Category: Freight Forwarding

Within the global food supply chain, seafood logistics are among the most compromised, due to the widespread misuse of labels and direct seafood fraud. Marine conservation non-profit Oceana published a report on the extent of seafood fraud within North America. Its research showed that the U.S. was particularly vulnerable, as 90% of all the country’s seafood is imported – often from Southeast Asia. 

Unisot, a Norwegian blockchain-based company, is working to bring visibility into global seafood supply chains. Unisot’s platform is powered by blockchain and provides all parties within the network a ‘universal source of truth’ to the end-to-end movement of shipment – from origin to the end customer. 

“We have technology like electronic data interchange (EDI) and email in use right now, but they are old and inefficient technologies. This results in companies not exchanging enough information with each other,” said Stephan Nilsson, the co-founder and CEO of Unisot. “Companies collect tons of data and store them in their data warehouses. They only use it internally, creating closed data silos inside their organizations. That’s a big problem, and we are tackling that.”

Trust is a deciding factor in data exchange, which the technology of blockchain can provide via its secure and decentralized ledger system. Nilsson explained that Unisot realized early that supply chains could benefit tremendously by adopting blockchain across their ecosystems.  

Due to its Norwegian roots, Unisot chose the seafood supply chain to pilot its blockchain technology, as the fishing industry is one of the largest contributors to Norwegian exports. Unisot created the Seafood Chain, which is a vertical built over its blockchain platform. The company is currently working with two pilot customers in Norway – one being a fish producer and the other a seafood distribution business. 

“By working with these two customers, we can cover the whole seafood supply chain – right from fish eggs to breeding and then the distribution that goes all the way to restaurants and end consumers,” said Nilsson. 

He contends that the COVID-19 situation has exacerbated the need for implementing such technology within supply chains, as they depend heavily on a human workforce to run logistics operations. 

“When you have people staying at home due to the pandemic, it disrupts the supply chain. Automating simple things such as order and delivery messages can help save a lot of time,” said Nilsson. “We’ve built the blockchain data interchange (BDI) that is just like EDI, but with blockchain as the communication layer. Instead of going via third parties and EDI providers, we do it peer-to-peer via the blockchain and have a secure, encrypted and cost-efficient network.”

The end-to-end visibility into supply chains will mean complete provenance tracking for end consumers. Nilsson explained that consumers would only have to scan a code on the seafood product they buy at the market to get details on the type of fish, the fishing company, fishing location, the time and place of its processing, and the time to reach the supermarket shelf. 

The transparency also allows seafood producers to seek feedback from end consumers directly. Unisot has developed a feedback process that works similarly to that of Uber or Airbnb, in which consumers can leave a rating between one to five on the product they consume. This rating would reach the producers, helping them improve their seafood quality based on real-time feedback.

With data stored within an encrypted and secure network, companies can now start sharing information with businesses of their choosing. Companies can also monetize data, with critical data put behind a paywall and charged for according to its market need. 

“Our customers only pay for what they use and do not need any understanding of blockchain to work on our platform,” said Nilsson. “Most blockchain companies only provide APIs for companies to build integrations, making it very complex and time-intensive. We mitigate that, making it very easy and low cost for companies to start using a blockchain system.”

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Global freight forwarder Kuehne + Nagel Group (OTCMKTS: KHNGY) used its “agile structure, rigorous cost management and high-quality service offerings” to counter potentially devastating financial impacts from the coronavirus pandemic during the first half of the year, said CEO Detlef Trefzger in a statement on Tuesday.

The Swiss company recorded a first-half, pretax profit of CHF 419 million ($449 million), down 18% from the same period last year.

“We took the right measures early on and successfully managed Kuehne + Nagel under these difficult conditions,” Trefzger said.

Kuehne + Nagel breaks down its logistics business across four segments: ocean, air, road and contract.

