Gross Domestic Product (GDP), production development,

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1 The Baltic Maritime-Aviation Year on year the Baltic Sea Region experiences a substantial development of both sea and air transportation, which goes in line with the overall economic situation in the area. Gross Domestic Product (GDP), production development, and the Foreign Direct Investment index (FDI) are usually among the most important factors to improve transport. This year, however, it was also the growing level of wages and the falling rate of unemployment which stood for bigger trade exchange or travel intensification. The maritime market featured a burgeoning increase in the Baltic seaports turnover, with a total of 755m tons of cargo served in Again, containers are among the key factors that drive the ports growth. Hence, an extra 1m TEU was shipped on the Baltic, and a 16.3% upwards trend in container handling is one of the world s best results (see our previous ranking in BTJ 4/2007 for a comparison). The development in aviation traffic has gradually stabilized. The annual growth rate in the main airports last year exceeded 8.9%, and the low-cost carriers were responsible for the majority of this increase. Cheap flights and the Baltic communities growing welfare seem to keep the aviation market on the run (cross-baltic journeys are still mostly made by air transport), and even the rising fuel costs did not do too much harm to the industry last year. On December 21, the market welcomed the implementation of the Schengen zone in Estonia, Latvia, Lithuania and Poland, but these couple of days certainly could not change this year s ranking edition. However, a lack of the borders may have a visible impact on air passenger traffic in the future. Baltic economy The highest GDP growth rate was witnessed in Latvia, Lithuania and Russia (Table 1). The first two are relatively small countries, which makes rapid economic changes more likely to happen faster. Russia s 7.6% seems to be mostly related to the growing prices of energy resources, but 11.6% in the Kaliningrad district and 8.1% in the area of St. Petersbsurg (Leningrad Region) point the significance of transport and the Baltic Sea to the country s total performance. Even though a good rate of economic development was also achieved in Estonia and Poland, the overall GDP in the BSR countries jointly grew only by 3.1%. In comparison, China s real GDP increased by 11.4% last year 1. With its 6.5% GDP growth, Poland is the ranking leader with a 9.6% increase in industrial production, followed by Lithuania (+7.2%), Germany (+6.7%), and Estonia (+6.1%). Because of huge differences in the scale of particular economies, the outcomes in Poland and Germany are also most significant for the whole region. Poland is also the only South-Eastern Baltic country with a low level of inflation, which rose sharply in this part of the region last year (from 8.1% in Lithuania up to 14.1% in Latvia). The gross average wage in particular economies even better indicates the discrepancy between the former EU-15, or otherwise the North and Western parts of the Baltic, and its Eastern area (new EU members and Russia). The unemployment index marks Germany and Poland at the top two places with their unenviable double digit rate, and the rest of the countries - including Russia stay much closer to the natural unemployment level. Eastern countries usually feature a good FDI index, executed mainly by Asian or West European investors, and currently the biggest Table 1. Economy in the BSR countries in 2007 No. Country GDP Development/Regional/ (%) Growth of industrial production (%) Inflation/Regional/ (%) Gross average wage (monthly, EUR) Unemployment (%) 1 Denmark , Estonia Finland , Germany , Latvia Lithuania Poland Sweden , Russia Leningrad Region Kaliningrad Region Source: Baltic Rim Economies. No. 1, Internet: ( ) 2 USD 26 Baltic Transport Journal 4/2008

2 ranking 2008 investment markets are Russia and Poland. According to available estimates, the entire Russia s FDI achieved a level of USD 26.2bl. in 2006, and rose to USD 30bl. in The expected level for is USD 39bl. However, the Baltic regions of Russia finished the year at EUR 4.6bl. 4 only, similar to the level of the neighbouring three Baltic republics. A total of EUR 15.1 bl. was invested in Poland throughout the year. Foreign trade of the BSR countries The region s prosperity and economic development increased the level of consumption and social needs, especially in the South-Eastern Baltic countries. This influenced changes in the foreign trade structure, which has been slowly turning from volume to value-oriented cargo and from bulk to unitized cargo transport. The average growth in foreign trade value in the nine Baltic countries achieved a level of 7.4% last year (Table 2), but the value trend in particular countries was not homogenous. However, except for a tiny fall in Estonia and Denmark (around -2.5%), the rest of the countries noted an increase ranging from 6.5% in Sweden to even +13.1% in Lithuania and +21.6% in Latvia. The numbers may sound staggering, but both Latvia s and Lithuania s changes occurred at a low level of EUR 17 bl. and 30bl., respectively. At the same time, the real leading country was Germany, which trade grew by EUR 135bl. Table 2 shows only eight BSR countries belonging to the European Union, so it lacks Russia s performance. The estimated data provided in The World Factbook in US Dollars give Russian exports a value of USD 365bl., and imports of USD 260.4bl. in This equates to +33.5% in export and +58.9% in import. The export growth was driven by the intensification of Russian production and a rise in energy prices (oil, gas, coal) on the global market. On the other hand, development of the Russian economy, investments and escalating consumerism influenced the outcome of imports. Of course it is not only the trade exchange value, but also the volume that counts, and here we have observed very interesting outcomes too. For the first time in a number of years, the total trade volume in the Baltic EU members decreased by 1.6%, and the main reason was the slump in German imports (-13.6m tons). Even the huge increase in Polish imports (+10.5m tons) could not compensate for the total drop. In the case of export, only Sweden featured a positive trend. At the same time, the exchange Table 2. EU Baltic countries export and import of goods in 2007 (value) 5 Import Export Total bl. Euro Change bl. Euro Change bl. Euro Change Germany % % % Sweden % % % Poland % % % Denmark % % % Finland % % % Estonia % % % Lithuania % % % Latvia % % % Total % % % Table 3. External trade of the Baltic countries in 2007 (tons) 7 Import Export Total m tons Change m tons Change m tons Change Germany % % % Sweden % % % Finland % % % Poland % % % Denmark % % % Estonia % % % Lithuania % % % Latvia % % % Total BSR % % % 3 ( ) 4 Baltic Rim Economies. No. 1, 29 February Eurostat ( ) 6 ( ) 7 Eurostat ( ) 4/2008 Baltic Transport Journal 27

