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Cargo

Fight or flight?

Vice president of air freight charters for Bertling Logistics, Konstantin Vekshin, warns that airlines must offer better pricing flexibility and improved customer service if they are to keep the charter business flying
 

All players in the air charter community need to ask themselves: are air cargo charters here to stay, or are we likely to see their gradual demise? The question is not without merit. It has always been about the survival of the fittest in the world of air charter business, but the golden age of charter-focused airlines which commenced in the early 90s bade us farewell a while ago.

 

The landscape of the entire air freight industry has dramatically changed in the last 15 years. The air cargo market – while diligently following global growth of respective domestic product curves – has been over-saturated with excessive airlift capacity. But, objectively speaking, it is not just excessive capacity that has affected the welfare of a number of speciality carriers. All dedicated charter operators have been predominantly focused on serving the needs of geopolitical-related crises in the last decade and more, losing sight of marketing and customer service. There is no denying the fact that life was good during those years, and it seemed the bonanza would last forever.

 

As the inevitable decline progressed, some new techniques and loading methods became run-of-the-mill events. It was when scheduled Boeing 747 operators started to fly one-piece loads exceeding 50,000kg in weight (not always, and not everywhere) that a sizeable chunk of the dedicated air charter market began to crumble. 

 

Another major factor contributing to the landscape change was ocean freight, which surpassed itself with various forms of flexibility, with price being the most attractive factor (as long as the docks are not acting up!) Jokes aside, three major factors: excessive capacity, the decline of unprecedented demand, and more organised ocean freight-based supply chains, have been an unfortunate trigger for the demise of some major air cargo operators.

 

It is especially painful to name specific airlines going out of business, but the trend became obvious in 2011, and we witnessed additional industry-changing departures at the end of 2013. The tally has not yet ended.

 

Experts and participants in the industry would agree that air cargo charters are becoming an endangered species. As both a former air charter operator and now a consumer of charters, I cannot help thinking that various supply chains must be beginning to feel the shortage in dedicated air charter operators, which are now few and far between. It is very possible that we are likely to see more cargo airlines going out of business. Incidentally, the airline industry is one of the most challenging and technology-intense, with a very high barrier of entry due to specific regulatory and financial requirements. In other words, rapid replacements are not likely to occur.

 

As part of the air cargo community, we collectively need to start addressing various operational and commercial aspects of the charter business. It is no secret that air charter is perceived by many logisticians today as a last resort. For the majority of supply chain and procurement experts (unless it is part of a ‘just-in-time’ plan), an air charter is nothing short of an operational disaster, demonstrating a lack of adequate planning and professionalism. This presents a bleak future for speciality airlines.

 

In my present capacity as a logistician, my advice to all interested parties would be to demonstrate flexibility in pricing – especially in light of decreasing oil prices. The end user is looking to see additional efficiencies, enabling them to reduce their cost by 20 to 30%. Airlines are expected to display more willingness to work with any project, big or small. Of note, complacency is not uncommon among carriers, even in this harsh environment. End users need to make very quick decisions in order to justify the use of an expensive air charter, so airlines ought to be prepared to provide a quick response time and accommodating attitude when it comes to feasibility studies and overall customer service.

 

It has been a common perception that an air charter price will always go hand-in-hand with a sticker shock. As painful as it is, a charter price is further aggravated by rudimentary fees such as royalty or non-objection fees in certain countries, which, incidentally, are beginning to see a growing volume of business. Parties imposing them should realise that they inflict more detriment on their local economies, rather than taking advantage of a seemingly lucrative benefit. It is about time respective stakeholders and industry-leading associations spearheaded the effort of having those levies eliminated. Often, a royalty fee may be the last straw that prevents a charter from flying, which causes its own economic ripple effect for everyone concerned.

 

It goes without saying that painful, obsolete levies are only one of the many issues indirectly affecting the welfare of charter airlines. One recommendation nevertheless prevails. To survive in today’s environment requires championing an exceptional service, and demonstrating a full commitment to real value creation for the end user. Various supply chains and projects around the world still rely on healthy, strong air charter carriers. This will lead the air cargo industry’s long-term vision, innovation and dedication to the customer’s bottom line.


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