Turbulent seas

In its ocean transport segment, the company handled 1.1 million twenty-foot equivalent units (TEUs) of containerized freight during the second quarter of 2020, an 11.7% drop compared to the same period last year. This resulted in a second, pretax profit of CHF 88 million ($94 million)for the segment, down 29% compared to the same period in 2019.

Kuehne + Nagel said its first-half, pretax profit for the ocean transport segment was CHF 167 million ($179 million), down about 29% compared to the same period last year.

The company said it gained some traction in container traffic through pharmaceutical, refrigerated and e-commerce cargoes, but this volume was not enough to offset the “significant decline in the high-yielding SME customer portfolio.”

The forwarder’s second-quarter pretax profit from airfreight registered at CHF 110 million ($118 million), up 17% compared to the same period last year. It handled about 315,000 tons of airfreight during the second quarter, down 22% from the same period in 2019.

Air traffic control

Kuehne + Nagel attributed its second-quarter airfreight profit to the high demand for goods to fight the coronavirus pandemic, which required the purchase of all-cargo charters and space on certain passenger-to-cargo flights.

“With the gradual resumption of passenger services since June, a slight normalization of the general market conditions is visible,” the company said.

The company’s second-quarter success in airfreight generated a 4% increase in pretax profit for CHF 181 million ($194 million), compared to CHF 174 million ($186 million) for the first half of 2019.

Over the road

Between April and May, Kuehne + Nagel said it experienced a “significant decline” in its over-the-road business in Europe and North America during the second quarter, but since June has seen demand from European shippers increase to pre-COVID-19 levels.

“In North America, demand for all product segments — with the exception of pharma and e-commerce — was significantly lower than in the previous year,” the company said.

Road logistics services for the second quarter generated CHF 9 million ($9.6 million) in pretax profit, down 57% from the same period last year, with a first-half pretax profit of CHF 26 million ($28 million), down 42% compared to the first half of 2019.

Contract logistics

Kuehne + Nagel sustained a second-quarter pretax profit within its contract logistics segment of CHF 28 million ($30 million), down only 9.7% against the same period last year.

The company said a more significant reduction in demand for contract logistics services was “mitigated by stringent cost management.”

Contract logistics accounted for CHF 26 million ($28 million) for the first half of the year, down 42% compared to the same period in 2019.

COVID uncertainty

Kuehne + Nagel, which has more than 80,600 employees worldwide, said its goal is to ensure continuity of its business operations for the remainder of the year, including monitoring the business results of its recent acquisitions.

“We expect the second half of the year to continue to be marked by major uncertainties,” Trefzger said.

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Schiphol Airport in Amsterdam witnessed a nearly 50% rise in freight flights for the first half of the year, but this traffic was not enough to counter the dramatic drop in cargo transported in the bellies of passenger planes grounded by coronavirus travel restrictions.

Despite a 12.4% increase in all-cargo volume to 463,679 tons, the Amsterdam airport said Monday that cargo throughput had fallen 14.5% because passenger traffic virtually disappeared in March when COVID-19 surged in Europe. The number of passenger flights with lower-deck cargo dropped 51.6% compared to the first six months of 2019, wiping out 46% of passenger cargo.

Inbound cargo volumes fell 11.5% to 341,130 tons, and outbound cargo volumes fell 17.6% to 314,812 tons, the Dutch airport authority said on Monday.

Schiphol was the fourth-largest airport for cargo in Europe during 2019, according to Airports Council International.

Business to all regions was impacted by the coronavirus outbreak. North American airfreight was down about 17% in both directions.

Airport officials are not sure how Schiphol’s cargo prospects will change during the second half of the year with the COVID-19 pandemic affecting overseas markets differently.

Shanghai remained Schiphol’s single largest cargo destination during the six-month period.

“The COVID-19 pandemic has also led to a shift in cargo flows and some usually high-volume verticals have decreased, such as the import and export of flowers,” said Bart Pouwels, the airport authority’s head of cargo.

Airport officials say they are seeing passenger flights increase as Europe begins to reopen its borders, which means more cargo opportunities for shippers.