3 between Russia and the EU also decreased by 1.2% to 444.9m tons. Russian exports to the EU still constitute 95% of the country s total turnover, while imports from the EU are estimated on 24.1m tons of cargo only. A detailed analysis indicates that the average value of one ton of cargo is gradually increasing. The average value for total turnover (export + import) exceeds 9.2% up to 1,606 EUR/ton. The value of one exported ton of cargo was EUR 2,080 (+10.7%) and imported EUR 1,270 (+7.8%). An analysis not only predicts a further increase in the total value of foreign trade, but also a continuous change in the average unit value of traded goods. The modal split The use of particular transport modes is directly connected with the direction of foreign trade (main trading partners) or the structure of exchanged commodities. Apparently most of the trade contacts in the BSR have a landneighbouring nature. Thus, short distance cross-border routes are usually operated by land transport, with bulk cargo going by rail, and general cargo by road haulage. It is the main reason for the domination of road haulage in foreign trade services (52% of export and 47% of import). When it comes to cross Baltic Sea connections, they are mostly served by ro-ro shipping carrying road vehicles onboard. Maritime transport gains its position in case of extra EU trade relations (Figure 1), with 60.57% of the total BSR export and 42.67% of import. The majority of cargo transported by the Baltic Sea is bulk cargo. General cargo, susceptible to ro-ro traffic or containerization, constitutes about 42% of the total volume, where the main share are containers coming to the Baltic with the long distance overseas cargo. Similarly passenger traffic is mostly served by cars, which constitute 72.7% of the total share, and the second aviation takes as little as 8.6%. The following places are occupied by bus & coach and railway traffic. Sea transport has been traditionally classified as the underdog. It is only responsible for 0.6% of total passenger travels (Figure 2). To be precise, the comparison concerns only inner EU traffic, while e.g. aviation seems to gain importance on long, outer-eu relations. A detailed analysis of the air passenger traffic indicates that 767.1m people travelled by plane within the EU in 2006 (inner traffic only). Regional passenger traffic within the Baltic Sea countries accounted for 8.5% (65.2m people) of the EU market (Table 4). Additionally, about 100m passengers started or ended their journey in one of the BSR s airports. The most intensive domestic air market is Germany with an unrivalled 22,767,000 passengers last year. This is twice as much as all three Scandinavian countries (Sweden, Finland and Denmark) summed up together. Germany also leads the ranking among the busiest international relations, with a vast network of connections to Poland, Sweden, and Denmark. The total traffic of maritime passengers in the European Union was estimated at 190m people in 2005 (outwards relation). BSR travellers (people who started their journey in one of the BSR countries) accounted for 135m pax. The most important ferry market is Denmark, Sweden, and Germany, and the traffic directions (in/out) are almost perfectly balanced. MARITIME Baltic seaports As it has already been noticed, maritime transport is responsible for about half of the BSR countries extra EU foreign trade. Over 400 ports 8 of diverse kinds, types, and sizes operate along the Baltic coast line. All the nine countries finished the year with a slight growth in total regional turnover (+2.1%). A detailed analysis indicates a domination of Russian and Swedish harbours (market share of 19.8% and 19.4% respectively), with almost 150m tons of transshipped Figure 1. The modal split of the extra EU foreign trade of BSR countries in Figure 2. The modal split of European passenger transport in Source: Energy and Transport in figures Eurostat Source: Energy and Transport in figures Eurostat Statistical Analysis of the Baltic Maritime Traffic. VTT Technical Research Centre of Finland , p Baltic Transport Journal 4/2008

4 Table 4. Air passenger traffic between BSR countries in 2006 (1,000 pax) Denmark Germany Estonia Latvia Lithuania Poland Finland Sweden Total BSR Denmark Germany Estonia Latvia Lithuania Poland Finland Sweden Total BSR Source: Energy and Transport in figures Eurostat goods in both countries last year. The next positions are occupied by Finland (14.4%) and Denmark (12.9%), both with an outcome of about 100m tons. Meanwhile Denmark is among the three Baltic countries which experienced a decline in total seaport turnover, with the biggest negative trend experienced in Estonia (-10.1%), the abovementioned Denmark (-9.6%) and a minimal drop also in Poland (-0.4%). On the contrary, the best growth rate (+14.4%) was noticed in Lithuania, but transferring it to real cargo volumes, it is definitely Russia with its extra 13.1m tons which featured the biggest increase in Yet, the main kind of cargo here is mineral resources (oil and coal), whereas Sweden, the close second market player, comes with as much as 40% of general cargo in the country s total turnover. The strong market position of the particular countries is naturally connected with huge ports operations. An important issue is also the centralization of port services, and thus we have as many as 60 seaports functioning on the Swedish coast alone. The two Russian Baltic ports once again led the chart as the biggest ports in the region with the Port of Primorsk handling over 74m tons (a 12.5% increase in volume) and St. Petersburg finishing at 58m tons last year. It is worth indicating, that