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Archive for March, 2012

Up in the Air

As appeared in FDI magazine, December/January 2012

 

By Karen E. Thuermer

 

 

When the Hesse Administration High Court in Germany put an end to scheduled nighttime flights at Frankfurt Airport, the news came as a big blow to Lufthansa Cargo.  The carrier had planned for 10 night flights on its winter schedule, beginning October 30.

Karl Ulrich Garnadt, Chairman of the Executive Board and CEO of Lufthansa Cargo, sees the resulting consequences for the carrier as “quite severe.”

“We don’t know how our customers will react, but we expect a double digit impact,” Mr Garnadt says.

He sees the provisional night-flight ban in Frankfurt as a drastic signal for the German logistics industry.

“As an export world champion, Germany is reliant on dependable connections to ship airfreight to destinations around the globe,” he says. “Frankfurt Airport plays, in that respect, a highly important role since around 40% of German exports are transported by air.”

 Mr Garnadt also predicts the decision will impact companies in Frankfurt and the Rhineland industrial area that depend on night flights to give them a competitive logistics solution.

 “By loosing night flights, the quality of Frankfurt as a logistics hub will have an impact on investment decisions by companies,” Mr Garnadt proclaims.

Airports are economic drivers, and those handling cargo are powerful engines for local economic growth, particularly in attracting manufacturers and logistics operators who depend on fast transport service.

         This fact is so poignant that Dr. John Kasarda, professor at the Kenan-Flagler Business School at the University of North Carolina-Chapel Hill, has named the concept “Aerotropolis” to describe an aviation-oriented economic region that has an airport as its cornerstone.

         Two cities in the United States exemplify this point: Memphis, Tennessee, home to Federal Express; and Louisville, Kentucky, the world hub for UPS.

         FedEx has grown into a worldwide power, and its Memphis hub has made the city a magnet for businesses that thrive on time-critical transportation. From Memphis, FedEx can deliver to any North American location within 24 hours and to most major global cities within 48 hours.

         Among the companies locating in Memphis to capitalize on these advantages are Johnson & Johnson and Pfizer. Both have major logistics centers in Memphis.

         Zappos.com, one of the largest on-line shoe stores in the world, moved its fulfillment center in 2006 to Louisville to be close to the UPS world hub.

That hub, dubbed Worldport, currently turns over 130 aircraft and processes around 1.5 million packages a day.  

 “From there, and with the help of UPS, we were able to serve areas with population density, and the US lower 48 states with next day or two day delivery,” says Craig Adkins, Zappos.com vice president of services and operations.

As a result, Zappos sales grew from $597 million in 2006 to $840 million one year — an amazing 40 percent jump.

          Nevertheless, Dr. Kasarda points out airports in the US are treated as nuisances to be controlled, unlike their counterparts in Asia and the Middle East where they are regarded primary infrastructure assets for their cities and nations to compete in the globally-connected, speed-driven economy. 

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