BUSINESS

Air-Cargo Firms Shunning New Terminal

By Andrey Musatov

Staff Writer

Alexander Belenky / The St. Petersburg Times A forklift operator moving pallets at the still-idle Pulkovo Cargo Terminal on Monday, as carriers continue to use the old facilities.

While a new air-cargo terminal that has been in the works for four years opened its doors last Monday, squabbles between terminal management and air-freight carriers have led the latter to continue to work from the old facilities.

The project to build the Pulkovo Cargo Terminal, which is located in the area between the Pulkovo-1 and Pulkovo-2 airports and the Pulkovskoye highway, was initiated by Pulkovo Airlines and Germany's Lufthansa in 1998, with $8 million of the $12 million construction cost covered by a loan from the European Bank for Reconstruction and Development. The remainder of the cost was covered by Pulkovo and Lufthansa.

With an area of 8,000 square meters and the capacity to handle 30,000 tons of cargo per year, the new terminal had been billed as a big step forward from the existing facilities. One air-cargo industry official, who spoke on condition of anonymity, said that the old facilities, which are located within Pulkovo-1 and Pulkovo 2 themselves, are not heated and are unequipped to deal with frozen, dangerous or live cargo. But the source said that a big jump in the prices being charged to freight expediters and the airlines have led the airlines to question whether the new facility is worth it.

"I have serious concerns with relation to the prices being offered by the new terminal," the source said. "The terminal is using its monopoly position to try to charge rates two or three times higher than before."

As a result, the companies involved have so far refused to sign on to work out of the new facility.

The story behind the present stand-off began in the middle of December, when Pulkovo Airlines sent all of the cargo-transport departments of the airlines working out of St. Petersburg a letter signed by Nikolai Kolesov, the deputy general director of Pulkovo airlines and the chairperson of the administration board of the new cargo terminal. The company operating the new facility, Pulkovo Cargo Terminal, is 40-percent owned by Pulkovo Airlines, with another 40 percent of the company's shares owned by Lufthansa and the remaining 20 percent in the hands of the Lenstroyzhilservis construction firm. The letter informed them that, commencing on Feb. 15, all handling of cargo at the old warehouses would be transferred over to the new facility.

But a letter signed Jan. 22 by the cargo representatives of 11 foreign airlines - including British Airways, KLM, Lufthansa, Finnair, Air France and Austrian Airlines - informed the management of the new terminal that the airlines were not prepared to sign new deals.

The companies listed a number of grievances with the new site, including the lack of proper licensing for the terminal, a lack of clarity as to how the system at the new location would function and the level of the fees to be charged for using the facility.

The companies wrote that, if some kind of compromise could not be reached between the two sides, they would seek other methods of shipping cargo out of St. Petersburg.

The same letter was also sent to Pulkovo Cargo Terminal General Director Kristian Altmann.

A reply to the letter came from Boris Demchenko, Pulkovo Airlines' general director, at the end of January. Demchenko wrote that new contracts and tariffs for using the cargo terminal would be discussed with the carriers on an individual basis.

Then, in a letter dated Feb. 5, Pulkovo Cargo Terminal officials provided information explaining how the system at the new facility were to work, while also extending the deadline for moving to the new terminal to April 14.

Despite the request in the letter for airline representatives to sign agreements with Pulkovo Cargo Terminal quickly, they aren't in a rush to do so.

"We've been negotiating with the management of the new terminal, but haven't signed an agreement yet," said Dmitry Ivanov, cargo-sales representative for Dutch airline KLM in St. Petersburg. "We still have a number of questions where we have yet to reach an understanding. I'm worried most of all about the proposed prices for the handling and storage of cargo, as well as with levels of efficiency and quality control."

"We can't sign any agreements with our customers, as Pulkovo Cargo Terminal Pulkovo hasn't even shown us a published price list for their services and for handling procedures approved by customs authorities " said Natalia Fedorova, the CIS general director of Cargo Service Center, a firm which handles freight expedition for KLM Cargo.

"If the terms offered by the new terminal aren't satisfactory for the headquarters of the airlines, they will probably just decide to close their cargo operations in St. Petersburg and ship by an alternate route, through Moscow or Helsinki," Fedorova said. "But I'm hopeful that we will reach an agreement, as the management at Pulkovo Cargo Terminal has started to show a willingness to move toward our position."

Frank-Uwe Ungerer, the acting general director of Pulkovo Cargo Terminal, confirmed that the new prices are higher than those charged by the old Pulkovo warehouses, but he refused to discuss exact figures, saying that they will be agreed to on a company-by-company basis. He defended the hikes, however, saying that the new prices reflected the new facility and higher levels of service.

"It's not realistic to simply compare the prices at the old and new terminals," Ungerer said Monday. "The new terminal offers the transport companies new working conditions and the complete range of services needed by air-cargo firms."

But prices aren't the only things worrying the airlines. While Pulkovo Cargo Terminal officials are trumpeting the broader set of services, industry outsiders worry that this will drive other firms from the market.

"The new terminal wants to become a monopoly in the fields of the organization, sales and custom brokerage for cargo shipping," one source, who asked not to be named, said. "Using its monopoly position, the terminal will be able to push out other firms that are working in customs brokerage and expedition."

About 70 percent of international import and export cargo going through Pulkovo is carried by the top five foreign airlines companies Lufthansa, British Airways, KLM, Finnair and Air France.

The total volume of cargo moved through Pulkovo-1 and Pulkovo-2 in 2000 totaled about 3,860 tons and rose by about 70 tons in 2001. Officials at Pulkovo Cargo Terminal say they expect the growth rate of air-cargo tonnage to continue to increase at a rate of about 10 percent per year.

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