Road feeder providers rally around demand

Road feeder services heavyweights Wallenborn and Jan de Rijk discuss how air cargo market trends are impacting the sector and why e-commerce has its drawbacks.

2024 has so far delivered a remarkably different air cargo market to last year, but the key question for road feeder services (RFS) providers is does the upturn in year-on-year demand benefit them and how can they capitalise on it?

Looking at RFS verticals certainly paints a positive picture.

Perishables including food and flowers, automotive and fashion continue to be growth verticals for Wallenborn.

“Fresh particularly has been a massive ramp up for us over the last two quarters,” says Wallenborn’s chief commercial officer Ram Menon.

“Flowers, particularly into Liege, is massive. In Frankfurt, we last year very happily won the Lufthansa fresh-to-door business and that’s been a huge ramp up for as well for us as well with them.”

E-commerce is of course a growth vertical for RFS providers. As well as serving airlines, Wallenborn is working directly for e-commerce shippers.

There are a number of European destinations for e-commerce including Heathrow in particular, as well as Frankfurt, Amsterdam, Paris CDG and Warsaw, which fall within Wallenborn’s existing network.

“The UK is a very heavy market for e-commerce,” says Menon. “So we’ve got a lot more volume going into the UK than we used to, but that’s okay because we have operations there. We’ve adapted to shippers’, forwarders’ and airlines’ needs.

In addition to e-commerce, pharma, fresh and fashion markets are driving growth at  Jan de Rijk, says Stephan Pieters, commercial director.

Jan de Rijk’s growth in Europe is concentrated more in the south, including Italy and Spain due to demand for fresh exports.

“So out of Spain, for example, there are various kinds of flowers that go to the flower market/auction.

He added that climate change has forced a shift in the peak market months for fresh products, which are now earlier in the year to avoid the hottest months, while he adds “products are going faster” overall.

E-commerce is also going from strength to strength, but while it is boosting volumes, RFS providers aren’t always benefitting as much as it may appear.

Klipphausen, Germany headquarted Wallenborn has observed growing volumes of e-commerce being flown from Asia into the US instead of Europe, which has dented RFS volumes somewhat.

According to Menon, this is “because the yields are a lot higher on e-commerce to LA than to Europe”.

He adds: “That, of course, has an impact on the European market and also has an impact on RFS as a whole.”

Increased costs and capacity in the airfreight market mean that despite higher volumes with e-commerce, the payoff isn’t as high.

Referencing the first quarter of the year, David Smorenburg, sales manager at Jan de Rijk explains: “E-commerce is where our growth numbers mostly come from but in the end, it’s the cheapest of our verticals. The revenue compared to the cost is not bringing the big margins. However, it gives us visibility in the market.”

Belly battle

Airlines are continuing to add passenger flights and belly capacity back into the market, but direct routes don’t utilise RFS, points out Menon.

For example, he says: “You have a lot of belly freight coming into Frankfurt, but if the final destination is Frankfurt then it goes out of our network.”

Summer airline schedules also mean there are more passenger flights to regional airports or airports airlines don’t normally fly to in winter.

“There’s less of a need for RFS because there’s more options direct via plane.”

Last year, Jan de Rijk reported that the post-pandemic return of passenger flights had caused excess capacity on direct routes and lowered the need for RFS and volumes for the company.

This year’s increased demand has put a more positive spin on belly capacity.

Smorenburg says: “It contributes to our load factor when it comes to scheduled service and makes the truck itself more profitable.” But, he adds “gross volumes and load metres vary dramatically”.

For Jan de Rijk, the potential for more belly capacity on direct flights to eat into RFS demand is a concern, but Smorenburg says the company’s network is quick to adapt and the scale of the company means it does not have to adjust its network or schedule.

“We do see direct flights are impacting some of our routes. The flow changes all the time, but we’re a big company with assets all around Europe. We can handle it better than last year because we have more people available to us and more capacity.”

Juggling costs

As well as operational highs and lows, RFS companies also have a number of ongoing challenges to contend with.

