Air Cargo Role for Regional Development and Accessibility in the Baltic Sea Region
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1 Anatoli Beifert, Laima Gerlitz and Gunnar Prause (eds.) Air Cargo Role for Regional Development and Accessibility in the Baltic Sea Region Handbook of the EU projects Baltic Bird and Baltic.AirCargo.Net in the framework of the Baltic Sea Region Programme BWV BERLINER WISSENSCHAFTS-VERLAG
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3 Regional Business and Socio-Economic Development Herausgegeben von Gunnar Prause, Hochschule Wismar / Technische Universität Tallinn Jost Kramer, Hochschule Wismar Juhani Laurinkari, Universität Kuopio Tatjana Muravska, Universität Lettlands Jüri Sepp, Universität Tartu Band 8
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5 Anatoli Beifert, Laima Gerlitz and Gunnar Prause (eds.) Air Cargo Role for Regional Development and Accessibility in the Baltic Sea Region Handbook of the EU projects Baltic Bird and Baltic.AirCargo.Net in the framework of the Baltic Sea Region Programme BWV BERLINER WISSENSCHAFTS-VERLAG
6 Bibliografische Information der Deutschen Nationalbibliothek Die Deutsche Nationalbibliothek verzeichnet diese Publikation in der Deutschen Nationalbibliografie; detaillierte bibliografische Daten sind im Internet über abrufbar. ISBN Auflage 2014 BWV BERLINER WISSENSCHAFTS-VERLAG GmbH, Markgrafenstraße 12 14, Berlin Internet: Alle Rechte, auch die des Nachdrucks von Auszügen, der photomechanischen Wiedergabe und der Übersetzung, vorbehalten.
7 Table of Contents List of Figures 7 List of Tables 9 List of Abbreviations 11 Acknowledgment 13 Preface 15 PART I AIR CARGO MARKET: ANALYSIS AND OUTLOOKS Air Cargo Market Outlook Maciej Maczka 21 Economic Outlook for the Air Cargo Market in the Baltic Sea Region Branko Bubalo 85 PART II AIR CARGO MARKET: DEVELOPMENT AND BUSINESS ACTIONS Air Cargo Market Development and Business Actions Jukka Siren, Kim Irmov, Hans Christian Stigaard and Fredrik Backman 151 Annex: Project Consortium Baltic Bird 186 Annex: Project Consortium Baltic.AirCargo.Net 190 5
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9 List of Figures Fig. 1: Baltic Sea Region air cargo demand in kilotons 22 Fig. 2: Geographical coverage of the BSR including cargo data 24 Fig. 3: Visualisation of EDDB-EPKT example 26 Fig. 4: Model geographical space 30 Fig. 5: Validation of model output. A scale coefficient (k= 0.24, Pr>0.1) 33 Fig. 6: Confrontation of two data sources and model output adjustment (k=4.22, Pr>0.1) 34 Fig. 7: Air cargo movement in the Baltic Sea Region 37 Fig. 8: Air cargo arriving to the Baltic Sea Region : Three top volume long/short routes per country 41 Fig. 9: Belorussian air cargo routes 44 Fig. 10: Performance of Estonian airports Fig. 11: Forecast of the air cargo demand handled at Tallinn Lennart Meri Airport EETN 46 Fig. 12: Performance of Finland s airports , 47 Fig. 13: Forecast of the air cargo demand handled at Tampere Airport EFTP 48 Fig. 14: Performance of German (BSR part) airports Fig. 15: Forecast of the air cargo demand handled at German BSR airports EDDB/EDDT, EDDH, ETNL 50 Fig. 16: Performance of China-EDDT connection in tons 51 Fig. 17: Performance of Riga Airport EVRA Fig. 18 Forecast of the air cargo demand handled at Riga Airport EVRA, 53 Fig. 19: Performance of Lithuanian airports Fig. 20: Forecast of the air cargo demand handled at Vilnius and Kaunas Airports EYVI, EYKA 55 Fig. 21: Performance of Warsaw Chopin EPWA and Katowice Pyrzowice EPKT Fig. 22: Forecast of the air cargo demand handled at Katowice Pyrzowice Airport EPKT 57 Fig. 23: Performance of Swedish airports Fig. 24: Forecast of the air cargo demand handled at Norrköping Airport ESSP 59 Fig. 25: Air cargo development scenarios in Sweden 60 Fig. 26: 2013 forecast average probability multiplied by mean volume loaded at airports to the BSR 62 Fig. 27: 2013 forecast average probability multiplied by mean volume unloaded at from the BSR 63 Fig. 28: Baltic Sea Region at regional and global scale 68 7
10 List of Figures Fig. 29: ETRS-LAEA coordinate system 70 Fig. 30: Baltic Sea Region airports catchment areas 78 Fig. 31: Potential accessibility function 79 Fig. 32: Probability estimation for the short-haul air cargo transport (<3500 km) 82 Fig. 33: Probability estimation for the long-haul air cargo transport (>=3500 km) 83 Fig. 34: Baltic Sea Region map 85 Fig. 35: Sample airports and intra-regional main cargo routes today in a hypothetical scenario Fig. 36: Distribution of airports in the Baltic Sea Region 90 Fig. 37: Annual GDP growth in Latvia and four other CEE countries, percentage 93 Fig. 38: How air traffic is correlated to development of the economy 94 Fig. 39: Imports from the EU in 2009 to Fig. 40: Exports to the EU in 2009 to Fig. 41: Imports from outside the EU in 2009 to Fig. 42: Exports