after a setback in turnover, a positive trend (+8.1%) was observed in this port. The most significant annual increase in total cargo turnover (2006/ 2007) took place in the Eastern part of the Baltic, with Gdynia (+19.9%), Table 5. Baltic seaports turnover by countries in No. Country thou. tons Annual change 1 Baltic Russia 148, % 2 Sweden 146, % 3 Finland 108, % 4 Denmark 97, % 5 Latvia 61, % 6 Poland 60, % 7 Baltic Germany 55, % 8 Estonia 44, % 9 Lithuania 31, % Total: BSR 754, % Klaipėda (+16.2%) Helsinki (+14.5%) and Kotka (+10.6%). To sum up, the cargo transshipment volume in the presented top 20 Baltic ports has increased by 4.3%, within one year. Furthermore, an analysis of the eight year period ( ) indicates a 72% turnover increase, however, the tempo has been slowing down. Liquids constitute about 66.3% of BSR s bulk cargo and 42.1% of the total turnover in the Baltic seaports. We can point out four main groups of products: crude oil, oil products, gas, and chemicals, with the majority of the market turnover (93.6%) coming from the Table 6. Total cargo turnover and annual change in the top 20 Baltic seaports in 2007 (thou. tons) No. Seaport Total cargo Annual change 1 Primorsk 74, % 2 St. Petersburg 58, % 3 Göteborg 39, % 4 Tallinn 36, % 5 Ventspils 31, % 6 Lübeck (LHG) 29, % 7 Klaipėda 27, % 8 Rostock 26, % 9 Riga 25, % 10 Gdańsk 19, % 11 Sköldvik 19, % 12 Szczecin-Świnoujście 18, % 13 Copenhagen/Malmö 18, % 14 Gdynia 17, % 15 Kaliningrad 15, % 16 Fredericia 15, % 17 Helsinki 13, % 18 Trelleborg 12, % 19 Aarhus 12, % 20 Kotka 10, % 4/2008 Baltic Transport Journal 29

5 Figure 3. The Baltic seaports turnover development (thou. tons) first two. The Port of Primorsk is a traditional market leader, with a systematic growth in liquid bulk transshipment, followed by the ports of Tallinn and Göteborg. As for now the Port of Sköldvik is responsible for the majority of gas shipping on the Baltic, but there are plans for new gas terminals (LNG) underway in the region, i.e. in Primorsk and Świnoujście. Dry cargo constitutes 33.7% of the overall bulk traffic on the Baltic and the main products here are coal, grain and ore. The dry bulk market leaders are Riga (15.5m tons), Szczecin Świnoujście (9.8m tons) and St. Petersburg (9.7m tons). The dry cargo market has also noticed significant changes with the biggest positive trends in St. Petersburg (+25%), Klaipėda (+19.2%) and Gdynia (+14.9%), and the most remarkable slowdown concerned Tallinn (-30.1%) and Gdańsk (-21.5%), mostly due to changes in the coal market. The boom in Russia s economy and the ever-growing container flow has once again let St. Petersburg lead the general cargo statistics. Lübeck comes in close as second, but here ro-ro traffic is the real engine of the port. The followers are Göteborg, Rostock, Trelleborg and Helsinki, all with their turnover over 10m tons yearly. Important annual changes in general cargo operations happened in Gdańsk (+18.9%), Gdynia (+17.3%) and Helsinki (+11.8%), with a dynamic rise both in ro-ro and containers. The entire region s container turnover of 7.5m TEU gradually improved Baltic importance in the global throughput. The Baltic seaports obtained a share of about 9.5% of the European and 1.6% of the global market. The average containerization growth in the Baltic exceeded 16.3% last year, but apparently these changes mostly occurred on a relatively low volume level. Three countries (Russia, Sweden and Finland) usually generate most of the region s container traffic. This is followed by the medium-sized Poland and Denmark. The Baltic leader is still St. Petersburg with an annual throughput of almost 1.7m TEU and a very good 17% improvement rate. The second place goes to Göteborg with a volume of over 840,000 TEU, as well as a rather low, but still positive development trend. The fast growth in Gdynia (+33.2%) and Kotka (+26.2%) helped them maintain a fairly safe position in the top four. On the other hand, it is the ports of Klaipėda (+38.8%) and Helsingborg (+37.3%) that welcomed the highest rise among the top 20. Over 30% more containers were handled in the little terminals at Szczecin-Świnoujście. The only port with a negative tendency was Gavle, but -0.1% might as well be seen as stabilization. According to the data presented in Table 8, the biggest container terminal Table 7. The top Baltic container seaports in 2007 No. Seaport TEU Annual change 1 St. Petersburg 1,697, % 2 Göteborg 840, % 3 Gdynia 614, % 4 Kotka 570, % 5 Aarhus 504, % 6 Helsinki 431, % 7 Klaipėda 321, % 8 Riga 211, % 9 Hamina 195, % 10 Copenhagen/Malmö 192, % 11 Helsingborg 188, % 12 Tallinn 180, % 13 Rauma 174, % 14 Kaliningrad 157, % 15 Lübeck 140, % 16 Gdańsk 96, % 17 Gavle 67, % 18 Szczecin-Świnoujście 56, % 19 Hanko 47, % 20 Stockholm 42, % Source: The Baltic Container Outlook Actia Consulting Baltic Transport Journal 4/2008

6 Figure 4. Baltic seaport container throughput by country in Source: The Baltic Container Outlook Actia Consulting is the First Container Terminal (FCT) in St. Petersburg, with its total turnover close to 1m TEU. However, FCT is responsible for only 56.5% of the port s total container traffic. Although the limited traffic development of 7.9% at FCT Table 8. The main maritime container terminals on the Baltic in 2007 No. Terminal TEU Annual change 1 First Container Terminal 959, % 2 Container Terminal Göteborg 840, % 3 Mussalo Harbour Kotka 570, % 4 5 Aarhus Container Terminal North/East BCT Baltic Container Terminal (Gdynia) 504, % 493, % 6 West Harbour Helsinki 431, % 7 Petrolesport 365, % 8 KTG Klaipėda Terminal Group, UAB 283, % 9 Moby Dick Ltd 217, % BCT Baltic Container Terminal (Riga) West Harbour Helsingborg HMT Hamina Multimodal Terminals 211, % 206, % 195, % 13 AS MCT Tallinn 180, % 14 Unit Cargo Port Rauma 174, % 15 Lübeck 140, % GCT Gdynia Container Terminal GTK Gdańsk Container Terminal GCT Gavle Container Terminal 116, % 91, % 90, % 19 Drobnica Port Szczecin 50, % 20 Ports of Stockholm Container Terminal 45, % influenced the whole port s results, it is supported by numerous other terminals: Petrolesport, Moby Dick, the Sea Port of St. Petersburg, Rusmarin Forwarding, Baltic Transportation Systems, Leningrad River Port and Transport, and the Timber Commercial Centre. Second on the list, the Port of Göteborg has only one location for container services (Container