EMEA players aim for sustainable growth

As the air cargo industry progresses through its current downturn, carriers are tempering growth expectations and aligning their strategies with the decreasing demand for dedicated freighters in 2023 — at least until the market begins to show modest signs of a resurgence. Air cargo executives operating in the Europe, Middle East and Africa regions gathered in February at Cargo Facts EMEA 2024 in Amsterdam to reflect on challenges the industry faced in 2023 and previewed what lies ahead in 2024. “The last twelve months have been challenging,” Alex Harrington, commercial director at Titan Airways, said during a panel on narrowbody freighter conversions. “We operate four A321-200P2Fs and we probably had work for about two and a half of those.” There was a slight increase in demand in November and December that lasted for about three weeks, Harrington said, adding that Titan has started to see an increase in demand in 2024 but rates remain flat. European freighter operator SmartLynx Airlines expressed similar views on regional growth as it continues to evaluate the local markets. “We see some of the market pick up here and there,” SmartLynx Head of Asset Management Laura Ivaskaite said during the panel. “But it’s much more localized and probably triggered by some specific geopolitical events, sea freight challenges or other issues.” Balancing capacity and demand Demand for lift capacity has risen slightly in the Middle East as operators establish a balance between serving customers and the surging e-commerce segment. “The main emerging market is e-commerce,” Liesbeth Oudkerk, senior vice president of cargo sales and network planning at Qatar Airways, said. “How much of your capacity will you fix towards e-commerce or your regular customers who are also stepping into e-commerce? It’s a mix there.” [caption id="attachment_56867476" align="aligncenter" width="2560"] Adriaan den Heijer, executive vice president of Air France-KLM Cargo and managing director of Martinair, speaking at Cargo Facts EMEA 2024. (Photo/Cargo Facts)[/caption] Incorporating e-commerce into the business model creates an extremely imbalanced network for carriers, leading operators to rethink their network plan that factors in the state of global markets, she said. The e-commerce element may pose a challenge to developing a new fleet strategy, she added. Increased air cargo volume in the Middle East is a promising trend, Saudia Cargo Managing Director Loay Mashabi said during a panel on widebody freighters at Cargo Facts EMEA 2024, adding that the carrier sees opportunity for growth in Africa. As infrastructure development continues in Africa, operators are evaluating strategies to increase lift capacity in the region. “The trends are there, the potential is there, and the products are there,” Mashabi said. “Now with new governments in place, I think we have the right atmosphere to operate in a better manner.” Building the infrastructure for global trade lanes in Africa is the main barrier to developing a market, Turkish Airlines Senior Vice President of Cargo Sales Cornelis de Man said during the event’s opening session. However, in the continent’s middle regions, there is room for technological growth that could enable Africa to emerge as the new India in the next twenty to thirty years, he said. Oudkerk said Qatar Airways’ mini cargo hub in Kigali (KGL) started in 2023 and the carrier intends to grow the operation as part of its initiative to provide service to smaller destinations. The economic and geopolitical challenges in Africa are more stable than in other areas in the world and there is a steady stream of cargo into the region, giving Africa a strong market in the short term, Adriaan den Heijer, executive vice president of Air France-KLM Cargo and managing director of Martinair, said during the discussion. The need to support SAF With rising costs and market demand fluctuating, carriers are driven to lower costs and increase revenue and yields. Sustainability is another variable expense that is mandated globally and which has proven to be costly in the early stages of development. “If you look at the airline operation framework, you would see that 90% of the carbon emission of an airline comes from fuel burn,” Soufyan Mouaniss, director of West cargo commercial for Europe and the Americas at Etihad Cargo, said during a discussion on the global freighter market. Fuel is one of the highest operational costs for an airline, so sustainability and fleet renewal naturally go hand in hand, he said. [caption id="attachment_56867478" align="aligncenter" width="2501"] David