Asked to address the current economic outlook and how best to cope with the downturn, four executives representing airports, government, logistics and air carriers were unanimous in their conviction that a full recovery was in store for the globaleconomy, it’s just a matter of when.

The airport view
“In general the long term trend will be upwards,” said Munich Airport’s president and CEO, Michael Kerkloh adding that he expects there may be some structural differences in the market following the recovery. He added that there was some optimism that the air cargo sector has reached the lowest point and is now largely a question of how long it will stay down.

While Munich has felt the bite of the slowdown, with cargo volumes down nearly 25 per cent, it’s worse for other airports which rely to a larger extent on cargo traffic. “Munich is not dominant cargo hub, but we do have substantial volumes because of our long haul connections,” Kerkloh said.

He also noted that the crisis has also highlighted what he says were exaggerations. “Before the crisis there were growth expectations in the 15-20 per cent range. Sometimes this is not sustainable nor healthy.”

The crisis, he says, is also a time to look at the structure of the global economy. “Is it good to produce components (for the car industry, for instance) in Asia, to use them in assembly lines in Europe?” he asks.

This may lead to the structural changes he referred to earlier.

When asked if he believed there were too many airports, he said no citing the fact there were over 100 currently being built or expanded in China alone. “These are opportunities for the future,” he said even if currently some are not efficient or profitable.

One future trend he sees, particularly for Europe, is specialisation. “The role of airports in the future is not as a department store, but one of very specialised knowledge and specialisation service for the customer.

“We see problems with the regulatory environment that is hindering operations and expansion, so future development will be specialisation – a specialization in competence and in infrastructure,” Kerkloh said.

As for other changes, he sees Asia playing a greater role in Asia itself. And issues like climate change, sustainability and emissions trading will require greater thought and cooperation by producers, forwarders, carriers, airports – the entire industry.

A carrier’s perspective
From the point of view of a cargo carrier, Lufthansa Cargo’s member of the Executive board, Andreas Otto said his division’s focus would not be acquisitionbased. “It has to be a vertical, or systemsbased partnership with customers and with service providers,” he said.

In order to deal with the drastic drop in cargo volumes, the carrier has like much of the industry, reduced capacity by around 20-25 per cent, put staff on shorter working hours and is focusing on core business, in particular asset management. Otto also emphasised that down sizing, as some companies have done, would only be a last resort.

“Keep the people, reduce costs, and train them so when the economy picks up again we have our team ready. But if the downturn lasts a few years and is not a curve, then we may have to down size the company, but that is not our approach at this point,” he added.

For Lufthansa, Otto said the bottom line was very important. He noted that some carriers in the Middle East in particular, had not reduced capacity and while that kept the top line market share intact, it came at cost to their bottom lines. “For Lufthansa Cargo the top line is important, but not as important as our bottom line.”

Part of the coping strategy will involve increasing service levels like improving ground handling times. When asked whether the current environment would encourage more attempts at cargo alliances, Otto said this was very unlikely.

“I don’t see it coming up, there were a few tries and a few errors. And with anti-trust action around the world it’s not likely.” There is a different logic to cargo alliances compared with the passenger side where it makes sense to combine networks, he said pointing to the United Airlines/Lufthansa passenger cooperation on the transatlantic in which the two then tap their own domestic networks for that portion.

“For cargo, all carriers have the same networks so where are the synergies? This is why even in good times it also makes no sense to have alliances on the cargo side.” The key problem is that alliances tend to be more horizontal in nature, he added.

International trade advice
For Michael A. Fine, principal advisor at the Canada’s department of Foreign Aff airs and International Trade, companies should not just sit back and wait for the economy to turnaround, but should make major changes to their business.

Fine urged carriers to take advantage of the recently signed open skies deal for cargo between Canada and the European Union. “Th ere are many benefits for carriers,” he said, “including lower costs and more flexibility”.

“I don’t think we should wait, never waste a good crisis to make some major changes,” Fine said. “Companies more than ever should be focused on reliability of supply chains and this is an opportunity to develop this.”

For successful business must put self in position of shipper. “There needs to be a partnership between the carrier and the shipper and it must be seen as not simply a cost, but something that can contribute to their bottom line by offering a valueadd to their product.

Logistically speaking
Agreeing with Fine’s argument for more intensive partnerships, Panalpina CEO, Monika Ribar said the current environment made it even more crucial to get supply chains under control. Increased visibility was important, but so too is interaction with supply chain providers.

A strong customer focus is even more important than ever before, she argued, which includes a focus on the global level. “Asset light, customer heavy. More focus on partners, including air carriers, sea carriers, etc,” she said.

“We are still #3 on air and #4 on ocean in terms of volumes and we aim to stay there. We will grow our volumes and grow our network and will look into the possibility of acquisitions, but this has not been the main strategy,” she added.

With virtually no debt and a high degree of liquidity, Ribar said Panalpina has the strength to overcome the downturn, “but we have to manage the cash carefully.”