Terminal Göteborg), and the overall port s outcome is solely connected to CTG operations. Similar conditions are in Kotka, Aarhus, Helsinki and Klaipėda. The situation is very interesting in the neighbouring cities of Gdynia and Gdańsk, where recent investments are substantially changing the market structure. The Polish leader is still BCT Gdynia, and the second position is occupied by its closely located rival, GCT Gdynia. Both companies are owned by huge multinational operators with BCT being a part of ICTSI group and GCT belonging to Hutchison Port Holdings. The end of 2007 brought on the opening of the second container terminal in Gdańsk (DCT Gdańsk), and even though its traffic was limited only to 4,423 TEU last year, the annual capacity is estimated at 500,000. Maritime passenger traffic has evidently been caught in stagnation. Over 70m people were serviced in BSR seaports in 2007 but that means an annual growth of only 0.2%. The majority of clients travelled with regular ferry lines. Additionally, 2.3m tourists visited the Baltic seaports on cruising vessels (annual growth of 4.1%). According to Table 9, the passenger market is definitely Scandinavian with five places in the leading six. The two main passenger travel areas comprise of the Western (Germany-Sweden-Denmark) and the Eastern Baltic (Finland-Sweden-Estonia). The ranking leaders, Helsingborg and Helsingør, take their main advantage of the favourable location in the Øresund Strait, but their traffic practically stopped developing. This is quite contrary to the close by destination at Copenhagen/Malmö, where the traffic rose by over 27% during 12 months. Simultaneously, not all the Scandinavian ports did well last year. Göteborg, Ystad and Aarhus, all dropped a few percents during 2007, and the little port of Table 9. Passenger traffic and annual change in the top 20 Baltic seaports in 2007 No. Seaport Pax Annual change 1 Helsingborg 10,966,204 1,8% 2 Helsingør 10,896, % 3 Helsinki 8,511, % 4 Stockholm 8,112, % 5 Tallinn 6,514, % 6 Turku 3,056, % 7 Rostock 2,400, % 8 Göteborg 2,091, % 9 Ystad 1,878, % 10 Trelleborg 1,816, % 11 Aarhus 1,600, % 12 Copenhagen/Malmö 1,600, % 13 Gotlands hamnar 1,472, % 14 Stromstad 1,344, % 15 Nynäshamn 1,343, % 16 Kapellskär 1,184, % 17 Szczecin-Świnoujście 584, % 18 Gdynia 432, % 19 Karlskrona 431, % 20 Oskarhamn 391, % 4/2008 Baltic Transport Journal 31

7 Kapellskär (60 km north of Stockholm) experienced even a 14% downfall. Significant negative trends also touched major Polish destinations at Szczecin-Świnoujście and Gdynia. The contemporary ferry market is facing changes in the transport structure. Ferry passengers are travelling with their cars or trucks, while trips without cars are usually made by plane (low-cost carriers). Hence the ro-pax vessels with a limited passenger capacity are becoming more popular on the Baltic routes. On the other hand, ferry operators are developing tourist services on regular lines to boost demand for the passenger capacity onboard. The stagnant Baltic passenger traffic is now majorly dependant on cruising. Far from global conflicts and terrorist activity, economically and politically stable, the Baltic is an attractive cruising area, abundant with historical monuments and beautiful countryside. On the other hand, the touristic potential is limited to several destinations and dependant on unsure weather conditions. After the huge development in 2005 (+19.5%), the market stays stable. The most important Baltic cruise port remains Copenhagen with over 0.5 m tourists yearly. This is followed by a group of four other destinations St. Petersburg, Tallinn, Stockholm and Helsinki - ranging from 260,000 to 300,000 passengers per annum. However, these are not the best traffic growth centres in the region. Actually four out of the five biggest cruise ports on the Baltic (with the exception of the market leader) lost a few points in A tremendous step forward has been achieved in Riga (+60.3%), Skagen (+53.6%), Klaipėda (+47.4%) and Marienheim (+46.6%). The Baltic cruise seaports have mostly been visited by Americans (425,783 tourists), Brits (254,699), Germans (221,867) and Italians Table 10. Cruise tourists and annual change in the top Baltic seaports in No. Port Tourists Annual change 1 Copenhagen 502, % 2 St. Petersburg 299, % 3 Tallinn 288, % 4 Stockholm 281, % 5 Helsinki 259, % 6 Kiel 173, % 7 Rostock 115, % 8 Gdynia 89, % 9 Visby 81, % 10 Riga 65, % 11 Klaipėda 36, % 12 Aarhus 18, % 13 Rønne 13, % 14 Gdańsk 12, % 15 Göteborg 11, % 16 Helsingborg 7, % 17 Marienheim, % 18 Skagen 3, % 19 Karlskrona 3, % 20 Turku 2, % Table 11. Cruise ship calls and annual change in the main Baltic seaports in 2007 No. Seaport Cruise calls Annual change 1 Copenhagen 291 3,9% 2 St. Petersburg % 3 Tallinn % 4 Stockholm % 5 Helsinki % 6 Kiel % 7 Rostock % 8 Riga % 9 Gdynia % 10 Visby % 11 Klaipėda % 12 Gdańsk % 13 Rønne % 14 Marienheim % 15 Göteborg % (104,441). The total number of cruise calls at Baltic ports dropped by 2.5% down to 2,016. It looks like the average size of a cruise vessel or the load factor has increased. The Baltic shipping lines A complete research of irregular carriers - usually chartered for ad hoc bulk cargo shipments - is almost impossible. The most important bulk routes lead from Russia and the Baltic republics via the Danish Straits to destinations outside the region, and the level of bulk carriages can be driven out of the seaports turnover basis (see chapter: Baltic seaports). Let us then focus our shipping market analysis on regular connections, basically responsible for general cargo. Currently, there are over 200 regular shipping lines on the Baltic Sea. They can be divided into four main categories: container lines, ferry lines (cargo and passengers), cruise lines and traditional carriers (conventional ships), with the first two dominating the Baltic market. Today, 16 container lines operate on the Baltic with a total fleet capacity of 110,200 TEU, served by 145 vessels. In 2007 alone the total fleet grew up by 16 ships (+12.4%) and available capacity increased by 24.9%. At the same time, the average capacity of one ship increased from 658 TEU in 2006 to 760 TEU in There have also been important changes in shipping last year. The market leaders, Unifeeder and Team Lines, improved their positions. Some players disappeared and newcomers joined the game. Baltic Container Lines was bought by IMCL, Saimaa Lines stopped its activities and Samskip stepped back from the Baltic. Two operators have new brands due to a change in ownership. Russian FESCO took over the Dutch company ESF Euroservices and is presently known as FESCO ESF Ltd. Estonian TECO was bought by the Norwegian Tschudi Group and assumed the new name Tschudi Lines Baltic Sea (TLBS). Simultaneously, new competitors emerged onto the scene. The global operator Nippon Yusen Kaisha (NYK) started with its own Hamburg-St. Petersburg service using two ships. Swan Line from the Peter Döhle group and the youngest Lithuanian Seaconnect, followed the same route with the same number of vessels 9. The market leader is still Unifeeder with 34 ships and a total capac- 32 Baltic Transport Journal 4/2008

