“This is clearly a financial crisis like we’ve never seen,” starts Ad Rutten, executive VP and COO of the Schiphol Group. “We all know in the cargo world that business is down, its been down since the summer. The only thing we can predict is that everything will change and nothing will be the same,” he adds.

It is this ‘all-change’ environment that Schiphol – which handled a total of 1.61 million tonnes of air cargo last year – has fi rmly grasped as it charts its strategic growth going forward.

The airport group’s bold strategy is most clearly visible in its announcement a few months ago that it is entering into a long-term, and potentially farreaching cooperative arrangement with the French Aéroports de Paris group. The French airport group includes the 14 civil airports and airfields in the ÃŽle-de-France (Paris) area. Among its notable airports are Charles de Gaulle International Airport, Orly Airport and Le Bourget Airport.

So was this simply a response to competitive pressure, or a protective response to the crumbling global economic situation? Neither, according to Rutten, who says the move was far more strategic in nature and more informed by larger trends within the aircargo industry.

M&As
Chief among these, according to Enno Osinga, senior VP of Cargo at Amsterdam Airport Schiphol, is the ongoing series of mergers and acquisitions amongst not just the carriers, but the integrators as well, although they had a bit of jump on the airlines.

“Airlines are building airline systems and we really have three major systems in the world,” Osinga said. “But also in the forwarding world – DHL used to be a significant, but not all that large international express company, now they are a fully integrated logistics service provider in every part of the world.”

As an airport it’s vital to recognize and adapt to that trend, he adds. It’s now about global sourcing and global movement of parts and components.

“But that means all the individual parts need to be there on time, it’s a very complex system and cannot workwithout an efficient air cargo network.”

Supply chain integration
Supply chain integration is another key feature of the changing environment, he said. “Forwarders are not only playing their traditional role, they’ve also become the airline and the handling agency.”

And for that very reason Schiphol took the bold move – and the first airport in Europe to do so – to allow a forwarder to operate its own airside facility.

Panalpina, the second largest air cargo logistics service provider and fourth largest freight shipper worldwide, is nearing completion of its 12,000 sqm facility, expected to be ready in January 2009.

Osinga concedes it was a move that didn’t win many friends amongst the traditional cargo handlers, but said there was ultimately understanding that it was a beneficial value proposition for the airport as a whole.

For Panalpina it allows them more control over the product they offer their customers. It allows them, for instance, to build-up their own pallets and maximise their available space is cash in the pocket, but more important, it significantly reduces damage and losses, Osinga said.

In the final analysis it does cost Panalpina more, he says, but what they gain in reputation and customer loyalty is far more valuable.

Imbalances
Another key change resulting from the economic turmoil are the cargo imbalances – “it used to be all traffic from Asia to Europe and what we’ve seen in the last year is that we have actually started building increasing volumes from Europe to Asia.”

There is still an imbalance, he notes, but in the case of the US and Europe, with the US dollar moving up and down so much, suddenly a country will go from being an exporting one to an importing one.

“This is very challenging for the airlines,” he says, because effectively the carriers fly one way, Asia to North America, or Asia to Europe and traditionally return via different route and “they need to optimise that,” he says.

Sustainability
The other key change the industry is facing is the issue of sustainability. “As an industry it means the traditional shippers and the manufacturers are going to be looking at their supply chain and they are going to be judging the quality of their supply chain not just on cost, but on sustainability.”

If as an airline, an airport, or as a region you cannot support these people, you may lose them as customers. While most companies have not yet clearly defined the parameters, it is on their minds and in their corporate policies, and will be an important issue in thenear future, he cautioned.

Changing dynamics
Looking forward, Osinga said the “dynamics of cargo” will change – “more speed, more reliability means that more volumes will go to the integrators” and as a result they will move further into the general air cargo industry. “They have a lot more capacity and the borders of theindustry will change,” he said.

And change of course brings us back to the tie-up with Aeroports de Paris. When combined with its new partners at Charles de Gaulle International Airport, the duo are by far the largest cargo operation in Europe.

The tie-up as Rutten said earlier, is strategic in nature, it is fundamentally a response to the changes taking place in the industry.

“The global consolidation in aviation where we see that consolidation started with the airlines, but we think there will be a need for consolation in airports as well to support those airlines and offer them better opportunities and more seamless service on the ground, because that is where they make a major part of their competition.”

“We think we have the market by taking this opportunity with the Paris airport group. Not just by picking some low hanging fruit, but by having a more structural cooperation which includes exchanging seats on boards and exchanging part of the shares,” he said.

He added that the partners are also looking at a few areas for further cooperation including looking to develop “processes and product offerings” in order to leverage each others best practices both in terms of airport operations such as marketing, as well as real estate and commercial development. “That is where we see significant cost savings and improvement of margins and in the long run we think we can offer for airlines a much better foothold on the ground which will attract more business and more traffic,” he added.

Another key benefit that Schiphol in particular hopes to gain from this tie-up is a better foothold in Brussels. With European air policy now almost solely determined out of Brussels, the Paris connection should help give the Dutch airport a bit more lobbying clout.

As to whether Schiphol would take this model to other parts of the world, Rutten said: “We made a start with the French which was our strategic ambition, there are no further talks, but we are active in terminal four at JFK with our 40 per cent stake and we are looking together with Aéroports de Paris at how we can expand it. Air France, KLM and Delta are flying into JFK and there might be another business case there, but ithasn’t been developed yet.”