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State aid distorts competition say logistics leaders

HAMBURG: February 03, 2016. Lufthansa Cargo CEO Peter Gerber and his Hapag Lloyd counterpart Rolf Habben Jansen have criticized state-aid for Gulf airlines and Chinese shipping companies saying such subsidies distort competition and create an uneven playing field.

Hapag Lloyd Alfa RomeoGerber said the EU should make it difficult for Arab oil states to continuing supporting their airlines at current levels: “Without government subsidies, the three airlines there wouldn’t be able to survive given the dumping prices they are currently offering in the cargo field,” he said. “The Arab states are preparing themselves for the post-oil era, when it’s all gone.”

Both men think logistics is meant to be a replacement for disappearing oil revenues in the Gulf while continuing subsidies in China coupled with low freight rates are meant to safeguard that country’s exports.

The two CEOs also criticized the length of time it takes to build new infrastructure in Europe – saying the construction of roads, railways, ports or airports “can often drag on for over one or even two decades”. Gerber suggested politicians and the business community should cooperate better to speed up the process in order for the EU to remain competitive.

For Gerber, an example of this lack of cooperation is the ban on night flights at Frankfurt that has had a negative impact on his air cargo business, while for Habben Jansen the legal constraint on dredging the Elbe river is threatening to make the port of Hamburg less competitive: “Hamburg is competitive, but Hamburg should also stay competitive,” he declared.

Gerber said the most important challenge for Lufthansa Cargo in the near-term is to digitalize all transport documents and drive IT harmonization across the entire airfreight sector. With ocean freight much more advanced in paperless transactions, Habben Jansen noted Hapag-Lloyd is more focused on carrier alliances and improving yield management, adding: “Here, we could still learn something from our counterparts in airfreight.”

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