When one talks about Luxembourg, one hardly associates it with logistics; Luxembourg is, usually, about banking and financial services. However, the Grand Duchy of Luxembourg, as the tiny city-state is called, has recently been making moves to suggest that it is aggressively moving into the world’s cargo markets and is eyeing what is described in local cargo circles as the “incredible business potential” inherent in Asia. Luxembourg airport signed a memorandum of understanding with the Hong Kong Air Cargo Terminals Limited (HACTL) at the recent Transport/Logistics 2015 fair in Munich on the transportation of pharmaceutical products between the two cities.

The MOU aims to promote the shipping of so-called “time-and-temperature-sensitive” pharmaceutical products for human consumption, complying with the European Union and World Health Organization Good Distribution Practice certifications, as both sides stated at the Munich event.

In terms of the MOU, both Luxembourg airport and HACTL have reinforced their commitment to ensure the safe and secure movement of medicinal products between Hong Kong and Luxembourg, besides coordinating with local businesses to ensure that all the partners in the transport chain comply with the high-quality standards.

While emphasizing that the MOU is the first of its kind worldwide, the objective behind the agreement is not only to strengthen links between Asia and Europe, but also, particularly, between Luxembourg-Findel and Hong Kong airports.

In an interview with Asia Cargo News at the Munich show, Johan Vanneste, chief executive of Luxembourg Airport, described the move with HACTL as a “very interesting and unique one” for shippers of high-value and time-and-temperature-sensitive pharma and medicinal products, and averred that this would stimulate traffic between Hong Kong airport and Luxemburg.

Vanneste said that Luxembourg airport was “very well positioned” for pharmaceutical traffic. Two years ago, Luxair Cargo, Luxembourg’s cargo carrier, set up a warehouse where temperature-sensitive products could be kept. Explaining the structure of the warehouse, which entailed an investment of some €6 million (US$6.55 million), the airport’s chief executive said that it was made up of two zones, with one having an uninterrupted 15 to 25 degree temperature range and the other a range between 2 to 8 degrees.

The pharmaceutical sector is a “fast growing industry,” Vanneste said, adding that the airport had seen potential to tap another area of business and pointing out that all the players at the airport – from the forwarding/transporting companies such as Wallenborn and Arthur Welter through Luxair Cargo to Cargolux – have a “good distribution practice” (GDP) certification. This had also strengthened the airport’s ability to offer a door-to-door service from the manufacturer to the final customer. The GDP certification of the European Union regulates the freight handling of medicinal products.

Besides ensuring a cost-effective and safe transportation of the pharma cargo, both the signatories to the MOU agree to recruit companies in the pharmaceutical and medicinal sector as new customers in their respective territory.

Luxembourg’s Findel airport is striving to get a bigger slice of the global cargo pie: it offers services to a total of 65 passenger and 100 cargo destinations. Luxembourg airport clocked some 2.5 million passengers in 2014, up 12.3% over the previous year. The airport handled a total of 708,078 tonnes of cargo in 2014, 5.1% higher than 2013, to achieve its best result since 2008 (787,971 tonnes) and the onset of the economic crisis.

Outgoing tonnage accounts for 54% of the total and incoming for 46%. Cargolux posted its highest growth in 2014 (+9%), reaching a volume close to 600,000 tonnes.

Other cargo airlines that performed well included, in particular, Atlas Air (+2%), in cooperation with Panalpina, and Yangtze River Express (+2%).

The five top cargo airlines in terms of tonnage, in descending order, are: Cargolux, Atlas Air, China Airlines, Qatar Airways Cargo and Yangtze River Express. The airport, Vanneste said, is the fifth-largest cargo-handling airport in Europe, excepting express freight. The airport offers capacity of up to 1.2 million tonnes.

“We do not have any slot problems. Taxiing time is very short and our cargo centre offers services for specialty products. We have eight stands for B747-8 aircraft, and plan to add four more stands for this aircraft type. We’ll start with the expansion work by the end of this year and hope to complete it in a year’s time,” Vanneste said, highlighting the “ease of transportation” on the roads from the airport to other European cities, particularly in neighbouring France, Germany and Netherlands.

“After banking, Luxembourg is focussing on hi-tech logistics which is our second most important sector. Our government has recognized the significance of air trade and is strategically promoting it. If in the past we did not appear to be aggressively promoting the airport but now we are doing it with vigour,” the airport’s chief executive said.

Luxembourg airport’s MOU partner HACTL, the largest cargo operator at Hong Kong’s airport, provides services to a hundred airlines and their forwarders/customers. Indeed, Mark Whitehead, HACTL’s chief executive, who was also at the MOU signing ceremony in Munich with Vanneste, claimed that HACTL’s facility handled 1.815 million tonnes (including import-export, transshipment, etc.) in 2014, up 8.7% over the previous year.

HACTL was the first to get the GDP certification. The cargo operator is thus able to handle a so-called “golden route” for temperature-sensitive pharma products between any carrier’s aircraft and its storage facility. In an interview with Asia Cargo News, Whitehead averred that the agreement between Luxembourg airport and HACTL would enable both to create a GDP standard pharma trade lane between them, “a major step in HACTL’s strategy to build a global pharma hub.”

According to HACTL’s chief executive, the volume of pharma products handled by HACTL was around 16,000 tonnes in 2014. “This volume will further grow,” Whitehead predicted. “We handle all types of pharma products and the GDP has to meet special requirements. The pharma products arrive from Europe,” he said, making a point that handling of pharma products and perishable items differed because perishables rarely remained at the airport and were cleared immediately.

While HACTL will enhance its links with Europe through Luxembourg airport, the latter also stands to benefit from its growing connections with Asia in the east and North America in the west.

Indeed, even before the airport and HACTL signed the MOU at the Munich show, Luxembourg’s largest cargo carrier Cargolux announced that it was launching its twice weekly flights connecting the Chinese city of Zhengzhou and Chicago. The cooperation between Cargolux and the Henan Civil Aviation Development and Investment Company (HNCA) in Zhengzhou has acquired concrete contours with the launch of the new trans-pacific route. Cargolux will have two weekly flights between Zhengzhou and Chicago.

Each Tuesday and Friday, Cargolux’s B747-8 aircraft will depart from Zhengzhou at 1:00 am (local time) and land at 3:25 am in Chicago. The return flights will depart at 5:25 am in Chicago and land at 8:40 am in Zhengzhou. The Cargolux chief executive executive Dirk Reich has described the launch as a “milestone” in cooperation with China.

But there are also murmurs of unease amongst Luxembourg’s labour unions, which fear that the move could eventually lead to migration of jobs and the danger of “dumping wages,” particularly after Cargolux hinted last October about launching a new airline which would operate from China.

Nevertheless, the link between China and the US is inherent with potential for expansion. Luxembourg-based sources told Asia Cargo News that the carrier will further add two more flights between China and the US. The carrier is already flying seven times a week from Luxembourg to Zhengzhou and return.

Luxembourg airport’s moves to expand cargo traffic to Asia have not gone unnoticed by other airports in Central Europe, which are equally keen to increase their ties with the fastest-growing markets of Asia. Pundits at the Munich show were privately saying that other airports are also working towards forging similar partnership with Asian airports.

By Manik Mehta

International Correspondent | Munich