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In the last-mile segment of logistics, delivery route planning and schedule optimization are predominantly human-driven tasks. Organizing workforce and determining delivery routes of the day is an exhaustive process, which can negatively impact bottom lines if handled inefficiently.

OptimoRoute, a route planning and schedule optimization platform, bridges this gap by leveraging technology. “We help companies organize their mobile workforce, building routes and schedules for them to increase the number of deliveries or services performed with their existing workforce,” said Marin Saric, the CEO and co-founder of OptimoRoute. 

Saric explained that by reducing the unnecessary consumption of resources, companies can grow their revenue. Case studies of companies using OptimoRoute have shown them to increase activity by nearly 30% via intelligent management of schedules and reducing fuel expenses through dynamic route planning. 

“Logistics is not just happening in big warehouses and on trucks moving between cities,” said Saric. “Logistics is every time you call a plumber to your house. Logistics is a pharmacy trying to quickly organize medicine deliveries to homes during the pandemic. OptimoRoute pushes a product that provides the most advanced logistics planning possibilities into everyone’s hands.”

OptimoRoute currently has over 1,000 businesses using its platform, from small neighborhood businesses to large multinational corporations generating hundreds of millions of dollars in revenue every year. COVID-19 led to an explosion of interest in OptimoRoute, especially among last-mile food delivery businesses. Food delivery orders placed monthly with businesses using OptimoRoute rose 151% month-on-month in April, compared to 19% the month before. 

Saric called the last-mile route optimization issue a particularly complicated example of the “traveling salesman problem” where salesmen selling across several cities would have to find the shortest possible route to visit every city and return to their origin city. A major chunk of all routing-related technology currently in use today is several decades old. Saric contends they are inefficient and not adaptable to real-time changes in logistics needs.

Today, companies across a myriad of industries work with OptimoRoute to get their workforce schedules in order. “For example, the Southern Star Central Gas Pipeline runs pipelines that cross several U.S. states and lay thousands of miles. Over 300 people are maintaining it, and they are organized every day using OptimoRoute,” said Saric. “We are also used by a huge number of small business services, that do anything from pool services to meal-prep kit delivery services.”

The company raised $6.5 million in a Series A funding round earlier this year, led by Prelude Ventures and with participation from other Silicon Valley-based venture capital firms and angel investors. Saric explained that OptimoRoute was particular in raising investment from Silicon Valley, as the high standards set by investors from the region would help validate their technology prowess. 

“OptimoRoute allows companies to plan across large time scale horizons. We provide multi-day work schedule planning tools to businesses for as little as $100 per month. This is because of the fundamental breakthroughs that we’ve achieved over the years,” said Saric. “Our solution automates even the most detailed decisions that are usually left to a logistics manager today. Timely delivery percentages go up considerably, and companies save substantially on fuel.”

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The BiTA Symposium @HOME on June 10 saw speakers present blockchain use cases and possibilities across various verticals within the supply chain industry, elucidating ways to leverage blockchain to bring in more transparency and visibility into logistics operations. In a series of two digests, FreightWaves outlines key aspects of those talks individually. For the first part of the discussion, check here.

Specright empowers Salesforce blockchain customers to create trusted supply chains

Customer relationship management (CRM) software company Salesforce is currently working on a closed blockchain pilot program, initiated based on customer interest in cross-company collaboration. Dan Harrison, emerging technologies architect at Salesforce, explained that such collaboration is more important than ever, whether to simplify supply chains or to track the provenance of products.

“In Salesforce blockchain, we focus on a couple of things from a value perspective. It’s the ability to, in a few clicks, be able to deploy a network. We give our Salesforce admins the tools to manage their blockchain, exactly the same way they manage their current Salesforce projects,” said Harrison. “So now, you have a huge number of people that are able to create, deploy and manage a blockchain network.”

Harrison contended that for the blockchain network to be a success, it was important to gain widespread adoption, as that would bolster the network. Salesforce has built its blockchain network on the Hyperledger Sawtooth, but the company also encourages businesses to bring their own blockchain networks. The Salesforce blockchain sits inside the Customer 360 platform.  