8 Table 12. The fleet of container shipping lines on the Baltic in 2007 No. Shipping lines Number of ships Total capacity TEU 1 Unifeeder 34 24, Team Lines 30 21, MSC 15 17,100 1,140 4 FESCO ESF 8 8,980 1,123 5 Maersk Line 9 8, Containerships 8 6, OOCL 6 5, Transatlantic 9 3, IMCL (BCL) 7 3, Transbaltica Container Line 6 2, NYK 2 1, Swan Line 2 1, TLBS (TECO) 4 1, Seaconnect MacAndrews Hacklin Total BSR , Ship s average TEU Table 13. The fleet of the Baltic ferry operators in No. Shipping line Ships total 1 Finnlines 29 2 Stena Line 17 3 Tallink 17 4 Scandlines 16 5 DFDS 12 6 Transfennica 8 7 Viking Line 7 8 TT Line 6 9 Unity Line 6 10 Mols Linien 5 11 Color Line 4 12 Polferries 4 13 Bornholmstrafikken 4 14 Destination Gotland 3 15 Transatlantic 3 16 Eckerö Line 3 17 HH Ferries 2 18 Nordic Jet 2 19 SuperSeaCat 2 ity of 24,920 TEU. Despite decreasing its number of vessels, the company s fleet capacity increased by 1,700 TEU compared to In case of the second largest operator Team Lines, the gradual exchange of utilized ships improved the fleet capacity by 44%, up to 21,300 TEU. MSC added another 7,700 TEU to its fleet with seven new vessels, which is a true Baltic record in development. Thus, the company has shortened its distance to the Baltic leaders. What is more, MSC operates the biggest ships on the market with an average capacity of 1,140 TEU, due to utilization of former ocean-going vessels, like MSC Katrina (1,647 TEU). There are nine container shipping lines on the Baltic (from FESCO ESF to Trans-Baltica) which we can call the medium-sized sector with a fleet ranging from six to nine ships and a capacity of 3,000-9,000 TEU. This group apparently has a strong position on the market with about 37% of the total potential. FESCO, Maersk, Containerships, and OOCL are characteristic for the utilization of container vessels with their capacity exceeding the Baltic average (over 760 TEU). FESCO is the oldest private logistics operator in Russia and is active in various fields of transport: shipping (containers, ro-ro, bulk and timber), terminal management, rail and road haulage. They own 65 ships of various types and sizes, of which 25 are container vessels (eight of them operate on the Baltic) brought two important market players - Containerships and Maersk - closer to each other, with the first one cutting its fleet by three vessels and the latter adding one more ship to the schedule. Both lines also decreased their capacity a bit from OOCL is now represented by 6 ships with an average capacity of 926 TEU. Out of the total 39 vessels of various types and in various sizes operated by the Swedish company Transatlantic, 9 container ships travel across the Baltic Sea. The shipowner Inter Marine Container Lines Ltd. (IMCL), a part of Lemissoler Shipping Co. Ltd., specializes in container connections between the Baltic and Western Europe. Thanks to the acquisition of BCL, the group expanded its fleet up to seven ships with an average capacity of 487 TEU each was just the second year of Baltic presence for Transbaltica Container Line (TBL) a member of the Mann Lines Group, and another four container ships with an additional capacity of over 2,000 TEU increased the company s potential. The total annual turnover of TBL is estimated at 75,000 TEU. The rest of the market is operated by small shipping companies with a total fleet capacity below 2,000 TEU, however the word small sometimes only relates to their Baltic activity. For example, the Japanese NYK, operating just two ships in our region, is meanwhile the world s ninth biggest shipping line. The Baltic sea is one of the most intensive ferry activity areas in Europe, next to the North Sea and the Mediterranean. The total turnover of the Baltic ferry connections was estimated at 70m passengers in The Western part of the Baltic connections (Sweden Denmark Germany) is responsible for 2/3 of passengers and the majority of private cars and trucks services. The second busiest area is the Eastern Baltic (Sweden Finland Estonia Russia) and the least important routes lie in the Central Baltic. The majority of ferry traffic on the Baltic is internal in its nature. A total 19 ferry lines operate on the Baltic, and the quantity of served cargo and passengers seems strictly connected to the carrier s fleet size. The leader of the ranking is Finnlines, which runs 15 ro-ro (only cargo) and 14 ro-pax vessels (cargo + passengers). The next places are occupied by Stena Line, Tallink and Scandlines, all exploiting ro-pax vessels majorly. On the basis of available data, Scandlines remained the biggest passenger operator last year. The company also transported 4.3m cars and 1.1m trucks and trailers. Second place was again occupied by Stena Line with almost 16m passengers, over 3m cars and nearly 1.9m trucks and 9 M. Błuś: Over the level of 1,000 TEU. Baltic Transport Journal No. 2/2008 (22) 10 M. Błuś: Growth in tonnage higher than in the number of vessels. Baltic Transport Journal No. 3/2008 (23) 4/2008 Baltic Transport Journal 33