to outside the EU in 2009 to Fig. 43: Import structure, modal split and trade partners 101 Fig. 44: Export structure, modal split and trade partners 101 Fig. 45: Profitability of airports in Sweden in 1997 to Fig. 46: Distribution of cargo-flights in the BSR 108 Fig. 47: Average daily revenues from cargo traffic based on airport traffic mix 109 Fig. 48: Call for tender for Public Service Obligations by country 117 Fig. 49: Baltic Transport Outlook 2030 Strategic Map Terminals, Ports and Airports 127 Fig. 50: Ranking of the World s Top air cargo carriers 154 Fig. 51: World air cargo traffic development Fig. 52: Fuel costs influence on world air cargo traffic growth 156 Fig. 53: World freight trends 157 Fig. 54: World air cargo traffic forecast Fig. 55: Airport as part of the shipper s logistics platform 174 Fig. 56: Aviation hubs of the Baltic Sea Region 181 Fig. 57: Air cargo revenues of Finnair s 182 Fig. 58: Road Feeder Services map 183 8
11 List of Tables Table 1: ACI report on the global air cargo activity, August Table 2: ACI report on the global air cargo activity, January Table 3: An example from the Eurostat avia_gor_de package 25 Table 4: Explanatory variables for advisory efficiency of the model application 27 Table 5: Heteroscedastic normal PDF Model for short-haul BSR air cargo transport 31 Table 6: Heteroscedastic normal PDF Model for long-haul BSR air cargo transport 32 Table 7: Air cargo statistics for Copenhagen-Kastrup EKCH 34 Table 8: Elasticity of demand in optimistic scenario 35 Table 9: Annual air cargo from the Baltic airports in thousands of tons (routes 3500 km or farther) 38 Table 10: Annual air cargo from the Baltic airports in thousands of tons (routes shorter than 3500 km) 39 Table 11: Annual air cargo arriving to Baltic airports in thousands of tons (routes 3500 km or farther) 42 Table 12: Annual air cargo arriving to the Baltic airports in thousands of tons (routes shorter than 3500 km) 42 Table 13: Forecast of the most promising potential for the air cargo arriving to Estonia 46 Table 14: Forecast of the most promising potential for the air cargo arriving to Tampere Airport 48 Table 15: Forecast of the most promising potential for the air cargo arriving to Schwerin-Parchim Airport 51 Table 16: Forecast of the most promising potential for the air cargo arriving to Riga Airport 53 Table 17: Forecast of the most promising potential for the air cargo arriving to Vilnius Airport 55 Table 18: Forecast of the most promising potential for the air cargo arriving to Katowice Pyrzowice Airport 58 Table 19: ICAO codes with airports and geographic coordinates 66 Table 20: ISO country codes AF-HK 70 Table 21: ISO country codes HU-SG 72 Table 22: ISO country codes SX-ZW 73 Table 23: Overview of NUTS 3 regions with coordinates 75 9
12 List of Tables Table 24: Transportation of goods by transport modes in the Russian Federation 80 Table 25: Freight turnover by types of transport in mln. tons-km in Belarus 80 Table 26: Region defining airports 87 Table 27: Airports under study in the Baltic Sea Region 88 Table 28: Trade partners and flows for countries in the BSR in Table 29: Top traded products (imported and exported) in the BSR by unit value and quantity 103 Table 30: Swedish benchmark airports with regard to profitability and airport size 106 Table 31: Total turnaround costs for cargo aircraft at BSR airports 113 Table 32: Aircraft mix at BSR airports with the main share of cargo flights 114 Table 33: Descriptive statistics of airports in the BSR in Table 34: Descriptive statistics of airports in Norway in 2010, 120 Table 35: Descriptive statistics of airports in Poland in Table 36: Origin/Destination map of cargo traffic in the BSR by country 123 Table 37: Detailed origin/destination matrix of cargo traffic in the BSR by airport 124 Table 38: Distribution of observed flights between origins and destinations of the core Baltic States Belarus, Estonia, Latvia and Lithuania 126 Table 39: List of airports from the Baltic Sea Region countries 130 Table 40: Most frequented airports in the Baltic Sea Region 134 Table 41: Cargo airlines and routes in the Baltic Sea Region 136 Table 42: Public Service Obligations routes in the Baltic Sea Region 146 Table 43: General view of regional airports with regard to marketing 175 Table 44: General view of regional airports with regard to logistics platforms and services
