BALTIC STATES – Moving in on Europe’s new stars in the east

Market size share data:
Industry sources estimate that Poland supports a EUR500m-a-year total express market, including courier business worth EUR270m – EUR280m.
Stolica is a leading Polish express player, with an estimated 21% share of domestic traffic, operating Poland's biggest sorting hub with 160,000 packages and 120,000 document shipments daily.
Lithuania's international parcels market is expected to increase 30-40% by 2006.

Express delivery is making inroads into Poland and the Baltic States, with new partnerships, services and investment launched in 2004. Established in Poland, DHL, TNT and UPS have been joined by FedEx, which launched direct flights in August.
Industry sources estimate that Poland supports a t500m-a-year total express market, including courier business worth t270mt280m, and the market is expanding rapidly.

TNT Express Poland general manager Robert Mianowski estimates that TNT holds 36% of Poland's international express traffic.

He sees the country as a future hub serving the Baltic states, Belarus, Russia and Ukraine. "Having distribution centres is key to development, " Mianowski says. "We are looking at Poland replacing Germany as a hub.

"Amodern hub in Warsaw, opening in September next year, will develop a 4,000sq metre warehouse with 2,500sq metres of office space. Phase two will begin at 80% utilisation, adding 2,000sq metres of warehousing. This represents investment of t3.5mt4m." With direct daily flights into Tallinn, Riga and Vilnius, TNT reports volume growth of 10% in 2004 in the Baltic states, split between courier and cargo. "More customers value express transportation, " says Akso Talu, TNT general manager Baltic states.

New depots will open in Tallinn and Vilnius in January, with 2,000sq metres of warehousing and 1,000sq metres of offices, following expansion at TNT's main Latvian depot in September.

"In Estonia, in particular, we have seen a lot of Swedish and Finnish companies invest in hi-tech industries, " Talu says.

The Warsaw hub responds to courier and heavy cargo growth. "Germany dominates our traffic, but does not have the infrastructure to support significant volume growth, " Mianowski explains.

"Poland's capacity is small;

our Warsaw hub will increase to accommodate transit cargo." TNT aircraft serve Warsaw and Katowice, and it launched a third flight to Gdansk in 2003.

It operates daily road services to Germany, sending three 24 tonne trucks out of Warsaw. "We serve Katowice and Warsaw out of our European hub at Liege, while flights to Gdansk are connected to Malmö in Sweden, " Mianowski says.

FedEx's Target Express has formed a partnership with Polish carrier Stolica to expand into eastern Europe, including the Czech Republic, Slovakia, and Hungary.

FedEx launched four flights a week into Warsaw in 2004.

"We decided to get involved after Poland's accession to the EU, " says Michael Mühlberger, FedEx MD operations, central and eastern Europe. "We are responding to growing demand from the Far East and US for connections into central Europe." Stolica is a leading Polish express player, with an estimated 21% share of domestic traffic, operating Poland's biggest sorting hub with 160,000 packages and 120,000 document shipments daily. Stolica has joined NetExpress Europe, offering door-to-door express delivery of imports and exports across Europe.

In the summer, Schenker announced that its Polish subsidiary Spedpol would build a logistics centre near Katowice. Spedpol has bases near Warsaw and Poznan.

This year saw Schenker merge Spedpol into its global network. It is also investing in warehouses in Estonia and Latvia, says spokesman Francesco Motka.

"Astrong presence in the area gives Schenker an advantage for further expansion. . . in Russia and Ukraine, " Motka says. "The Baltic states and Poland are the new EU borders and will become a strategic logistics point for flows of goods to Russia and Ukraine. Russia is particularly interesting for Schenker." Aschaffenburg-based parcels specialist DPD, a subsidiary of GeoPost, has entered Lithuania after buying Vilnius player Baltic Logistic System.

Lithuania's international parcels market is expected to increase 30-40% by 2006.

GeoPost's Polish subsidiary Masterlink Express has opened a base at Lucmierz.

Meanwhile, Deutsche Post captured the major Polish express player Servisco this year and incorporated it into its DHLoperation, greatly boosting the integrator's presence in Poland.

"Customers want western communications and realtime tracking, " says Willem de Bruijn, president of Exel Poland. "There has been a wave of takeovers of local Polish freight companies by international players [which] bridge the gap between what local companies offer and what multinational companies need." Air freight is increasing in Poland, says Pawel Kazmierczak, spokesman for BAWorld Cargo Poland. "We increased our volumes by 60% and revenue by 53% this year in Poland, " he says.

"However, the Baltic states have been similar to the previous year, with a slight increase in volumes and revenues." This year, Tallinn International airport handled a record million passengers.

Estonia's growing demand for air freight is boosted by multinational investment in Estonian electronics production.

Estonian Maritime Agency has moved into air freight.

"This area is going well, " says director Allar Vaht. "We handled 90,000kg in 2003, 160,000kg in 2004 and will increase volumes in 2005.

Imports are bigger than exports, as Estonia was always an importing country.

"Its main air freight exports include electronics, ship spares, communications accessories and parts and textiles." In Poland, Lot Ground Services is upgrading cargo handling training for forwarders and agents, through courses at Warsaw Cargo Training Centre.

Training is based on Iata regulations, and conforms to industry standards.

Lufthansa flies to Krakow, Wroclaw, Warsaw, Katowice, Poznan and Gdansk, using B737s into industrial Warsaw and Katowice. For express players, the removal of customs barriers has boosted small haulage companies, offering speedy service at cutthroat prices, the company says.

"Poland is a rapidlygrowing market, and Lufthansa Cargo experienced rapid growth since this summer's EU expansion, " says cargo sales manager Poland Wojtek Ryglewicz.

"An increase in volumes means that we have seen a decrease in our intraEuropean freight volumes.

"At the same time, though, we have seen growth in intercontinental volumes, particularly between Poland and the US and Asia. These are good times for Poland, and more business is moving into the country.

Manufacturers from overseas are taking advantage of Poland's low labour costs to shift production there." In January, TNT will upgrade its road services to western Poland, introducing a linehaul service to reduce delivery times by half a day.

But the new competition may prove short-lived. "There is a chance to win back our intra-European market share too, when Germany introduces the Maut next year, " says Lufthansa's Ryglewicz. "That will raise the cost of trucking, ending the ridiculously low rates we cannot compete with.

"Competitors truck freight between Poland and markets such as Spain within 48 hours at a fraction of the cost of air freight."

Posted: 20/12/2004

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