News / Eastern Europe trade takes off as new air services generate excitement

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Cathay Cargo’s new bellyhold service from Munich to Hong Kong launches today, and has already got one customer excited. 

The four times a week service, on an A350-900, follows the reintroduction of its Rome service, while a Brussels service will start in August. 

But it is the Munich service which will open up new markets for one airfreight player, which has seized opportunities created by near-shoring, and has a business USP boosted by Brexit. 

“Linz, which is one of the key hubs in Austria, is only three hours’ drive from Munich,” said Matthew Taylor, business development director of GSSA 4RCargo.  

“So we’re going to get cargo from Austria via Munich, then go to Hong Kong and onwards.” 

4R Cargo has seized on a niche opportunity. Started in 2021 by two former IAG staff, the GSSA eschews traditional routes and cargo flows, concentrating on the burgeoning manufacturing centres of eastern Europe. Fair enough. But its next step is rarer, if not unique.

As IAG managers, the pair know that bellies are often not full – and space can be cheap. So 4R trucks its shipments to the UK to board westbound IAG flights at Heathrow. Its other airline partner, for eastbound, is Cathay Pacific – hence the excitement about the Munich flight. 

We’ll come to the efficiency of that – but first, says 4R, volumes are good. 

“We’ve seen a lot of near-shoring. Also, because of the situation in Ukraine, we’ve seen businesses in Russia closing and moving to Eastern Europe because of the sanctions,” said MD Pawel Kazmierczak. “So we thought we could try and do things a little bit differently to the classic competitors.

“We’ve started with direct shipper pick-ups, and we started trucking to the UK to take advantage of capacity there. The UK, in terms of passengers, is one of the biggest markets in Europe, but the UK doesn’t produce very much, so there is capacity,” added Mr Taylor. 

“We run several trucks – 15 to 20 – from East European countries every single week to the UK.” 

And 4R claims transit times are good. 

“It’s actually competitive with mainland European carriers, because most people screen at origin and truck to their hub. And then it has to get through Frankfurt or Paris or Amsterdam.  

“We pick it up direct from the facility, truck it straight overnight and it takes two days to get to London, where it gets screened overnight and flies out the next morning. 

“People in Europe have a hub mentality – a customer in Frankfurt wants a shipment on a plane tomorrow. But customers in our region are not used to having capacity on their doorstep, a two-day truck is not a concern to them. They’re offering their customer five-to-seven-day transit time door to door. 

“So, in terms of transit time, it makes London, which has always been seen as this tertiary option, competitive with what continental carriers can offer. And obviously the airlines love it – they fly empty quite often because nothing’s coming out of London. It’s so competitive and there’s not that much demand.” 

Mr Kazmierczak added that one “super express” shipment arrived in LA from Warsaw within 72 hours – including trucking to the UK. 

So how did Brexit help their business? 

4R launched about a year after the UK formally left the EU, when border confusion was still rife. 

“Some airlines were a little bit funny about getting stuff over to the UK because of Customs and so on,” said Mr Kazmierczak. “We just did it from day one. We found the right Customs method, and it worked perfectly. People were scared of the Channel.” 

The heavy usage of trucking, however, as well as airfreight, could put a dent in Scope 3 emissions for shippers. 

“We always use passenger flights,” explained Mr Taylor. “In Eastern Europe there is a huge amount of manufacturing and passenger capacity is not there, so other airlines have to put in a freighter flight just to serve the market. 

“We are accessing passenger flights which are already departing empty. Yes, there is some fuel burn, but you’re not paying to fly an aircraft into the manufacturing hubs of Eastern Europe, you’re accessing flying that is already happening.” 

IAG primarily takes the goods to North America, and 4R sometimes goes via IAG’s hub in Madrid and on to Latin America, bypassing Miami and the increasingly complex US. It uses Cathay’s services across Europe and the UK, where it has five passenger flights a day. 

And what are 4R’s main verticals?

“Automotive is huge, not just traditional automotive but on the electric vehicles as well. A lot of German companies, or what you traditionally consider German, are moving to Hungary and to Slovakia, such as VW and Daimler. Consumer healthcare is a really growing sector, especially in Austria, where there are also vaccines. And electronics is also a growing sector in the region.” 

China-plus one, a strategy that has paid off and is continuing, has been a real boost for business – “a big driver. European producers are using Poland, Slovakia, Hungary as their plus one partner”. 

Poland has one of the highest GDP growth forecasts for this year in Europe, at 3.3%, with a skilled, educated workforce that has attracted manufacturers away from Asia. In addition, it is the gateway to Ukraine, with businesses moving just across the border.

“The pair are joined at the hip now, for the future,” said Mr Kazmierczak. “I can’t see that reversing.”

But 4R is also eying the Baltics, where GDP forecasts aren’t quite so strong – with the exception of Lithuania. 

“In the second half of this year we are probably going to add Estonia, Lithuania, Latvia. We’ve got two big contracts; basically, we just need to set up our operations there and use the lanes from there into the UK to feed the network,” said Mr Taylor. 

But perhaps the biggest growth market – if and when the war ends – will be Ukraine itself.  

“Some customers are already going back into Ukraine. There is a huge amount of business there,” added Mr Taylor.