9 Table 14. The number of passengers carried by top Baltic ferry operators in No. Ferry line Pax Annual change 1 Scandlines 20,500, % 2 Stena Line 15,954, % 3 Tallink Group 7,000,000-4 Viking Line 5,695, % 5 Color Line 4,300, % 6 Mols Linen 2,544, % 7 HH-Ferries (Stena Line) 2,000,000-8 DFDS 1,499, % 9 TT-line 742, % 10 Finnlines 500, % 11 Polferries 405, % 12 Unity line 261, % trailers. Both market leaders enjoyed a slight increase in their passenger traffic, +3.4% at Scandlines and +0.6% at Stena Line. However, all Scandlines figures come from the region, as the company only operates on the Baltic market, while Stena also renders its services on the North Sea. Scandlines and Stena Line are ex aequo the leaders with reference to the number of offered connections and served seaports on the Baltic. The following places are occupied by Finnlines and DFDS. Out of 13 cruising operators present on the Baltic, the majority are the main global players with Carnival Cruise Line, Costa Cruise Line Table 15. The number of regular services and seaports of the top Baltic ferry operators in No. Shipping line Services Seaports 1 Stena Line Scandlines Finnlines DFDS Tallink Transfennica Viking Line Unity Line Mols Linien Polferries Bornholmstrafikken Destination Gotland TT Line Color Line Eckerö Line Transatlantic HH Ferries Nordic Jet SuperSeaCat 1 2 Table 16. The total number of vessels operated by cruise companies in No. Cruise lines Ships 1 Carnival 23 2 Costa Cruise Line 19 3 Princess Cruises 17 4 Holland America Line 14 5 NCL Freestyle Cruising 12 6 Celebrity Cruises 10 7 MSC Cruises 10 8 P&O Cruises 6 9 Fred Olsen Cruise Lines 6 10 Regent Seven Seas Cruise 5 11 Silverseas 4 12 Azamara 2 13 Oceania Cruises 1 and Princess Cruises leading the chart. It should be mentioned that the Baltic is only one of many touring destinations offered by these companies, and for that reason, in a majority of cases only 1-3 cruise ships operate in the region. As for conventional shipping, the carriers render transport services mostly for general & bulk cargo, project or heavy weight commodities. Significant players with a dedicated activity of this kind are e.g. Spliethoff Amsterdam, Chipolbrok and Fast Lines. Other conventional shipping is often supplemental to container or ferry services, like in the case of Hamburg Süd, Conti Lines, Pol-Levant or COSCO. As due to the differences in cargo and operations characteristics, it is difficult to compare the companies directly, so we have focused on the number of ships in operation by particular carriers. The biggest fleets belong to: Hamburg Süd (177 vessels: 115 container and 62 tramp ships), Spliethoff Amsterdam (68 vessels: general cargo, semi container, con-ro and heavy lift), and Chipolbrok (23 multipurpose ships). The important players on the conventional market are also: Samskip, Euroafrica, Fast Lines, Pol-Levant, and the Biedermann Venbulk Service, all offering regular transport connections or tramp services. AVIATION The year 2007 was a period of strong growth in global air traffic. The global aviation turnover increased by 7.4% (RPK 12 ) in reference to passengers and by 4.3% in cargo transport. Europe noticed lower outcomes than the global average, corresponding to 6% (pax) and 2.7% (cargo). The current centre of global growth remains in the Middle East with +18.1% pax and +10.1% cargo traffic 13, but according to the average annual growth prognosis by International Air Transport Association (IATA), the three Baltic countries, i.e. Latvia, the Russian Federation and Poland, are the world s fastest growing markets for the upcoming years (Table 17). The Baltic airports Due to huge differences between national market potentials, in case of Germany and Russia, only the airports spatially connected to the Baltic Sea basin were taken into our analysis. The total traffic of the M. Błuś: Growth in tonnage higher than in the number of vessels. Baltic Transport Journal No. 3/2008 (23) 12 Revenue Passenger Kilometres 13 Internet: ( ) 34 Baltic Transport Journal 4/2008

10 Table 17. Top 10 countries ranked by AAGR to 2011 in international passenger numbers No. Country AAGR 2007 to Latvia 12.1% 2 Russian Federation 9.3% 3 Poland 9.2% 4 Ukraine 8.8% 5 China 8.8% 6 India 8.6% 7 UAE 8.4% 8 Vietnam 7.7% 9 Serbia 7.6% 10 Romania 7.3% Source: IATA Economic Briefing. October 2007 top Baltic airports reached 131.7m passengers, with an 8.9% increase during This means that the growth tempo has slightly decreased comparing to +9.7% in The total passenger throughput leader is the huge Copenhagen-Kastrup, the major European hub in the region. It is followed by the national airports offering many continental and intercontinental connections (Stockholm, Berlin, Helsinki) and a vast number of regional airports which mainly render services for the local carriers (most often the low cost airlines). As the low-costs are truly driving the market changes now, the annual growth in passenger traffic is relatively higher in smaller airports. In 2007, the leader of traffic development was the International Airport Wrocław-Starachowice in Poland (Figure 5). Nine new connections have been established there by LOT, Lufthansa, Volareweb and Ryanair, which resulted in 414,578 more passengers. This is almost a 50% growth rate achieved in a single year. Despite this staggering surplus, there are obviously far better airports in passenger numbers multiplication. Just a 13% rise in Berlin-Tegel let it welcome 1.55m passengers more than in Poland s unrivalled Warsaw-Chopin made progress on a level of 1.17m, and St. Petersburg-Pulkovo handled 1.04m pax more on an Table 18. Passenger traffic and annual change in the top Baltic airports in 2007 No. Airport Pax Annual change 1 Copenhagen-Kastrup 21,409, % 2 Stockholm-Arlanda 17,912, % 3 Berlin-Tegel 13,357, % 4 Helsinki-Vantaa 13,090, % 5 Hamburg 12,780, % 6 Warsaw-Chopin 9268, % 7 Berlin-Schönefeld 6,331, % 8 St. Petersburg-Pulkovo 6,137, % 9 Göteborg-Landvetter 4,355, % 10 Riga International Airport 3,160, % 11 Cracow-J.P. II 3,042, % 12 Billund 2,262, % 13 Skavsta Airport-Stockholm 1,995, % 14 International Airport Katowice 1,980, % 15 Malmö-Sturup 1,869, % 16 Stockholm-Bromma 1,805, % 17 Tallinn Airport 1,728, % 18 Gdańsk-Wałęsa 1,708, % 19 Vilnius International Airport 1,700, % 20 Wrocław-Starachowice 1,270, % annual basis. What is important, only three airports among the top 25 suffered from a passenger traffic reduction, but the level of this decrease was only 306,000 passengers. At the same time a total of 1.1m tons of cargo was handled in the Baltic airports in , giving a good growth rate of 6.3% for the indus- Figure 5. The best annual growth of passenger traffic in the BSR airports in Wrocław-Starachowice Aalborg Gdańsk-Walesa International Airport Katowice Kraków-J.P. II Riga International Airport St. Petersburg Billund Vilnius International Airport Warszawa-Chopin 14 Average Annual Growth Rate 4/2008 Baltic Transport Journal 35

