The European air cargo industry is facing challenges: high fuel costs, an unbalanced flow of goods between East and West, rising security demands, and a still-fragile recovery of the main Euro-area economies. The U.K. terror alert in August of this year was a wake-up call to work more closely than ever on improving and harmonizing security measures across borders. Nevertheless, European airfreight traffic is growing, and most cargo airports, carriers, and service providers are making investments in infrastructure and security as well as establishing new strategic partnerships to achieve better service and cost-efficiency.

Frankfurt, Europe’s largest freight airport, has more than one reason to look ahead optimistically. The airport celebrated its 70th anniversary this year and achieved record freight volumes, increasing its traffic by 8.1 percent to 1.89 million tons in 2005. This positive trend continues regardless of season: Despite the usual summer weakness, cargo-facility operator Fraport AG reported another 9.5 percent increase in July, and traffic with the Middle East, Asia, and North America registered double-digit growth.

But that success doesn’t mean Fraport’s management will sit back and put its feet up, as Executive Board Chairman Dr. Wilhelm Bender explains: “We urgently need to implement Frankfurt Airport’s planned expansion program to remain competitive in the future and to gain the airline alliances’ long-term commitment to the FRA air transportation hub.” Bender is confident that Frankfurt Airport will achieve its planned capacity increased within the announced time frame, and that the new northwest runway will open in 2010.

Meanwhile, expansion is continuing in CargoCity South, Frankfurt’s main cargo center. AMB Property Corporation has extended its building there by 9,822 square meters of office and warehouse space, and the airport’s perishables center is also set to undergo an expansion of about 2,500 square meters of storage space. The center is able to sort, store, pick, and pack up to 200,000 metric tons of fresh produce a year. The facility boasts over 9,000 square meters of floor space and 18 different climate zones geared to different product groups.

Frankfurt also saw growth of 12.2 percent in dangerous goods shipments in 2005. These specialized cargoes were handled by Fraport Cargo Services (FCS) at the 2,000 square-meter hazmat warehouse in CargoCity South.

An unwelcome effect of Frankfurt’s growth is congestion during the peak times of the day. This has given smaller, regional airports in Germany a chance to increase their freighter services. One of them is Frankfurt Hahn airport, Germany’s fourth-largest cargo airport. This airport’s cargo traffic, including road-feeder services, grew to 228,920 tons in 2005, a jump of 20 percent. Among the carriers offering regular service is Aeroflot Cargo, which uses Hahn as its European freight hub. So far in 2006, Hahn has hosted nearly 60 AN124 freighter flights, operated mainly by charter companies such as Volga-Dnepr, Antonov Airlines, and Polet. Hahn also has invested 6 million euros in a new cargo hall to boost capacity.

A new star in the air cargo sky is Munich’s airport. Cargo traffic continues to boom, increasing 15.2 percent mainly on the strength of new long-haul belly-cargo services. Munich provides daily connections to U.S. destinations, with Lufthansa flying to Washington and United Airlines serving Chicago. US Airways launched another new route in September 2006 with daily Airbus A330-300 service between Munich and Philadelphia. FedEx, UPS, DHL, and TNT serve Munich from the airport’s new express center. The integrators also contribute a high percentage of the airport’s freight growth.

The big integrated carriers continue to invest in their main hubs. TNT, for example, is putting 94 million euros into the expansion of its facility at Liège, Belgium. A new route between Liège and the Czech airport of Brno will relieve pressure from TNT’s hub in Prague and serve the booming Eastern European market with additional flights and services. But a move eastward is not under consideration, as TNT’s managing director of worldwide networks, Christian Drenthen, explains: “From our perspective, the preferred option for a central sort hub in Europe is still in the triangle between Frankfurt, Paris, and Amsterdam. If based in Liège, we can truck to these airports and still have excellent connectivity. We would not have that advantage in Eastern Europe,” he says.

Cologne-Bonn, Germany’s second-largest cargo airport with 643,653 tons in 2005, is also the largest hub for integrated carriers in Europe. Nearly 60 percent of the airport’s cargo was contributed by UPS, which uses the airport as its European hub. UPS reinforced its position with a $135 million investment in a new sortation facility, the integrator’s largest investment outside the United States. DHL also serves Cologne-Bonn, as does FedEx. The airport’s nighttime license currently extends to 2015, but competition is in sight: Leipzig, in the eastern part of Germany, has a similar license until 2035.

Leipzig is becoming the new home base of DHL, which will shift its European hub operation from Brussels to the East German airport. DHL is making the move after Belgian authorities refused to allow the integrator to increase its nighttime operations out of Brussels’ Zaventem Airport. The shift also gives DHL owner Deutsche Post World Net the opportunity to consolidate the integrator’s operations under one roof.

FedEx established its European hub in 1999 in Paris at the Charles de Gaulle Airport, which is the company’s largest hub outside the United States. FedEx is the second-largest cargo operator at the airport, providing direct flights from Paris to hub locations in the United States. In addition, it is a major Air France customer and cooperates closely with Geopost, the express package arm of LaPoste. Charles de Gaulle Airport handled a record 1,767,300 tons of cargo in 2005, up 8.3 percent compared to 2004. Those numbers helped to make the French airport the second-largest cargo hub in Europe.

While most of its competitors showed solid growth, London Heathrow, the U.K.’s largest (and Europe’s fourth-largest) airport, saw a 1.6 percent decline in cargo volumes in 2005, mainly caused by a significant decrease in air exports. In addition, Heathrow faced an attempted terrorist attack in August 2006, thankfully foiled by British authorities. Although cargo flights continued, they were subject to security-related delays.

Other U.K. airports reported an increase in cargo volumes: 5.1 percent at Nottingham East Midlands, 6.5 percent at London Stansted, and 2.2 percent at London Gatwick. U.K. airports that are main hubs for trans-Atlantic traffic benefited from strong demand from U.S. carriers.