Specright comes into the picture with its already existing blockchain network with a large number of businesses adopting it. Specright is pioneering “specification management,” which deals with managing the most granular details of products and their packaging. The company digitalizes these specifications and places them on a single source of truth via its blockchain network. Being a decentralized network, it equally allows all users to track changes as products move across multiple stakeholders. 

Interoperability innovations: Addressing the cross chain challenge

Dean Tribble, the CEO of Agoric, spoke about driver credential verification that uses a secure and immutable blockchain network. “A low-hanging fruit for blockchain in freight is the high-assurance chain of custody, which requires driver authentication,” he said. Such networks also help realize payment automation, as processes can be set to automatically issue payment out to intended recipients as and when freight custody changes hands. 

However, the issue with structuring such a system is that data is spread over several networks and they would need to be interoperable for seamless operations. Data privacy is another parameter that needs to be addressed, as companies would need to disclose private data for credential verification. 

Agoric is building a next-generation platform for smart contracts, for public, private and consortium chains alike. This allows millions of developers who are familiar with JavaScript to write smart contracts. 

Smart contracts are an arrangement between multiple parties that can be expressed in software code, where the behavior of the code enforces the terms of the contract. Such smart contracts, when built within a blockchain network, can realize integrity within computing. 

Interoperability between independently functioning computers becomes easy, as smart contracts provide high assurance across multiple machines, increasing trust across ecosystems. 

Using Routeique to ensure touchless collection in a post-COVID world

Mike Allen, CEO of Routeique, a cloud-based order and delivery management platform, spoke about the changes that can occur in the way records move through the supply chain in the post-COVID world. 

Though paper documents were already waning in popularity as a means of communication, the pandemic has forced companies to adopt digitalization faster. Allen explained that putting together a road map on what to do right now and planning for a couple of years into the future will help companies stay on track toward getting their processes digitalized. 

Allen spoke of how Routeique would be part of a larger ecosystem and of the need for accessing data, ingesting and broadcasting it to all parties that need it — securely via a blockchain network. “It is about making sure the data we’re ingesting is making the algorithms smarter and trustworthy,” he said. 

Today, blockchain ecosystems are about having a descriptive model that shows stakeholders the current state of the supply chain, giving an accurate picture of what is happening. However, Allen explained the need for switching to prescriptive models that can help predict bottlenecks within the ecosystem before they occur. 

“That is where things are headed with smart contracts within blockchain networks. It’s about where we can get to, beyond just reporting and analytics. It is about actually improving the bottom line using those metrics, as opposed to just reporting on them,” said Allen. 

Delivering supply chain transparency using a turnkey, configurable blockchain platform

Sergei Beliaev, the CSO of DLT Labs, a blockchain-based distributed data management platform, spoke about how the company established a single trusted version of truth that is truly shared between participants in real time. “If there are no multiple views of the world, there is nothing to reconcile,” he said.

DLT Labs has partnered with Walmart Canada to create a blockchain solution for the latter’s supply chain to improve efficiency, reduce costs and increase control over operations. Pete Gowanlock, vice president of freight at DLT Labs, explained how a single version of the truth would reduce the number of steps in a process from 11 to five. 

“A freight invoice is complex. In our scenario, we have one invoice per shipment. Each contains a lot of information with many data elements associated with it. The invoice is the first step in the process. The Internet of Things (IoT) data will be collected from this point forward. GPS tracking helps track shipment delivery. It can help find if there were wait times at the distribution center loading docks and if the shipment incurred any damage,” said Beliaev. 

The next step would be for companies to have an additional review of the transportation provider and other assets that are not necessarily tracked by GPS. Walmart as the shipper will have full visibility into all the information being added in real time. 

“Everything going through the smart contract process within the platform is being tracked. It is visible and is approved as you go through each step. So when the final invoice is submitted, there will be no reconciliation needed,” said Beliaev. 