13 List of Abbreviations ACI Airports Council International AWB Air Waybill BSR Baltic Sea Region according to Baltic Sea Region area CMR Convention relative au contrat de transport international de Marchandise par Route (Convention on the Contract for the International Carriage of Goods by Road) EC European Community, formed after ratification of the Maastricht Treaty of 1992 EEC European Economic Community, formed after ratification of the Rome Treaty of 1957 EU European Union, formed after ratification of the Lisbon Treaty of 2009 IATA International Air Transport Association ICAO International Civil Aviation Organisation IMF International Monetary Fund KS-RA EN Illustrated Glossary for Transport Statistics, 4th ed., EURO- STAT, 2009 NNSCRB National Statistic Committee of Republic of Belarus PSO Public Service Obligations RFFSSS Russian Federation Federal State Statistic Service RFS Road Feeder Service SGP Stability and Growth Pact in all 27 EU Member States having roots in the Treaty on the functioning of the European Union Article 121 and 126 UNML Unrestricted Normal Maximum Likelihood estimation, an econo metric method of function parameter estimation assuming hetero scedastic (non-constant) variance WB the World Bank is an international financial institution that provides loans to developing countries for capital programs 11
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15 Acknowledgment The handbook in hand represents a compilation of studies and reports contributing to the research on air cargo analysis and development in Europe, especially in the Baltic Sea Region. Studies and research were carried out within the frame of the EU cofunded INTERREG IV B projects Baltic Bird and Baltic.AirCargo.Net. We would like to express our gratitude to the project partners and researches from the countries of the Baltic Sea Region, who have worked together with us during the life of the EU-funded projects and contributed to better understanding of air cargo market development in the Baltic Sea Region through their studies, reports and discussions during the project-based meetings. Reports and studies, which evolved during the project life significantly support exploration of development patterns in the air cargo market and underpin better preparation of the regions across the Baltic Sea to respond to the market challenges in the future. Our thankfulness also goes to the Baltic Sea Region Programme and the respective development funds for the financial project support and opportunity to contribute to the more efficient European research area. Anatoli Beifert, Laima Gerlitz and Gunnar Prause 13
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17 Preface Current performance and future prospects of regional airports are subject to a bundle of social, political, economic and technological factors. In fact, air transport sector and its development increasingly depends on changing role of means of cargo transport, global and regional economic and trade tendencies, increasing fuel prices, role of trade partnerships overseas, nationally and regionally, allocation and reallocation of different resources and a series of other indicators residing in global, national and regional political, economic and technological macro-, meso- and micro dimensions. Regional airports have enjoyed weaker performance and are subject to stronger competition in the regional, national and international transport system. Nevertheless, due to increasing globalisation and trade it is likely that passenger flows and cargo volumes will follow a paradigm of increase. Consequently, regional airports will be ineligible to assist the national airports and enable transport and handling of increased cargo flows in order to correspond to the growing demand. Indeed, regional airports bear a potential for servicing the air cargo market needs on macro-regional, national and regional scale. In this, they are also capable of accelerating regional development and safeguard better economic performance. Peripheral Baltic Sea regions have been characterised by depopulation and weak socio-economic conditions. These trends are contrary to the EU Strategy for the Baltic Sea Region (BSR), VASAB and the integrated territorial development of the EU (see Art. 3 (2c) of the Council Regulation (EC) No. 1083/2006 and Art. 6 (2) of Regulation (EC) No 1080/2006). Although train and ferry connections exist, only airside quality accessibility is the key to change the current situation and to bring employers, investors and market demands to the remote regions. Being aware of the interrelation between socio economic development and accessibility, 21 regional authorities, airports, economic development agencies and transport institutes from eight Baltic countries incl. Norway as well as five international airlines have established a transnational partnership to work on efficient, effective and viable air transport connections for peripheral regions to improve airside accessibility as well as regional competitiveness (more job opportunities and growing economic prosperity) of peripheral Baltic Sea regions in an economic and sustainable way the Baltic Bird project, an INTERREG IV B project, part-financed by the European Regional Development Fund and the European Neighbourhood and Partnership Instrument within the frame of the Baltic Sea Region Programme Baltic Bird Improved Accessibility of the Baltic Sea Region by Air Transport was implemented by the partnership along the Baltic Sea Region from March 2012 till June The Lead Partner of the project is the Ministry of Economics and European Affairs of the Region Brandenburg (Germany). Hochschule Wismar, University of Applied Sciences (Germany) has participated in project as the project partner and the 15