Dwek, senior future fuels analyst at SkyNGR, presenting at Cargo Facts EMEA 2024. (Photo/Cargo Facts)[/caption] The financial commitment required to establish sustainable aviation fuel will be expensive, but “if we do nothing as an aviation industry, we will go from currently 3% global emissions to 20% by 2050,” SkyNRG Senior Future Fuels Analyst David Dwek said during a presentation on sustainable aviation fuel (SAF). SAF is one of the four primary options available to the market but is also limited in supply, he said. It can be produced from three types of feedstock: oils and fats, solid biomass and other sources. “Our first conclusion is that waste oils and fats will be dominating up until 2030, and that’s because its technology readiness level is quite high,” Dwek said. “But beyond that, we are seeing that it will be capped and that’s just because, in simple terms, we have a limited amount of waste.” The constant demand for jet fuel will require 40 million tons of SAF annually by 2050 and IATA estimates fuel usage to increase at a rate of 2% per year, Dwek said. Technology and the voluntary market will play a vital role in filling the void but the contributors from each sector may need to exceed established mandates to meet the net zero goals, he said. Government policy is also crucial to the development of SAF production facilities. “If you compare the U.S. against the EU, what we’re seeing is that the U.S. is much more dependent on a very short-term view; the incentives they’re putting in place right now could change in four years' time if there’s a new government in place. So, that’s a risk, you could say,” Dwek said. Meanwhile, in the EU, the mandates are set and cannot be changed, even if leadership changes. “That is something that the EU has decided,” Dwek said. “So, that showcases a very guaranteed market — one that we can bank on.” An uncertain future From a widebody operator’s perspective, there is an equal mix of optimism and trepidation when it comes to the economies in the European region, de Man said during the opening panel discussion. “Germany as far as we see is slowing down,” Turkish Airlines’ de Man said. “This is something which is a cause for concern from a bigger economic perspective. The conflict in Ukraine is not helping either, we don’t know which way that is going. The farmers in Europe are embracing the protests a bit more, which is also dampening economic activities.” [caption id="attachment_56867477" align="aligncenter" width="2560"] Cornelis de Man, senior vice president of cargo sales at Turkish Airlines, speaking at Cargo Facts EMEA 2024. (Photo/Cargo Facts)[/caption] On a positive note, Denmark-based Novo Nordisk’s new diabetes and weight-loss products are likely to generate increased demand for lift capacity as well as higher margins, he said. “So, there’s a lot of bad news, but there’s also a lot of good news,” de Man said. Air France-KLM’s den Heijer agreed that Germany is a major indicator for the direction of the industry in Europe, and the outlook is “at least uncertain.” “Normally, there’s a relation between GDP and air cargo, and that figure is relatively stable over the last ten years,” he said. “For Europe, GDP growth is quite limited and certainly driven by some of the main economies, and I think there’s a direct relation there.” It can be difficult to see some of the underlying movements with Europe’s e-commerce players and integrators because there was a lot of reorganization, and trajectories have changed after the pandemic, ASL Aviation Holdings Chief Operating Officer Colin Grant said. “We are seeing consolidation of freight within Europe to save money and we’ve seen smaller airplanes in certain instances,” he said. “So, it’s difficult to look at the total outlook, but it is important to say there’s this period of adjustment, and that’s reflected in fleet changes, in downsizing and network redesign.” Nobody can know for certain which way Europe will go, but de Man believes there is always a market for specialist providers, even if the market may be a little less optimistic. “But then again, there are also some stars on the horizon, which may show us the way,” he said. “There is proverbial light at the end of the tunnel — let’s hope it’s not a train coming in our direction.” Don’t miss our two upcoming events that are essential for stakeholders in Asia and Latin America: Cargo Facts Asia 2024 , taking place April 15-17 in Singapore, and Cargo Facts LATAM 2024 , taking place May 13-15 in Panama City. Register by March 29 to take advantage of early-bird pricing for CF LATAM.

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