Dr. Stefan Schulte: Air traffic caught between export economy and global competition for transport & logistics

Airfreight is essential for both importation and exportation, whether it be high-tech spare parts for industrial plants being flown to Taiwan or roses being flown in from Kenya. For example, even if Frankfurt Airport seems to be a giant, competition with other hubs is tough. This is why our airports require optimum basic conditions.

The mobility of human beings and goods has steadily grown in recent decades. In particular, the quality and density of mobility options have evolved, resulting in a fundamental competitive factor for the economy and society.

Mobility broadens the scope of economic activity. Air transport allows the entire globe to be a market of oppor­­tunities. Many believe that “globalisation” is an example of excessive megalomania where it would rather be necessary to reflect on the obvious. However, in reality, globalisation is old news.

Already, the success of the German Hanseatic League was based on expanding their area of activity, primarily in the Baltic Sea region. Being active on foreign markets increased the supply of goods and stimulated demand in domestic markets. To this end, new products, or perhaps only other methods of production, encouraged domestic producers and traders to expand their portfolio of goods and manufacturing processes. Economic cycles were initiated which would either have not emerged at all if there had been limitations in the domestic region or would have only sprung up after a much longer devel­opment period.

The resulting impacts for the Hanseatic towns are still admired today. Their fortune, size and power are reflected in the architecture. The residents see them­­selves as “Hanseaten”, even though the seaport for most of the Hanseatic towns is no longer of significant importance. But looking at the big wide world is a matter of course for them.

Great importance continues to be placed on the the large seaports due to the expanding global trade rela­tions. However, they are also faced with competition by the large airports.
Airports allow links to all parts of the world in just a short period of time and times that can be scheduled at short notice. In times of accelerated technical devel­opment, time provides that all-important competitive edge compared to other competitors.

Technical devices are becoming progressively smaller, lighter and smarter. As innovation cycles rapidly accelerate, market cycles become shorter. Today, market success means being one step ahead of competition in terms of a product’s technical development level and its market introduction. Market success implies fast transport.

Everyone is talking about the export boom in the Ger­­man economy and correctly associates this boom with business travellers from large companies listed on the DAX (German blue chip stock index) and now also medium-sized enterprises in Germany. They can be en­­countered all over the world because there is demand for their products all over the world.

But nobody talks about efficient German logistics. However one without the other would be unimaginable. A functioning logistics system is required for flourishing export trade.

Very little thought is given to what is being transported and who commissions which transport. And no thought is given to airfreight – except in the case of exotic or exceptional transports. For example, a heart that needs to be transplanted. Or a film star‘s exotic lapdog. Or the annual splendour of roses from Kenya.

Airfreight does all of these things and much more. Both surprising and common. Our life would be different without logistics. Airfreight assists us in everyday life in more ways than it is given credit for.

“Flugmango” (flying mango, the German term for airfreighted mango) is not only a name, it is indeed transported by air. Everyday, more fresh fish is being handled at Frankfurt Airport than at the port of Hamburg and is then transported to stores and restaurants in lorries. Textiles produced in China are flown in because the several week long shipment cannot keep up with the short-lived fashion trends. And when the Icelandic Volcano Eyjafjallajökull spewed so much ash into the European atmosphere that air traffic across the continent came to a standstill for days, it took half a week before Ger­­man automotive manufacturers had to shut down their production lines because the supply of individual modules for automobile production was running dry.

Airfreight also ensures that goods manufactured in Germany reach customers all over the world. Fully furnished cars are transported by air to affluent countries of the Middle East regions, for example luxury cars with their proverbial gold-plated fittings. But above all, the goods that the German industry is renowned for: machines of all kinds, large and small examples of miraculous precision, quality and durability. And if they are not transported by air, then the spare parts are and they have to reach the customer as fast as possible, in other words overnight, so that the machines are forced to stand still for only a few hours.

As a matter of fact, export is not only about producing the goods at the domestic production site and then transporting them to other markets beyond country borders. In fact, export today involves much more or­gan­­isation of the so-called value-added chains that can reach across the entire globe. The “resource knowledge“ is the main good being exported: knowing how modern, leading global products are created by bundling global skills with cost-efficient production sites and knowing how they can be provided to markets all over the world by means of an efficient logistics system. This does not at all rule out the need to have a high-performance logistics system in this part of the world too. The final component of a value-added chain is quite often left in the hands of the domestic industry who add the finish­ing touches to the imported pre-products before they are exported.

This means that in this country, there has to be adequate capacity, both on the ground and in the air, for the growing need for fast, long-range transport. And because global logistics, for example all air transport, is subject to stiff competition around the world, it is essential that intelligently implemented conditions allow Ger­many to have a strong position in the air transport market so that the drivers of prosperity for the export industry can continue to play a global role.

As a result, the airport in Frankfurt has an exceptionally important role: around 70 per cent of all German intercontinental flight operations are carried out via our airport, while 63 per cent of the German intercontinental cargo is handled here. Airfreight is dependent on major hubs to a far greater extent than is passenger travel. Worldwide, half of the entire airfreight is processed by 20 large aviation hubs. Frankfurt is ranked among the top ten airports and it is Europe’s largest freight airport thanks to its central geographical location.

Airfreight strives for a connection with passenger flights. Over half of all freight is transported in the cargo hold on passenger planes. An airport such as the one in Frankfurt, which offers more intercontinental destina­tions than any other comparable airport, attracts freight, on the one hand, because it can reach many different destinations directly without having to reload. On the other hand, freight improves the load factor of a passenger aircraft. This increases the likelihood that the connection density to the nearly 300 destinations serviced from Frankfurt will increase, or that new destinations will be incorporated into the flight schedule.

In other words: if the airport has appealing location qualities, additional users of the infrastructure make it even more attractive. An upward trend in the development spiral has been set in motion.

If the possible scope of actions within the infrastructure is limited, the number of users could decrease – with the effect that other stakeholders at the airport will look for an alternative location for their services business. This could result in a development that would dampen the airport‘s attractiveness.

The author was born in 1960. He has worked for Fraport AG since 2003 and is now chairman of the executive board. As CEO Finance he was responsible for com­­mercial activities, IT services and the Group’s invest­­ment activities. He was ap­­pointed deputy executive board chair­­man in 2007 and today he manages the Group’s aviation, ground hand­ling, retail and properties operations as well as its external activities.