18 The Project Team Lead Partner of the INTERREG IV B project Baltic.AirCargo.Net Improvement of the Air Cargo Transport Sector by Service Oriented ICT-methods and Processing Logistic Network, also funded by the European Regional Development Fund and the European Neighbourhood and Partnership Instrument within the frame of the Baltic Sea Region Programme The project was implemented from September 2010 until September Due to its experience in the air cargo sector on regional level gained during the Baltic.AirCargo.Net project implementation, Wismar University of Applied Sciences contributed to the Baltic Bird project to achieve stronger impact on establishing and embedding bundled cargo and passenger market activities and establishing new flight connections at regional airports across the Baltic Sea Region. The general aims of Baltic Bird are to improve airside accessibility of the peripheral Baltic Sea Region (BSR) and intermodal interconnectivity to increase socio-economic cohesion as well as to strengthen economic growth, and ecological sustainability in those regions. Through transnational development and implementation of new routes and flight connections competitiveness, and economic potentials of peripheral BSR will be realised as evidenced and measurable by GDP growth and the numbers of additional jobs. The large and experienced partnership aims at establishing new flight connections to peripheral areas by a transnationally developed and applied specific set of instruments, such as: Air Transport Market Analysis, Airport Marketing Concept, Public Service Obligations Manual, Tourism Destination Development Check List. Based on a best practice approach, those instruments shall be jointly developed and implemented during the project execution. The Baltic Bird partnership has also analysed how to reduce extensive detours flights via Oslo and Stockholm to the benefit of less fuel consuming direct flights, connecting locations in the northern part of Norway, Sweden and Finland while reducing CO 2 footprint. A joint policy framework paper has been developed and submitted to the DG Region/ DG MOVE proposing ideas for improvement in EU regional policy for peripheral BSR. By this cluster approach up to 40 partners from different INTERREG regions can actively participate in EU policy on regional development and accessibility. Baltic Bird intends not only to achieve sub-objectives during project implementation, but also afterwards because the project is seen as the start of a life-process of all actions (test ground but also implementing ground). Hochschule Wismar, University of Applied Science as the Lead Partner of the Baltic.AirCargo.Net project acted within the Baltic Bird project as an interface between both projects in order to coordinate and disseminate common activities across the Baltic Sea Region regarding the fields of interest, i.e. PAX or air cargo development. As a result, the Baltic.AirCargo.Net project outputs, particularly, analyses and outlooks 16
19 Preface for the Baltic Sea Region air cargo market development and implementation of measures and business actions for the air cargo market development yield synergy effects and value added in linking and expanding of running activities as well as underpinning positive implications and results sustainability of both INTERREG IV B projects of the Baltic Sea Region Programme Baltic.AirCargo.Net Improvement of the Air Cargo Transport Sector by Service Oriented ICT-methods and Processing Logistic Network represents a transnational initiative INTREREG IV B project, part-financed by the European Regional Development Fund and the European Neighbourhood and Partnership Instrument within the frame of the Baltic Sea Region Programme The core idea of the EU co-funded project Baltic.AirCargo.Net under the Baltic Sea Region Programme draws on the EU Strategy for the Baltic Sea Region and the objectives of the Joint Position Paper (JPP) on the EU Strategy for the BSR, i.e. better use of existing transport infrastructure, better connecting transnational and regional networks, paying more attention to specific elements of BSR transport system such as air and ferry transport and ports. The project correlates also with the Gdansk Declaration, which named main common problems concerning accessibility (necessity of creation a well working transport network to enable the connectivity within and outside the