Munich Airport’s virtuous circle

If you want evidence that it is still possible for European airports to capture new freighter business, look no further than Munich.
The south German airport saw a growth of 9.5% to 236,000 tonnes in the first nine months of 2015, with maindeck cargo being the overwhelming — but not the only — reason. Freighter volumes were in fact 31% up while belly was up 6%. 
That follows a 22.7% rise in all cargo volumes and 5.8% rise in bellyhold in 2014.
Even more interestingly, the growth was due to exports more than imports. Figures for the first half of last year show outbound cargo up 7% while inbound was up only 3%. If European Union traffic is stripped out, export growth was 8.2% and imports 3.8%.
The reason for these strong figures was the start of three new freighter services to the airport. The first, in 2013, was a weekly Cargolux Boeing 747F flight from Atlanta. 
In April 2014, AirBridgeCargo also started 747F services to Munich, with one frequency a week from April and a second one in November. Yangtze River Express (YRE) launched a 747-400F service five times a week from May 31, 2015, boosting that to six times a week in the recent peak season.
The YRE service points to one of the attractions of Munich — export cargo to Asia. The Chinese carrier routes its freighters via Munich from Brussels and Amsterdam, and they carry on to Shanghai and Tianjin. Markus Heinelt, director traffic development cargo for Munich, says that this service is operated on behalf of one particular large forwarder which had a special need on this route.
Munich in general offers a very attractive market for air cargo, one that has probably been underexploited in the past. The German state of Bavaria, of which Munich is the capital, would rank 7th or 8th in the world on GDP if it were an independent country and boasts such industrial giants as BMW, Audi, Siemens and Grundig. 
The next door state of Baden-Württemberg, centred on Stuttgart, adds Daimler, Porsche, Bosch, Carl Zeiss and lots of mid-sized ‘Mittlestand’ companies to that roster.
Given all this, it is perhaps surprising that Munich does not have more freighters. “There is a huge backlog of demand,” says Heinelt. “This area has 43% of all German air cargo, and at present only 35% of it goes via Munich. But four years ago we handled only 29%, so we are getting more and more of the cake.
“That gives you a nice idea of the potential for the future. If new capacity comes, either bellyhold or maindeck, then it will be accepted by the market.”
There is also something of a chicken and egg effect at work. The more capacity there is, the more forwarders consolidate cargo at Munich, and the more forwarders consolidate, the more attractive the airport is for freighter operators.
A key factor here has been the growth in longhaul belly capacity, particularly since the airport’s second passenger term-inal opened in 2003 as a hub for Lufthansa and its Star Alliance partners.
The German carrier in fact put up 40% of the money to build the terminal and has since developed a growing network of longhaul flights from it. 
A third terminal, joined to terminal two by a people mover and also jointly financed by Lufthansa, is due to open next April and will add capacity for a further 11m passengers to the existing 40m.
Destinations that have been added by Lufthansa recently include Mexico, Miami and Cape Town, and doubtless it will be adding more services when terminal three opens. But Heinelt also points to the Gulf carriers, such as Qatar Airways and Emirates, as well as four daily flights from United and one from Delta.
The latter will be boosted to twice daily when Delta adds Boeing 767-400 services from Detroit in May to its existing Atlanta service. 
Meanwhile, Qatar Airways deployed the Airbus A350XWB, for which it is launch customer, on all Munich flights from November 1, and Emirates is to add a daily Boeing 777 service to its existing twice daily A380s from February 1.
Indeed, as time goes on, it is getting harder to identify blanks on the map that need to be filled in. Pushed on this point, an airport marketing executive identifies South America (currently only Sao Paulo is served), and “some points in Asia”. To China the airport already has passenger flights to Beijing (Lufthansa and Air China), Shanghai and Hong Kong (both Lufthansa).
Running alongside the belly growth, Munich has been investing in forwarder facilities, which have been built as a second line behind the cargo handling terminals. 
The first 15,000 sq m of units were full as soon as they opened seven years ago. Two years later, at the request of forwarders, construction of another 16,000 sq m started. Opened three years ago, this facility is now also full.
Heinelt says that a third facility is now in the pipeline. “We are still in negotiations about this and there are no detailed plans yet, but we think we can go to concrete planning from next year. It is for three clients and they would like to have it more yesterday than tomorrow.”
He points out that one big advantage that Munich can offer in its forwarding facilities is direct access to the ramp by dolly. “They are directly opposite, only 200 metres from the ramp, so no trucking is required, unlike in other airports. They can feed built-up pallets directly to the ramp, bypassing the cargo terminal.”
All these factors — freighters, belly cargo and forwarding facilities — feed into each other. “Daily belly capacity is secured uplift,” Heinelt says. “Based on this, forwarding agents develop in Munich more and more and then they need additional capacity, which is interesting for Cargolux, AirBridge and Yangtze. It is the mix of belly and freighter that is attractive for forwarders, and this in turn produces strong demand.”
In turn this also makes forwarders less inclined to truck to other airports, such as Frankfurt. “Reduced trucking means reduced costs and it eliminates double handling,” Heinelt points out. But trucking is growing in the other direction, with cargo being fed in from Northern Italy, the Czech Republic, Hungary and even northern Germany.
The latter may sound counter-intuitive as such trucks would have to pass Frankfurt on their journey to Munich, but Heinelt says it can make sense. 
“They are maybe trucking to Munich because of the length of processes at other airports, as service is very fast here. If you have maindeck shipments, it can make sense to build pallets here.”
Landing slots can be another issue for freighter operators at Europe’s busy hubs. The two current runways at Munich are now pretty busy during peak hours, though Heinelt says that he does what he can to get freighter operators the slots they want.
All would be relieved if a third runway goes ahead, but this is still not certain. A third runway plan has cleared all legal hurdles but in 2012 the City of Munich, which owns 23% of the airport, put the scheme to a popular vote, which produced a slight majority against.
This was only binding for a year, but the third runway plan is still a political issue. The airport says it hopes for a decision in the spring of 2016.  

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