA. Operations will continue as before, customer input will be taken in and evaluated, the flight schedule could be tweaked, but essentially, life goes on.
     In response to FlyingTypers‘ questions, Matthias Eberle (left), who took over the post of Director of Communications for Lufthansa Cargo effective April 1 with an immediate and urgent call to duty, said: “The legal situation is such that the Leipzig court decision de facto puts the matter back into the hands of the Hessian court. While no one expects a reversal in the foreseeable future, it does provide Lufthansa with the opportunity to formally be heard and voice its concerns for the first time, something that was not the case in the course of the initial procedures.”
     Matthias reiterated the views expressed by many outside Germany who simply cannot comprehend how a nation that is a world leader in exports would hamper itself to such a degree. The situation is compounded by the current public outcry that ensued since the new landing runway opened at FRA. While several areas around the airport have experienced relief once flights were moved from the “old” runways to the new one, no one is lining up to say ‘thanks’. Instead, the communities affected by the new approach pattern are demonstrating their displeasure and dismay, which influences politics and who knows—maybe even the court. And the party most impacted by all this, Lufthansa Cargo, had actually little if nothing to do with that, but it is all lost in the breathless, hysterical opposition to the airport.
Ted Braun





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     There might be gloom all around the aviation circles in India, but the Federation of Indian Chambers of Commerce and Industry (FICCI) has pointed out that there is hope. In fact, in a recently released paper it has gone a step further to mention that the country has the potential of becoming a global aviation hub and the third largest aviation market by 2020—but only if an 8-point action agenda is pursued that includes closer collaboration between the Ministry of Civil Aviation, other related ministries (finance, home, defense, external affairs, commerce and industry, tourism, environment, HRD, etc.), regulators (DGCA and AERA), and the industry; reduction of tax on ATF; and implementation of the policy decision of 49 percent Foreign Direct Investment limit, etc.
     Indian air cargo volumes are woefully low. In 2011, all Indian airports handled the total air cargo volume of 2.3 million. The figure is less than the volumes handled by any of the international airports like Hong Kong, Memphis, Shanghai, Incheon, Anchorage, and Paris. Incidentally, the average weight load factor of air cargo in the last five years was 62 percent, reflecting unused capacity. To top it all, air cargo has not kept pace with other transport modes like shipping: the five year CAGR of air-cargo at 11 percent is lower than the growth rate of the country’s overall exports and imports, which grew by around 15 percent and 18 percent over the same period.
     The FICCI paper worked out in conjunction with KPMG has shown that while cargo and passenger traffic have shown strong growth and infrastructure has been enhanced at both metro and non-metro airports, the country stands at a crucial juncture—it can leap forward from its position as a leading aviation market to a global aviation hub, but only with some fundamental changes.
     It is interesting to note that the paper acknowledges the contribution of air cargo. This realization that air cargo is important for the economy of the country seems to have bypassed the country’s lawmakers and planners. The contribution of air cargo, according to the paper, needs to be adequately and appropriately focused upon, so that the country’s fast growing international and domestic trade by air is facilitated, enabled, integrated, and expanded. While the volume of air cargo is just 1.5 percent of the total trade, it constitutes almost 29 percent of the total trade value.
     While total freight traffic handled by the airports of the country increased at a CAGR of around 11 percent in the last five years, it is domestic cargo that has grown at a faster pace of 11.6 percent. International cargo has grown at a slower 10.3 percent. According to the 12th Five-Year Plan estimates, domestic and international cargo will grow at the rate of 12 and 10 percent respectively over the next five years. By 2017-18, while international cargo could touch the 2.7 mmtpa mark, domestic cargo would be around 1.7 mmtpa. In addition, considering India’s geographic location, the tonnages of transshipment cargo—which for many international airports is as high as 60 to 70 percent—is small in the international airports in the country.
     However, first the challenges have to be overcome. Among these are high dwell times, congestion at cargo terminals, missing and damaged cargo, manual processing, etc. These obstacles can be overcome if infrastructure is enhanced, procedures are simplified, and new technology is introduced. The FICCI-KPMG paper suggests some quick-fix measures, among them the establishment of an Air Cargo Promotion Board (ACPB). The ACPB can help in the growth of the sector by enabling policies and facilitating planned development of air cargo hubs in the country. ACPB could comprise representatives from relevant ministries, including finance, commerce, industry and civil aviation and meet on a quarterly basis.
     Other than the ACPB, the paper suggests the development of an Air Cargo Vision 2020 along with a time-bound implementation roadmap, the development of air cargo hub airports to compete against those in West Asia and South East Asia, establishment of Cargo Villages at all hub airports and Air Freight Stations (AFS) in smaller airports, formulation of the Quality of Service (QoS) parameters for stakeholders in the air-cargo supply chain, and facilitation of the expansion of freighter fleet in the country.
     The paper also suggests the need to promote professional training programs for air cargo since there is an acute shortage of trained manpower in the sector. To overcome the skills crisis in the air cargo sector, the government could set up a world-class cargo training institute in collaboration with the industry.
     Perhaps the most important suggestion is 24x7 customs operations. The move would not only push India to compete with cargo hubs in the region but also facilitate faster clearances, including processing of documents, assessment, examination, and release of cargo.
     Along with the FICCI-KPMG paper, CAPA - Centre for Aviation and air transport IT specialist SITA has also forecast that India will become the world’s third largest aviation market by 2020. The growth can be achieved with the right investment, infrastructure, and regulatory systems. According to Kapil Kaul, CEO CAPA India:
     “Technology today has the potential to become far more pervasive and to transform the operations of airlines, airports, service providers, and border control. The aviation industry can leverage technology not only to deliver functionality and cost efficiencies, but also to drive enhanced passenger experiences, new commercial revenue streams, and improved security. In this report we set out to understand whether India's aviation industry is positioned to grasp these opportunities, and to present a roadmap for the future.”
T. Ghosh


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