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Virgin Atlantic Airways said an emergency funding package and plan to restructure operations will keep it afloat as it tries to withstand a steep loss in business stemming from the coronavirus pandemic.

The British carrier, which is scheduled to restart passenger operations on Monday, said its recapitalization effort is worth $1.5 billion. Private investors and existing creditors are contributing £1.2 billion ($1.35 billion) in financing, while the airline is implementing £280 million ($351 million) per year in cost savings and deferring £880 million ($1.1 billion) in Airbus aircraft deliveries over five years. 

Virgin Atlantic officials aren’t calling it bankruptcy, but it essentially is a court-supervised process that protects it from creditors while it reorganizes.

On the financing front, founder Richard Branson’s Virgin Group (NYSE: SPCE), which has many travel sector holdings, is investing £200 million ($251 million), with an additional £400 million ($501 million) provided through shareholder deferrals and waivers. U.S. investment firm David Kempner Capital Management is providing £170 million ($213 million) in secured loans, and creditors will defer more than $564 million in scheduled payments.

Virgin Atlantic has struggled to reach profitability in recent years but was nearing break even before the coronavirus hit and forced airlines to shut down most operations. Delta Air Lines (NYSE: DAL) owns a 49% stake in the company. Branson was set to sell one-third of Virgin to Air France-KLM before nixing the deal in December. 

Airlines in the U.K. have been forced to fend for themselves because the government has opted not to provide an industry-targeted bailout. The U.K.’s approach stands in marked contrast to the U.S. and Europe, where local governments have provided multibillion-dollar packages of grants, loans, loan guarantees, stock purchases and other financial support to airlines. Air France-KLM is receiving nearly $12 billion in aid structured through the French and Dutch governments, while Deutsche Lufthansa AG, Austrian Airlines and Swiss International Air Lines have also received government lifelines.

Each week brings more news about airlines seeking bankruptcy protection or waiting on the edge of their seat for governments to inject liquidity so they can plan future operations. 

Like the rest of the airline industry, Virgin has undergone a significant retrenchment in four months. It suspended passenger flying in April to save money and only expects to be at about 60% of capacity in the second half of the year compared to 2019. In May, Virgin eliminated 3,500 jobs. More than 80% of its workforce has received support from the government’s emergency job protection program.

Virgin Atlantic also closed its base at London Gatwick Airport and consolidated leisure flying at London Heathrow and Manchester airports.

Virgin Atlantic said efficiency improvements will allow it to fly the same number of routes in 2022 as last year despite its smaller scale. The airline said it will retire seven Boeing 747 and four Airbus A330 aircraft by the first quarter of 2022, leaving it with a fleet of 37 twin-engine planes.

“The last six months have been the toughest we have faced in our 36-year history. We have taken painful measures, but we have accomplished what many thought impossible. The solvent recapitalization of Virgin Atlantic will ensure that we can continue to provide vital connectivity and competition to consumers and businesses in Britain and beyond,” CEO Shai Weiss said in a statement.

Auxiliary freighters

When travel flights and the belly space they provide dried up, Virgin set up an extensive cargo-only operation utilizing passenger planes for cargo charters and scheduled cargo routes. Between April and the end of June, Virgin said it operated more than 1,400 mini-freighter flights. Virgin’s cargo operation includes at least 10 Boeing 787-9 and four Airbus A350 widebody aircraft.

Delta Air Lines has been a Virgin joint-venture partner since 2014. In February, Air France-KLM, Delta and Virgin launched an expanded joint venture to give passengers more route choices and flexibility, helping Virgin compete with British Airways. The trilateral venture also created more opportunities for the airlines to expand their cargo business.

Before the pandemic devastated the airline industry, the new partnership offered more than 600,000 tons of annual capacity to shippers, representing 23% of total trans-Atlantic air cargo capacity.

Click here for more FreightWaves/American Shipper articles by Eric Kulisch.

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The annual AirCargo Conference scheduled for January 16-18 in New Orleans has been moved online due to the ongoing health and safety concerns surrounding the coronavirus pandemic.