Fuel prices are an ongoing concern for RFS companies and the cost of trucks has meant building up fleets has become a headache too.

“The costs of trucks have gone up significantly, with almost 20% increases,” says Menon.

The truck cost conundrum extends to Jan de Rijk as well. “Truck prices increased in the last couple of years by approximately 30-40%,” says Pieters.

“Alongside this is the cost of truck infrastructure and maintenance. This pushes up costs across the supply chain,” highlights Pieters.

On top of this, there is competitive pricing from within the RFS industry to contend with, but Menon stresses with lower prices comes the risk of lower service quality.

“There are other carriers on the market who will put in prices 20% to 30% lower than actual [market rates]. That’s not something we’re ever interested in competing with because you can’t ensure quality.”

Both Wallenborn and Jan de Rijk also face an ongoing challenge to grow their pool of truck drivers, given the sizeable number of older drivers nearing retirement age on their books.

One of the incentives Wallenborn uses is a gradual system of increasing responsibility with shipments, starting from general cargo and progressing to high-value loads with aerospace and outsize “the top level”, says Menon.

He says this gives drivers “perspective within the company to grow. So that’s how we’ve managed to retain our drivers and keep them happy”.

Driver shortage will end up squeezing capacity again, says Pieters. There’s not that many young drivers being added to all the networks everywhere. So the driver population will get older and older and the capacity constraint will be back.”

Jan de Rijk is therefore focusing on hiring drivers below 40, while its diversity drive has reaped rewards with the recent hire of its 100th female driver.

Photo: Wallenborn

Airport hubs

Another issue is that traditional airport hub networks are back following the pandemic, but airports still lack the staff to keep operations running smoothly, which has a knock-on effect on efficiency according to Menon.

“The gateways are back, just not running at the same efficiency as they were pre-pandemic. The biggest challenge at the moment that we’re seeing is a lack of ground-handling staff.

“It’s getting better but there are delays that have a direct impact on us from a transit delivery point of view.”

Secondary airports are not seeing the same growth they did during the pandemic, but they have retained an important role in RFS supply chain networks, in Jan de Rijk’s experience.

“Major airports, such as Amsterdam and Frankfurt, are downsizing the slot capacity on freighter aircraft. So what we see is a little bit of a shift of freight going to secondary airports,” says Smorenburg.

E-commerce is also fuelling a shift in RFS airport shipment patterns, adds Smorenburg.

“For example, a big e-commerce supplier has started their last mile distribution into Europe, out of Maastricht. What we currently do is feed cargo out of Amsterdam, Frankfurt, Brussels into Maastricht.”

But aside from a few notable examples such as Liege, usage of “tier two’” airports including Cologne or Frankfurt-Hahn has fluctuated and growth has slowed at these airports, he says.

“Either this freight is moving on bellies towards a bigger airport or on freighter aircraft either to their original destination or to a different destination, and we truck it to the end destination.”

Green lanes

Decarbonising operations remains high on the agenda for RFS operators, but, as ever, the pathway to green trucking isn’t smooth.

HVO (Hydrotreated Vegetable Oil) is becoming big business for Jan de Rijk as it continues to partner with companies including Air France KLM Martinair (AFKLMP) Cargo and Saudia Airlines on decarbonisation.

The company has an exclusive HVO gas station at its home base in Roosendaal, The Netherlands.

Pieters points out that making road fleets sustainable is not as financially prohibitive as with airlines’ investment in sustainable aviation fuel (SAF).

“We were very successful last year in selling HVO. We had a goal of 500,000 litres for 2023 but we sold more than double this amount.”

The same success hasn’t been matched by electric trucks. The feasibility of operations remains questionable due to the problematic infrastructure and insufficient supply of electricity.

“Our fuel of choice will probably be electric trucks,” Pieters says. “But it’s not about production or the total cost of ownership of electrical trucks – it’s infrastructure that is holding us down.”