In July 2006, Delta Air Lines reached an agreement with United Airlines to acquire the route authority to serve London Gatwick non-stop from New York’s John F. Kennedy International Airport. The agreement is subject to U.S. Department of Transportation (DOT) approval and other closing conditions. If approved, daily flights will begin later this year, and a second service is to follow in spring 2007. The agreement marks a milestone in Delta’s decade-long effort to expand to London from JFK. Delta continues to favor an “Open Skies” agreement between the United States and Europe that would allow it and other U.S. carriers to also serve London Heathrow.

While London is still the main cargo hub in the U.K., Nottingham East Midlands Airport (EMA) has scored top marks during the last years. Centrally located, it has become another hot spot for the integrators and handled 292,993 tons in 2005. UPS has six flights a night, including a trans-Atlantic flight in each direction, and accounts for about 20 percent of EMA’s tonnage. UPS also invested in construction of a new package-handling facility at Tamworth. The new hub is expected to open in October 2007 and will be UPS’s second-largest European hub, following Cologne Airport in Germany.

Europe’s No. 3 cargo airport, Amsterdam Schiphol, showed an increase of 2 percent to reach a total cargo volume of 1,449,855 tons in 2005. Freighter aircraft carried nearly 55 percent of that volume, while 45 percent was belly cargo. Air France-KLM Cargo remains the largest cargo carrier at Schiphol, but the airport has also gained new freighter services. One example is Volga-Dnepr subsidiary AirBridge Cargo, which switched three flights to Russia and China from Luxembourg to Amsterdam.

The Dutch airport’s main rivals also continued to grow. Brussels Cargo Airport established new records in 2005, when volume reached 702,819 tons, up 5.8 percent over the previous year. Brucargo provides a dedicated cargo-handling area and also hosts large operations for mail, courier, and express cargo.

Luxembourg Airport reported an increase in cargo volume of 4.2 percent on the back of strong performance by its home carrier, Cargolux. The all-cargo carrier flew out 644,613 tons, up 8.3 percent over 2004, and is targeting more market share in Germany, France, and the Benelux countries. After successfully launching service to Indianapolis, the company added a second flight, mainly for forwarders serving the pharmaceuticals industry. The return flights from Indianapolis and Chicago bring exports from the U.S. Midwest to Europe.

With a transport volume of over 1.74 million tons of freight and mail shipments, and 7.8 billion revenue ton-kilometers in 2005, Lufthansa Cargo is one of the world’s leading cargo carriers. To improve its efficiency and quality and to keep its leading position, the carrier has established several partnerships with airports, airlines, and integrators around the world. A one-year contract has been signed this year with World Airways to operate two MD-11 freighters between Europe and the United States. Service will start with the winter schedule of 2006. Lufthansa also has signed an agreement for a strategic partnership with Fraport for further developing Frankfurt Airport as an air cargo hub. Executives of both organizations said the strategic partnership, which goes beyond previous cooperation at the operational level, will ensure joint planning of the overall airline-airport system and will further intensify the partnership between the world’s second-biggest cargo airline and Europe’s No. 1 cargo airport. With this initiative, the partners are also responding to the increasingly tough competitive situation in global air cargo transportation.

Another partnership was announced in August, this time with with DHL Global Forwarding. Both partners have signed a strategic agreement under which they will develop standard operating procedures that support and fulfill customers’ and governmental security requirements.

With a consolidated turnover of 2.9 billion euros, the French-Dutch group Air France-KLM is among the world’s leading air cargo operators. The two companies created the Joint Cargo Team (JCT) in October of last year to join forces in a single organization. They are also members of SkyTeamCargo, an international air cargo alliance. Air France Cargo recently signed an agreement with the communication-service provider Traxon Europe, which recently signed up as an IATA e-freight vendor. Traxon will cover all communications with customs authorities worldwide for Air France Cargo, starting with Canada, India, and the United States. Traxon Europe previously managed Air France Cargo’s communication with French customs authorities for import shipments under the new European Union customs regulations. There could be follow-on contracts with KLM Cargo and Lufthansa Cargo, but these are by no means certain, said Traxon’s managing director Felix Keck. Both Air France and Lufthansa are Traxon Europe stakeholders.

The demand for outsourcing solutions is rising along with the fast growth of freight volumes. A successful example is “time:matters,” a Germany-based global provider of emergency and customer-specific solutions. The wholly-owned subsidiary of Lufthansa Cargo transports urgent shipments through all transport modes, including same-day and courier services. The company cooperates with the leading integrators, carriers, and couriers and is linked to an international service network. Together with United Airlines Cargo, time:matters launched a same-day service from Germany to 40 U.S. destinations. This service has been expanded throughout Europe and now encompasses more than 40 airports.

Working with time:matters, TNT has introduced its own late-night express service to the United States. More and more logistics-service providers are developing special products in connection with time:matters, either by integrating those services within their own offering, as TNT has done, or outsourcing their emergency shipments to time:matters, explains Managing Director Franz-Joseph Miller. The company transported around 470,000 packages in 2005, 12 percent more than in the previous year.

Another highly successful provider of air cargo services in Europe is the recently forged union of Schenker and BAX Global. The companies have been combining their networks over the last few months, merging operations and announcing new management teams. In January 2007, the U.K. branches of the two companies, which operate 26 locations and employ nearly 1,000 people in that country, will be under the direction of a unified management team at Heathrow. According to Managing Director Klaus Eberlin, the new entity began winning new business even before the merger was completed.

Schenker/BAX’s efforts in Europe clearly have paid off. The company this fall earned the Institute of Transport Management’s European Logistics Company of the Year Award for 2007.