Most in-person conferences have been cancelled this year, but some organizations are being proactive and pulling the plug on events for next year and going virtual instead. The cancellations are another sign that airlines will have difficulty attracting customers back in the coming year, especially coveted business travelers.

The AirCargo Conference, now in its 28^th year, was last held in January as the first outbreak of COVID-19 was spreading in Wuhan, China.

The conference attracts about 800 attendees and more than 100 exhibitors each year. It’s sponsored by the Airforwarders Association, Air and Expedited Motor Carriers Association and Airports Council International-North America.

“While this is the first time that we will not be holding an in-person conference, we look forward to hearing from our attendees, exhibitors and sponsors about their preferences for a virtual gathering,” Airforwarders Association Executive Director Brandon Fried told American Shipper/FreightWaves.

“Our skilled and experienced planning team has been arranging the popular AirCargo event for quite some time and looks forward to a successful virtual conference,” he added.

The three organizations produced a five-minute online survey for their members to help guide the format for the 2021 virtual event, which is expected to be held in February.

So far, the agenda includes pressing airfreight topics, such as the use of passenger freighters, the International Civil Aviation Organization’s 2021 account consignor change requirements, cross-border trade matters, industry workforce development, and possible industry impacts after the U.S. presidential election.

Organizers said the next in-person conference will be held in 2022 at the same time and location.

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Cargo has been a bright spot for Delta Air Lines (NYSE: DAL), but the revenue from this business is still part of a $3.9 billion pretax loss for the second quarter.

Like other airlines, Delta in March shifted some passenger planes to cargo-only flights to carry personal protective medical gear and other high-demand products overseas to key U.S. markets. It also has made use of passenger quarters on some planes to handle certain cargoes.

Despite the cargo-only flights, the airline reported cargo revenue of $108 million for the second quarter, a drop of 42% compared to the same period last year.

At one point, Delta was operating 124 cargo-only flights per week.

Delta, however, continues pulling out all the stops to steady its finances during the coronavirus-induced crisis besetting the aviation industry.

CEO Ed Bastian said it could be two years or longer for international airlines to see a financial recovery that includes the gradual return of business and leisure travel.

With only about 5%-10% of Delta’s passenger aircraft fleet flying during the summer months, shippers and their freight forwarders have limited options for airfreight transport.

Bastian said the heavy uptake of buyout packages and early retirements should stave off additional furloughs.

In addition to the $1.3 billion CARES Act funding from Congress and significant reduction in “cash burn,” Delta raised nearly $15.7 billion in capital during the quarter.

“By raising cash early and aggressively managing costs, we are prepared to navigate what will be a volatile revenue period while making decisions that position Delta well for the eventual recovery,” Delta Chief Financial Officer Paul Jacobson said in a statement.

However, Bastian told industry analysts on a Tuesday morning conference call that the airline’s “revenue environment remains challenging.”

Delta’s total second-quarter revenue reached about $1.5 billion, down 88% compared to the prior year, with total unit revenue down 21%.

Bastian said he expects Delta to be a nimble airline post-COVID-19. The airline is pressing ahead with retiring more than 100 planes, including Boeing 777 and 737-700 fleets and a portion of its B767-300ER and Airbus A320 fleets in 2020. Delta also canceled its purchase commitment for four A350 planes from troubled LATAM Airlines.

Bastian said the health and safety of employees and passengers is Delta’s top priority, and he made a pitch to coveted business travelers that services are “not only safer but better.”

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Medical technology company Siemens Healthineers (OTCMKTS: SMMNY) has entered a 10-year service agreement with DHL Supply Chain to oversee its product distribution in North America.

The distribution operation will be housed at a DHL Supply Chain-owned facility in Memphis, Tennessee. Siemens Healthineers is expected to occupy about 260,000 square feet of the 422,000-square-foot facility. It will include 105 employees.

Neither company disclosed financial terms of the service agreement.