BSR, conception of intermodal logistic chain as a particular challenge for the region). By durable promotion of transport and ICT measures, Baltic.AirCargo. Net is also in a line with the VASAB Key Theme 3, as well as with statements of the Lisbon Strategy, i.e. fostering sustainable development, enhancing dynamic, knowledge-based economy and development of an information society. The Baltic Sea Region should become an accessible and attractive place with improved internal and external transport links. The project addresses three types of challenges structural, informational ICT challenges and political ones. On the one hand, regional airports act isolated without a clear picture of current situation on the international air cargo market and its future perspectives. Especially in the times of economic slowdown, the pace of change in the transport sector is increasing. Transport issues are especially important for the BSR, since the distances internally and to the rest of Europe are very long and the conditions for traffic are difficult. In the total market of logistic services air cargo transport has very low volume, but a high revenue yield part. Air cargo market had been expanding in Europe and the BSR, however, not so rapidly as passenger air transport. Acting isolated, regional airports in a rule do not have a clear picture of international air cargo market and its future perspectives. In current economic realities, when regional industrial landscape is changing rapidly, conventional transport services and corridors are not able to fulfill new needs of logistics. Fast transports enabled by air cargo are needed to support this new development. On the other hand, absence of the common ICT infrastructure prevents growth of air cargo flights in the regional airports and 17
20 The Project Team causes a stagnant economic, airport and hinterland development. Fragmented information traffic of the air cargo flow increases the number of not fully utilised or empty cargo flights that causes also unnecessary energy consumption, land use and environmental pollution. Finally, air cargo process players act isolated. Each region (airport & hinterland) has its own strategies, recourses, infrastructure, state of knowledge, economic and boundary conditions, and the cooperation between regional authorities with airports lack behind possibilities. The main objective of the project is to foster better connecting of regional airports in the Baltic Sea Region in the air cargo sector through the use of service-oriented ICT methods and to strengthen networking capabilities of regional airports and their involvement in the global logistics networks. This is particularly important for more remote regions of the Baltic Sea, which are not located at major transport hubs and transport corridors. Specifically, the project aims at providing airport regions complex measures that accommodate the demand for air transport in an optimal way that attains more sustainable air cargo development, whilst maximising economic benefits; increasing capacity of regional airports by improving usability, functionality and accessibility of the ICT network in the air cargo sector and increasing interoperability of political and content transport related networks, through exploring and integrating of the air cargo issues in agenda of common transport strategy of the BSR including political collaboration among regional airports and airfreight players. Project partners from Germany, Estonia, Latvia, Lithuania, Poland, Finland, Sweden, United Kingdom and Belarus are aiming at outlining future perspectives for the air cargo in the Baltic Sea and supporting smaller regional airports in developing their capacities. Since air cargo issues had been neither properly investigated in already finished projects nor have been included in the running logistic projects, Baltic.AirCargo.Net will secure relevance of the project activities with transport development strategies through cooperation with transport related initiatives on regional, Pan-Baltic and European level. This handbook is a collection of final project outputs produced by the project partners and includes main results, outputs and outcomes achieved during the project life, which want to be shared with the broader scientific community interested in the problems addressed. The handbook is a research endeavour in the light of the changing global and regional setting, which, in turn, causes shifting in respective social and economic structures. It aims at showcasing potential development roadmap for regional airports. It discusses the role of the air cargo for regional airports and regional economic development and draws performance and competitiveness potentials for the air cargo forwarding and handling sector. The Project Team Wismar, August
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