11 Table 19. Top 20 cargo traffic in Baltic airports in 2007 (in tons) No. Airport Cargo Annual change 1 Copenhagen-Kastrup 395, % 2 Helsinki-Vantaa 134, % 3 Stockholm-Arlanda 122, % 4 Hamburg Airport 84, % 5 Warsaw-Chopin 63, % 6 Göteborg-Landvetter 61, % 7 Billund 58, % 8 Malmö-Sturup 47, % 9 Berlin-Tegel 29, % 10 St. Petersburg-Pulkovo 29, % 11 Tallinn Airport 22, % 12 Berlin-Schönefeld 8, % 13 Riga International Airport 8, % 14 International Airport Katowice 7, % 15 Umeå 6, % 16 Vilnius International Airport 5, % 17 Jönköping 4, Gdańsk-Walesa 4, % 19 Oulu 4, % 20 Cracow-J.P. II 3, % Table 20. Aircraft movements at the top 20 Baltic airports in 2007 No. Airport Movements Annual change 1 Copenhagen-Kastrup 257, % 2 Stockholm-Arlanda 218, % 3 Helsinki-Vantaa 178, % 4 Hamburg Airport 173, % 5 Berlin-Tegel 151, % 6 Warsaw-Chopin 131, % 7 St. Petersburg-Pulkovo 86, % 8 Berlin-Schönefeld 66, % 9 Göteborg-Landvetter 64, % 10 Stockholm-Bromma 62, % 11 Billund 52, % 12 Riga International Airport 47, % 13 Malmö-Sturup 40, % 14 Tallinn Airport 38, % 15 Berlin-Tempelhof 35, % 16 Cracow-J.P. II 34, % 17 Vilnius International Airport 33, % 18 Stockholm-Skavsta 30, % 19 Wrocław-Starachowice 26, % 20 Umeå 21, % try. Last year the majority of airports achieved positive changes, after a quite poor 2006 with only a 0.6% development in Baltic cargo traffic. The biggest rise took place in Copenhagen-Kastrup (+15,500 tons) and Tallinn Airport (+12,400 tons). On the other hand, Riga International Airport featured the biggest downfall of 16.6%. The general trend implies a growing market for valuable goods, documents and parcels, but relatively short distances between the Baltic airports still make other modes of transport competitive to aviation. As shown in Table 19, the domination of the market leader is very clear, as it closed the year with a turnover of over 395,500 tons. The key for this supremacy seems to lie in the numerous cargo intercontinental connections offered by Copenhagen. The second in the ranking Helsinki-Vantaa achieved an almost three times lower turnover. Each airport traffic is strictly connected with the number of aircraft movements. A total of 1.77m movements was noticed in the top 25 Baltic airports. A single air movement is responsible for an average of 72 serviced passengers. Similarly to the passenger traffic analysis, the regional airports operating smaller aircraft could gain a relatively better position in the chart, but an important issue here is that a negative trend hit as many as 11 airports. During the total movements development achieved an average level of only +0.9%, which implicates that the size of aircraft and the load factor consume the passenger traffic growth. The biggest drop was observed in Stockholm-Arlanda (-8,580 movements), Berlin-Tempelhof (-6,890), Cracow-J.P.II (-4,422) and Gdańsk-Walesa (-3,324). On the contrary St. Petersburg-Pulkowo marked an additional 14,449 movements, Berlin-Tegel +10,785, Riga +7,185, Stockholm-Bromma +5,486, and Warsaw-Chopin 4,608 extra in respect to Air carriers in the Baltic Sky In 2006, European airlines collectively recorded an operating surplus of EUR 2.6 bl., continuing a steady upward progression of the previous two years. Nevertheless, an operating margin of just 3.5% is less than half of what the industry needs to be genuinely sustainable 16. The growing oil prices caused a further limitation in airlines profitability in The total number of passengers travelling on the Baltic carriers is estimated at 222m people 17, and a dynamic growth in traffic is still observed, with +12.5% achieved in The presented outcome concerns the total traffic but the air carriers market can be divided into several market sectors. The category of intercontinental carriers is represented by Lufthansa, the biggest European airline. As shown in Table 21, Lufthansa is beyond competition in terms of the number of passengers. Air Berlin, second on the list, with almost 28m pax, made only half of Lufthansa s performance in SAS Scandinavian Airlines (25.4m pax) occupying the third position is the representative of the national carriers, characterized by a wide scope of activity, offering intercontinental, international and local services under the trademark of Full Service Airlines. SAS Group consists of SAS Scandinavian Airlines, Widerøe, Blue 1, Air Baltic and Estonian Air. The whole group served 31.2m passengers in 2007 (still only 58% of Lufthansa s results). Under the pressure of the low-costs, a number of national carriers launched new transport products using the activity method of low cost airlines, as well as establishing dependent entities in this part of the market, like Euro LOT, or Lufthansa Cityline. 15 Estimation on the basis of the 25 main Baltic cargo airports 16 AEA Yearbook Top 30 Baltic air carriers 36 Baltic Transport Journal 4/2008

12 Table 21. Passenger traffic on the top 20 Baltic air carriers in 2007 No. Air carrier Pax 1 Lufthansa 53,000,000 2 Air Berlin 27,900,000 3 SAS Scandinavian Airlines 25,403,000 4 Thomas Cook Airlines 13,200,000 5 TUIfly 12,500,000 6 Eurowings Group (Germanwings) 9,600, Finnair Group 8,653,200 8 Aeroflot 8,166,000 9 Lufthansa Cityline 6,848, S7 Airlines (Siberia) 5,698, My Travel 5,500, LOT 4,278, Sterling (LTU) 4,200, WizzAir Polska 4,200, Rossiya (Pulkovo Airlines) 3,244, Transaero 3,242, Air Baltic 2,007, Widerøe 1,964, Blue 1 1,798, Malmö Aviation 1,194, Centralwings 1,055, Euro LOT 1,006, Cimber Air 938, Skyways 782, Novair 750,000 The low-cost airlines scope of activity is no longer limited to a minimum offer for the cheapest possible price. Sometimes the scale of their operations even exceeds national carriers offers, and hence, the differences between particular parts of the market are unclear. The fast growth in cargo turnover at the Baltic airports is, obviously, a reflection of the airlines performance. Once again Lufthansa is the leading airline in cargo transport, being also the second largest world cargo carrier. Lufthansa served 1.81m tons of cargo in 2007, offering 300 worldwide destinations. In a worldwide survey of the US Internet portal Official Airline Guide (OAG) users, Lufthansa Cargo has clinched the first place against other