The facility is not yet operational. It will start coming online later this year and is expected to be fully established by mid-2021, a Siemens Healthineers spokesman told American Shipper.

DHL Supply Chain expects to receive the company’s first inbound shipments at the Memphis facility in late October.

Siemens Healthineers manufactures a range of diagnostic technologies, including CT, MRI, and PET imaging systems, as well as medical equipment for immunochemistry and urinalysis testing.

Prior to entering this agreement, Siemens Healthineers said it worked with another third-party logistics services provider in North America, which it declined to name. The company spokesman said DHL Supply Chain was selected due to its ability to meet sophisticated logistics requirements.

The Memphis distribution center will incorporate DHL’s warehousing and inventory management system, which includes artificial intelligence and robotic storage and retrieval capabilities.

Siemens Healthineers will stock the distribution center with equipment from various domestic and international manufacturing sites.

When products are shipped from the Memphis facility, DHL will use its MySupplyChain application and GPS to track them to their destination. DHL said this will provide Siemens Healthineers engineers with “additional transparency, visibility and control over their orders and returns.”

“The Americas is an important growth market for Siemens Healthineers, and the quality, flexibility and speed of the service logistics platform we have established in the region helps us better serve our customers,” David Pacitti, the company’s president and head of the Americas, said in a statement.

DHL Supply Chain is part of the German courier giant Deutsche Post DHL Group (OTCMKTS: DPSGY).

Earlier this month, the company said it will invest an additional $70 million on top of $150 million that it had already committed last year to expanding its U.S. distribution network for the health care industry.

DHL Supply Chain currently operates 30 specialized facilities with more than 11 million square feet of temperature-controlled and certified infrastructure across the U.S.

The company will also expand its use of LocusBots to pick products in these facilities. DHL Supply Chain earlier this year announced plans to increase its LocusBot fleet to a thousand by the end of 2020.

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The European Union on Monday approved a 3.4 billion-euro ($3.8 billion) financial support package, backed by the Netherlands government, to help national champion KLM get through the coronavirus crisis.

The Dutch aid is on top of 7 billion euros ($7.9 billion) in funding granted earlier this year by France for sister carrier Air France.

Under the Dutch rescue program, KLM will receive a 2.4 billion-euro revolving credit facility from 11 banks. Loans are 90% guaranteed by the government and mature in five years. The Netherlands is also providing a direct loan of 1.1 billion euros, which is subordinate to the credit line and requires KLM to restructure for improved profitability and take steps to further reduce environmental impacts.

KLM is the second-largest private employer in the Netherlands, with more than 36,000 employees. It is also a large cargo carrier in its own right, but when combined with Air France the two rank in the top 10, based on freight-ton kilometers flown, according to the International Air Transport Association. Since the start of the pandemic, Air France-KLM (OTC US: AFRAF) has been very active moving essential supplies with passenger aircraft repurposed for cargo shipments. 

Without government assistance, KLM said it didn’t have the liquidity to ramp up operations as travel restrictions ease around the world. It suffered high operating losses when countries closed their borders to prevent COVID from spreading.

“KLM plays a key role for the Dutch economy in terms of employment and air connectivity. The crisis has hit the aviation sector particularly hard. This [financial aid] will provide KLM with the liquidity that it urgently needs to withstand the impact of the coronavirus outbreak,” EU competition chief Margrethe Vestager said in a statement.

Late last month Deutsche Lufthansa AG received a bailout from the German government. As a condition for that aid, the EU demanded the airline give up some slots at its Munich and Frankfurt hubs to competitors. Lufthansa subsidiaries Austrian Airlines and Swiss International Air Lines also received financial aid packages structured by their respective governments.

Many airlines are still hoping for government rescues as the industry suffers the worst economic crisis in its history. The International Air Transport Association estimates airlines will collectively lose $84 billion in 2020. Several airlines have filed for bankruptcy protection and some small local carriers have gone under.

Click here for more FreightWaves/American Shipper stories by Eric Kulisch (ekulisch@freightwaves.com)

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