From 27-28SEP23, this year's Cargo Forum will take place at Budapest Airport. For the first time, two organizers are responsible for the event: Budapest Airport's Cargo Division, and
World of Freight, the leading platform in supply chain matters in Central and Eastern Europe.
CargoForwarder Global (CFG) spoke with René Droese (RD), Chief Development Officer of Budapest Airport, and the airport’s Cargo Chief, Jozsef Kossuth (JK), about the bullet points and aspirations they associate with the trade show. World of Freight (WOF) sent us a reply without naming the author.
CFG: Mr. Droese, according to the preview of the conference in Budapest, supply chains and logistics are under pressure in Central and Eastern Europe (CEE). What exactly causes this
pressure and how can it be mitigated?
RD: The last three years have been full of challenges for the logistics industry and international supply chains. Keywords here are COVID-19 and its impact on the transport industry, and extra logistics tasks like PPE or vaccine supplies. All this affected people, society, and the entire economy. Companies became insolvent or changed their strategy, exited markets, or entered new ones. Many people working for airports or airlines, or at ground handling companies, left their companies and turned their back on the aviation industry for good.
We were also faced with these challenges in BUD. But we managed to handle and solve these issues quite efficiently, together with our partners, and avoided the manpower capacity problem that impacted several airports in Europe. Besides COVID-19, there were also other unpleasant surprises like the Suez Canal blockage or the war in Ukraine. So, the rules of the game changed again. Besides the horrifying direct impact of the war, the sanctions imposed by the West led to other economic constraints, spurred inflation and energy prices, but also slowed down consumption and contracted logistics volumes.
Despite these many challenges, we decided to focus on the Central and Eastern European region (CEE), and its logistics in our upcoming conference. Having said this, we should not forget that the CEE countries are directly affected by the consequences of the war and the state of affairs it has brought about.
CFG: Fully understood, but isn’t Eastern Europe in a rather comfortable situation, given that many companies are considering scaling down their activities in China and investing instead in safe havens such as Vietnam, India, and Eastern European countries, spurring their economy and logistics?
RD: Yes; as any change, these movements also involve threats and risks, but also opportunities. CEE became an attractive area for FDI projects in the last 30 years in many industries, e.g.: automotive, electronics, IT, machinery, pharmaceutical, agriculture. If there is increasing demand to establish new businesses or scale up the production of existing ones, the CEE region is in the focus of many companies. New entrants benefit from a well-functioning infrastructure, skilled and well-educated workforce, favorable taxation, slowly increasing but still very competitive operating cost levels, and are offered governmental support. During the last 2 to 3 years in Hungary, we are witnessing increasing investments - a shift of investments coming in from the Far East, South Korea, and China, but also from the U.S. For many firms, long-term stability is becoming more important for their investment decisions. Projects are planned for 15-30 years; predictability is crucial in all aspects, from the workforce to the political environment.
This also benefits our catchment area and BUD airport, since economic growth spurs inbound and outbound flows of goods. Industrial producers are importing raw materials and parts, which are often transported by air over middle or longer distances. The same applies to finished goods.
CFG: Turning to you, Mr. Kossuth: “Developing the Air Cargo Industry Together" is a core topic listed on the agenda of the WOF & BUD Cargo Forum from 27-28SEP23 at Budapest Airport,
Terminal 1. You advocate a culture of collaboration to leverage collective knowledge, resources, and best practices, to overcome obstacles and drive positive changes. Have you got an example on
hand to illustrate this collaborative approach, enabling the air cargo industry to reach the next level?
JK: Collaboration in air freight is a bit like football coaching. It is easier to talk about it than to actually do it. We often say, in Hungary, that we are a nation of 10 million football coaches - which is the whole population of the country. An air freight community consists of hundreds of companies, handlers, airlines, GSAs, forwarders, brokers, service providers, authorities, etc., with different goals, interests, strategies, and expectations; sometimes even with companies that are each other’s competitors. Five years ago, we decided not to establish our own formal air cargo association at BUD; we rather joined the existing logistics associations and agreed to establish an Aviation Working Group with the Association of Hungarian Forwarders, which is the main platform of our community work.