Wallenborn is concentrating on fuel efficiency and emissions reduction with its Euro 6 fleet that is compliant with the European Union’s Euro six emissions standards.

Following a speed versus time fuel consumption study, the company is in the process of limiting its trucks to 85 km per hour down from 90. “We found that that was the perfect sweet spot between transit time and fuel consumption per 100 km.

Business projections

IATA predicted that air cargo demand would improve by 4.5% this year and so far demand has been growing at an even faster rate, although there are signs of a slight slowdown.

Does this also reflect positively for RFS demand this year? Menon says not necessarily.

He points to the shifts in networks: “It’s a good thing airfreight is increasing. But it doesn’t necessarily mean that it will have the same impact on RFS.”

Menon is also reserving judgment about what the rest of the year might bring.

“I’m remaining cautious. I would of course love for this year to be a year where we see everything go up again. I think it’ll be a relatively tough year, flat, potentially building up to (a better) 2025.”

Jan de Rijk is equally cautious about what the rest of the year may bring.

“I think our expectations are that we are looking for growth this year versus last year, but there are a lot of things globally that can interfere with our growth,” Smorenburg reflects.

“I think the most important thing for us is that exports out of China are increasing and that the buying power in Europe remains strong.

“Inflation has gone down this year a little bit compared with last year. So I feel that people are in a bit more of a positive place when it comes to spending.”

But he highlights: “Another important factor is how the engine of Europe – Germany – will perform in the second half of the year. We see some issues, especially in the automotive industry, which is affecting our export loads across Europe, but in general, it’s quite stable.”

RFS project spotlight

Source: Shutterstock

One trailblazing road feeder services (RFS) project currently being carried at Amsterdam Schiphol Airport aims to implement digital truck stop planning to improve the efficiency, transparency and predictability of RFS services.

The RFS project is being carried out as part of the Smart Cargo Mainport Program (SCMP) at the airport, where RFS comprises 40% of the total traffic.

It aims to gather and centralise all relevant data including transport schedules, flight number usage and collaboration between partners in a secure digital location so that monitoring of RFS operations mirrors that of flights.

Erwin de Jager, business project manager of the RFS project, says the project was prompted by lengthy truck waiting times at the airport, plus disorganisation and inefficiency around the planning and execution of RFS operations.

“Trucks were waiting too long for ground handling services, but also ground handlers were ready to load or to unload delayed or no-show trucks,” stressed de Jager.

This is set to change with the Schiphol-developed ‘RFS Link’ digital tool. It is designed to fit with the airport’s existing Cargonaut-designed Port Community System (PCS), which went live at the beginning of this year.

Still in its first phase, the foundation of the project has involved analysing RFS flows – which saw traffic classified into inbound, outbound, export and import categories.

This resulted in a “solutioning document of all the data” that has to be included in RFS Link. The data compiled in the tool will be combined with a dashboard to ensure pre-notification of all trucks.

“Via the dashboard, we are in contact with all the stakeholders to get the coverage of the data,” de Jager says.

As well as ground handlers communicating what trucks they are handling, RFS companies have to declare their cargo for delivery or pick up.

For ground handlers, this is expected to result in a clear picture of what trucks are due to arrive and what cargo they are carrying, plus expected waiting times, so that they can prepare for loading and unloading of trucks and reduce waiting times.

The truck schedules between airlines and RFS providers can be complex and this also needs to be “rooted” in the tool, says de Jager.

“The airlines are the contractor of the of the RFS trucks, so they have a big interest in gaining efficiency and predictability in the project.”

RFS stakeholders in the project include Wallenborn and Jan de Rijk. Airlines include Etihad, Emirates, KLM and Lufthansa, while the ground handlers comprise dnata, Swissport, Menzies and KLM.

WFS is due to join the project in 2025 and a range of other stakeholders will also join once the project is live, confirms de Jager.

“The tool has got to be delivered this year and in 2025 we will implement it one by one with each of the five ground handlers and the airlines and truckers working with those handlers.”

RFS firms stand their ground in tough air cargo market