companies in the Best Freighter Operator category, outpacing its main competitors AirFrance/KLM, Amerijet International, Cargolux Airlines and Cathay Pacific Airlines 19. The total cargo turnover of all the other Baltic airlines is significantly lower than Lufthansa s. For instance, SAS Cargo served 295,000 tons, Finnair 98,700 tons, S7 Cargo 26,800 tons and LOT 22,600 tons. What is also important here, Lufthansa Cargo and SAS Cargo together with Singapore and Japan Airlines, form the biggest cargo alliance in the world (WOW). There are also numerous airlines of a luxurious or leisure character operating in market niches. In 2007, a total of 450 business aircraft was operated in BSR countries. Simultaneously, each of these types of carriers deals Table 22. Top 20 Baltic low cost and regional air carriers by number of passengers in No. Air carrier Pax 1 Air Berlin 27,900,000 2 TUIfly 12,500,000 3 Eurowings Group (Germanwings) 9,600,000 4 Lufthansa Cityline 6,848,500 5 S7 Airlines (Siberia) 5,698,109 6 LOT 4,278,983 7 Sterling (LTU) 4,200,000 8 WizzAir Polska 4,200,000 9 Air Baltic 2,007, Widerøe 1,964, Blue 1 1,798, Malmö Aviation 1,194, Centralwings 1,055, Euro LOT 1,006, Cimber Air 938, Skyways 782, Estonian Air 746, Finncomm Airlines 588, Sverigeflyg 500, FlyLAL (Lithuanian Airlines) 449,800 in the air charter (tourist) market. However, there are also examples of pure charter companies. The Baltic leader here is Thomas Cook Airlines and My Travel, serving 13.2m and 5.5m passengers in 2007, respectively. There were 1,764 aircraft operating in the Baltic countries last year, out of which passenger aircraft constituted 66% (1,149), and the cargo fleet was just 118 aircraft. The biggest fleets (passengers + cargo) were active in the following countries: Germany (727 aircraft), Sweden (138) and Denmark (128) 20. The amount of serviced passengers and cargo once again clearly 18 Year ( ) 20 Energy and Transport in Figures /2008 Baltic Transport Journal 37

13 Table 23. Top 20 Baltic air carriers by number of aircrafts (total) in No. Air carriers Aircraft 1 Lufthansa SAS Scandinavian Airlines Air Berlin Aeroflot 83 5 Eurowings Group (Germanwings) 74 6 Lufthansa Cityline 72 7 S7 Airlines 66 8 Thomas Cook Airlines 66 9 Finnair (Group) TUIfly LOT Rossiya (Pulkovo Airlines) TUIfly (HLX) My Travel Widerøe Transaero Sterling (LTU) Air Baltic WizzAir Polska Blue 1 13 indicates the leaders of the ranking Lufthansa and SAS. In accordance with the global tendency, the most popular manufacturers of the aircraft used by the Baltic carriers are Airbus (Europe) and Boeing (United States). Furthermore, the stock like: Embraer (Brazil), ATR (France), Saab (Sweden), Fokker (Dutch), Bombardier (France) or Avro (UK) are also common in operation. Summary Given the presented data describe the situation from 2007, three and a half years after the BSR joined the open EU market (except a tiny, but prominent Russian part) the market was experiencing huge structural changes in trade, characterized mainly by an increase in foreign trade value and a reverse trend in foreign trade volume. This stimulated both cargo and passenger mobility, and had a direct impact on transport. The maritime market continued its strong development tendency in The most significant growth was noticed in container transport, where the Baltic seaports turnover increased by 16.3% up to 7.5m TEU and the container fleet capacity grew by 24.9% up to 110,265 TEU. At the same time, stagnation was noticed in ferry passenger traffic and a slight decrease in the number of cruise tourists (-2.5%). In case of air transport, almost each analyzed indicator showed a gradual or even rapid increase. The most important changes concern passenger traffic. The BSR airports gained a development level of 8.9% and the air carriers exceeded a +12.4% tendency. A little increase was noticed in the number of aircraft movements, but this was generally caused by the use of bigger planes and an improvement in load factor. 21 Baltic Rim Economies No. 3, Baltic Transport Journal 4/2008

14 According to the current mid-2008 market situation, despite the oil prices crisis or GDP/inflation problems in Latvia and Estonia 21, the overall BSR economy, trade and transport should keep on rolling well. Main sources: Dr Maciej Matczak Gdynia Maritime University Actia Consulting/Actia Forum Ltd LFV_InfoSida_70_ aspx; Presse/Publikationen/index.html; pl/index.php?option=com_content&task=view&id=324&i temid=466; statistikker.shtml; facts_figures/index.php; public/32100.html; www. aeroflot.ru/eng/about.aspx?ob_no=550&d_no=9134; com/en/stena-line/corporate/about-stena-line/; Germany/TT-Line/Presse/Pressemeldungen2/TT-Line-festigt-Marktposition/; html; /Content Annual_Reports.aspx; www. elfaa.com/documents/elfaa_statistics_december_2007.pdf; www. lhcargo.com/content.jsp?path=0,1,19142,91382,99001; SAS Group. Year-end Report January-December 2007; EUROCONTROL Forecast Monitor, March 2008; EUROCONTROL Short-Term, Forecast May 2008; AEA Yearbook 2007; ERA Airport Traffic 2007; ERA AIRPORT STATISTICS ISSUE 12 DECEMBER 2007; Å R S R A P P O R T 2007; Berlin Airports Check-in 2007 Facts & Figures; Copenhagen Malmö Port Annual Report 2007; DFDS Annual Report 2007; Finavia 12/07; Finavia air traffic statistics 2006; Finnair Annual Review 2007; Finnlines Annual Report 2007; Mols-Linien Annual Report 2007; Pulkovo Annual Report 2006; SAS Group Annual Report & Sustainability Report 2007; IATA ECONOMIC BRIEFING PASSENGER AND FREIGHT FORECASTS 2007 TO 2011; Viking Line Annual Report 2006/2007; Forecast; Baltic Rim Economies. No.1, 29 February 2008; Statistical Analyses of the Baltic Maritime Traffic. VTT Technical Research Centre of Finland ; M. Błuś: Over the level of 1,000 TEU. Baltic Transport Journal No. 2/2008 (22); terminals/; M. Błuś: Growth In tonnage high er than In the number of vessels. Baltic Transport Journal No. 3/2008 (23); B. Łuczak: Rozwój portów bałtyckich na rynku przewozów promowych i ro-ro. VI Międzynarodowa Konferencja Naukowa Porty Morskie 2006, Szczecin r.; M. Błuś: Growth in tonnage high er than in the number of vessels. Baltic Transport Journal No. 3/2008 (23); Süd.com/WWW/EN/Company/At_a_Glance/Facts_and_Figures.jsp; ; AEA Yearbook 2007; Energy & Transport in Figures 2007; www. lhcargo.com; Baltic Rim Economies No. 3, /2008 Baltic Transport Journal 39