For European airlines, the industry’s nascent recovery was carried away on what seemed to be a wisp of dust.
The shutdown of large swaths of European air space for nearly a week because of volcanic ash from Iceland convulsed the airline industry and showed both the fragility and flexibility of airborne supply chains.
Losses from the “volcano crisis” were estimated at some $200 million a day for carriers, but experts said the impact on the broader economy would take longer to assess as businesses from farmers to high-tech manufacturers looked at the damage.
While television reports across Europe showed the plight of stranded passengers, shippers and others dependent on the expedited supply chain struggled to cope with the closure of Europe’s four largest air freight hubs — Frankfurt, Paris Charles de Gaulle, Amsterdam Schiphol and London Heathrow.
Kenyan farmers trashed hundreds of tons of flowers, fruits and vegetables that were booked to fly to Europe, losing an estimated $2 million a day. British perishables buyers set up an ad hoc distribution channel with flights into Spain and trucks the rest of the way to salvage some shipments.
Norwegian salmon farmers started to reduce their fish harvests. German carmaker BMW warned it might be forced to halt production of X5 and X6 sports utility vehicles at its South Carolina plant. Nissan suspended production of three models in Japan because it was unable to import air pressure sensors from Ireland. Hong Kong restaurants reported shortages of French cheese, Belgian chocolates and Dutch fresh-cut flowers.
Airports in China turned away Europe-bound consignments as they ran out of warehouse space. South Korea’s Incheon International Airport lost more than 3,200 metric tons of freight in four days after 20 inbound and 25 outbound cargo flights were canceled.
And airlines were hiking freight rates even as most of Europe was a no-fly zone as they prepared to clear the mounting backlog of cargo in a market already short of capacity following the trimming of freighter fleets during the deep global trade downturn.
As a result, most all-cargo carriers and scheduled airlines likely will quickly recoup losses sustained during the shutdown, although some undercapitalized niche players serving developing nations face a tougher road back.
Equally important, the shutdown of European airspace gave airlines, express carriers, forwarders and supply chain managers an opportunity to impress shippers.
Lufthansa Cargo and KLM got permission to operate a few intercontinental freighter flights during the shutdown. German mail, express and forwarding giant Deutsche Post DHL quickly shifted intra-European traffic to road and rail and sent some international shipments through Bergamo airport in northern Italy. Cargolux and forwarder Panalpina rerouted a 747 freighter service from Huntsville, Ala., to Spain’s Zaragosa airport and trucked cargo to and from the all-cargo carrier’s Luxembourg hub. DB Schenker sourced additional warehouse space for its clients and arranged several flights from Asia to southern European airports. UPS reacted to the closure of its hub in Cologne, Germany, by flying shipments from Asia to Istanbul, and distributing them across Europe by truck.
These were essentially short-term stopgap solutions, but they allowed air cargo operators to gain kudos with customers at a time of fierce competition.
Trucking also emerged stronger from the crisis with its rapid response to sudden requests from the air cargo sector sure to stand it in good stead when European politicians seek new ways to penalize road transport to encourage greater use of rail freight.
Rail never figured as an alternative transport mode during the airspace shutdown, and its already tarnished reputation was further sullied as a 2-week-old rail workers strike in France that has halved freight capacity halted cross-border traffic between Europe’s second-largest economy and Spain, Germany, Italy, Switzerland, Belgium and Luxembourg.
The volcano crisis coincided with a rebound in air freight traffic that began in the final quarter of 2009 and surprised even the most optimistic carriers whose capacity management strategies were based on a gradual acceleration from an 18-month slump.
The rally has been driven mainly by soaring Asian exports to North America and Europe that saw forwarders paying hefty premiums for space on outbound freighters. China was a major driver of the cargo revival, but other Asian markets are booming, too: South Korea’s semiconductor exports soared nearly 125 percent in March from a year earlier to $4 billion, helping Korean Air set a record monthly volume of 76,278 metric tons.
European airports and cargo carriers also were reporting bumper figures when the skies were closed.
Frankfurt handled more than 200,000 metric tons of freight in a month for the first time in March after traffic soared 37.4 percent from a year earlier. The new monthly record of 203,308 metric tons also included a daily high of 8,511 tons on March 14, 34 tons above the previous record set on Sept. 17, 2006.
Lufthansa Cargo boosted March traffic by 26.4 percent to 155,000 metric tons, taking first quarter volume to 391,000 tons, 19.3 percent more than in the first three months of 2009, at the low point of the recession. And the carrier now believes it will make an operating profit in 2010 after booking a record $234 million operating loss and a $1.35 billion revenue hemorrhage last year.
Cargo operators and express carriers have responded to the market recovery by boosting capacity on routes between Asia, Europe and North America.
Capacity remains tight, with demand edging ahead of supply before the European shutdown piled up thousands of metric tons of additional freight looking for space on freighters and the bellies of passenger jets as the volcanic ash subsided.
But as the airlines raised the heat on European governments and the air traffic control sector last week, KLM got permission to run two commercial flights from Amsterdam to the Far East. KLM trumpeted the successful flights, but the seats were empty and the planes carried only cargo, making the de fact freighters leaders in the charge to clear the air.
Contact Bruce Barnard at email@example.com.