CFG: And was the approach successful?
JK: We immediately received a positive message from the industry to our intent - especially from the freight forwarders’ side, the most important decision makers. Our job is to organize and lead the working group by focusing on local matters affecting the community. As an airport, we assist the community to jointly solve issues, listen to different suggestions or plans, and drive our cargo strategy forward. An illustrative example for a successful community approach is BUD’s IATA CEIV Pharma Certification in 2022. Without the commitment of ground handlers, forwarders, and truckers, this could not have been realized. The cooperation includes several fields of actions. This year, the Import Control System for Taxation and Customs clearance (ICS2), was implemented very smoothly at BUD. Preparations for shipments of a value below 22 euros were also seamlessly managed.
Basically, we favor a grass roots approach by listening to the members of the cargo community when discussing cargo matters such as infrastructural issues or even new air routes. This implies a lot of work for our team, but at the end it pays off as results have proved.
CFG: How does the CEE region, and particularly BUD Cargo, stay ahead of the curve in e-commerce? What is the contribution of integrators and the entire package delivery industry for your airport and the Hungarian economy as a whole? In other words, is it a must-have for BUD for reasons of prestige, or does e-commerce deliver real value?
JK: The development of e-commerce looks to be an unstoppable, long-term global trend which includes Central and Eastern Europe. In our cargo catchment area, it represents roughly 80 billion USD a year. Its annual commercial value grew from 10 million EUR to 3 billion EUR in 20 years by 2022 in Hungary alone. Recently we have seen a temporary decrease in e-commerce, in parallel with the general economic slowdown. E-commerce is an industry where logistics is under time pressure; it handles high-value goods and needs good tracking, so it will always be a typical air freight product which is here to stay.
BUD is developing into a gateway for e-commerce in our region. We have become a hub for Alibaba and Cainiao, but other service providers with giant customers like Shein also use our airport.
We have several direct and indirect air cargo transport options from Asia. Our customers are offered new and efficient ground infrastructure that is expandable if needed, and fast customs clearance, which is strict but very customer oriented. E-commerce delivers significant value for BUD; it helped to double our cargo volumes in 7 years to 194 000 tons in 2022, and contributes to handling 40% more volumes this year compared to 2019, thus bucking the contraction of the global cargo market.
CFG: World of Freight Group (WOF) has joined forces with Budapest Airport to jointly organize the upcoming WOF & BUD Cargo Forum 2023. What are the reasons for this
Tomas Kocer - WOF: It will be our fifth event and the first one where we are directly co-working with another organization. BUD Air Cargo Day is an established, successful trade show, and we are delighted to have it associated with our WOF brand. Our goal is to combine the best of both events. We believe that the Cargo Forum jointly run by WOF and BUD will attract an exciting mix of visitors, create plenty of business opportunities, and enable new contacts for all parties involved. Budapest Airport has been an essential partner of ours since our first event, and we are pleased that this cooperation has led to the upcoming joint event.
Our aim is to create business opportunities for companies in the logistics industry and the entire supply chain that have been already operating here, and for potential newcomers. In our publications we deliberately speak of a ‘New Europe’ where we organize our events. We use the term as characterization of the countries that are part of Central and Eastern Europe; it is not meant as a geographical or political definition.
CFG: Thank you all for the interview.
Accoring to agency Bloomberg, the Hungarian State is in talks with BUD majority owner AviAlliance to buy a majority stake in the airport valued at about EUR 4 billion. The Orban government intends to purchase 51% via a state controlled investment company while the remaining 49% is set to be acquired by another – undisclosed – airport operator. It’s not the first attempt of the government to regain control of BUD. An earlier bid put forward by a consortium led by the Hungarian government in 2021 collapsed due to the challenging economic environment the government was in at the time. The State’s financial situation has deteriorated ever since. HS
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