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Fossil fuel charter resurgence

Oil and gas are making a comeback after a lull last year and a period of meagre investment, delivering a welcome uplift for the charter market. Rob Coppinger has the story

After a tough few years, a tentative recovery in oil and gas is giving charter operators a boost, according to Chapman Freeborn’s Group Cargo Operations Director, Pierre van der Stichele. “I would say the charter market in 2017 is better than 2016 – we can see sharp improvements in goods requirements from heavy industry shipments that we’re doing for oil and gas, because the state of the oil and gas industry has improved.”

His comments are echoed by other industry players. “There are certainly some positive signs that the oil industry is starting to recover, and looking again at the types of long-term infrastructure projects that we have supported,” says Volga-Dnepr Airlines’ Commercial Director, Alexander Kraynov.


The number of oil and gas projects worldwide began to fall after the 2008 financial crisis, but it is in the last three years, following the fall in oil prices, that there has been a significant drop in the number of charters. Last year observed a downturn, but greater efficiency in the oil industry and an increase in price to around $45 a barrel have bolstered exploration efforts.

“It was only very essential [charter] flights for breakdowns that would probably cause some environmental disaster, but before it would be project moves, it would be when they need a bit of equipment urgently,” Air Charter Service (ACS) Group Cargo Director, Dan Morgan-Evans, explains.


What oil and gas activity there is can be found in the emerging markets. “We have a lot of shipments between the US and Africa, within Africa. So, you have big components for oil and gas going from one project to another, sometimes for the same oil and gas company, and a couple from Scotland into Africa, and a few between Europe and the Far East, at the moment,” explains van der Stichele.

With a lot of oil and gas exploration expertise in the West, equipment could be sent to the Far East by ocean freight, but it would take months – five weeks by ocean with additional time via road and rail. “People would prefer to just pay the difference for larger, better aircraft to get it there than trans-shipping through ocean freight and multimodal, and the time it takes,” van der Stichele adds.


Volga-Dnepr has been involved in liquid natural gas projects in the Far East. “In terms of the gas market, this has actually remained very resilient for us and we have seen a stable level of demand, boosted also by our expertise of serving customers in the industry,” says Kraynov. The company provided an airbridge for Papua New Guinea, as well as its plans for the Hides gas conditioning plant. “For this project, we completed 88 [Antonov] An-124-100 flights in 103 days, delivering 6,000 tonnes of heavy, outsize and sensitive equipment that could not reach the site by ground transportation.”

Substantial constructions, such as oil fields, benefit from airfields and Papua New Guinea built a new airport to serve its Hides gas conditioning plant. It was this airport that Volga-Dnepr used for those 88 flights. Major infrastructure construction projects are another source of charters – despite the West’s economic problems, emerging markets continue to develop.


“There are certain projects that run late. I can give you an example of an airport that was under construction in the Far East. There were some issues with the jetties for the airport,” van der Stichele explains. “These jetties were not up to standard and therefore the shipper had to manufacture and modify the jetties, which meant they weren’t going to be delivered on time.” While the first jetties were delivered by a scheduled service, delays caused by the need to modify the later set of jetties meant the need for a charter solution. “We had at the time three dedicated 747 charters. Where something goes wrong, this is when we supplement the scheduled services. It happens more often than you think.”


Antonov Airlines’ London office's Commercial Manager, Paul Bingley, tells Airline Cargo Management: “There have been a number of projects around the world where countries are improving their infrastructure.
There is a lot going on in Turkey, building bridges and all kinds of things, and so sometimes we’ll be involved in carrying parts from one part of the world to Turkey – parts of a bridge or parts of a gas plant.”

The developing economies of the Far East have also been a recent boon for the charter market, as Morgan-Evans says: “Our Far East office has done very well recently. There’s some traction in the market there, it’s taken a little while for us to get the traction going there. That’s bigger widebody aircraft to China and Hong Kong, so that’s not really any one sector, it is just volume stuff out of the Far East”


Two sectors that continue to provide the charter markets’ bread and butter are aerospace and automotive. “We’re seeing an increase in the number of satellite shipments – and you have launch pads out in the US. That is one area we’re looking to enhance when we open the office out there,” Bingley explains, as his firm plans to open offices in the US and the Far East. “A lot of satellite buyers are based there too. There are still several big names in the satellite industry in Europe and we’re working very hard to offer those services to those companies, Airbus and Thales.” Bingley says he expects that there will be more satellite shipments in the next 5-10 years.


In aviation, ACS is still seeing vibrant demand from aircraft-on-ground (AOG) business. Morgan-Evans says: “We do a lot of AOG work, while the airlines are our suppliers, a lot of the time for our commercial jet division, and our cargo division, when the airlines have issues with their aircraft, we provide charters for their AOG solutions, for moving engines, parts, crews or engineers.”


One company that is seeing growth in aviation and aerospace is Antonov Airlines, but not for obvious reasons. “The market has been stimulated by this split, customers have more of a choice now. Certainly, on the engines front we’ve seen an upturn,” says Bingley. The split he refers to being the end of Ukraine’s Antonov Airlines and Russia’s Volga-Dnepr’s joint venture, Ruslan International, last December. “In December, we split away. It was a case of getting the [London] office up and running, and most of the staff have come across from Ruslan International. [The] last six to seven months on the enquiries side, it has been really strong.” This split is also why Antonov is planning to open offices in the US and the Far East.

Ruslan International was created in 2006. Commenting on the decision last November, the Volga-Dnepr Group’s Vice President of Strategic Management and Charter Cargo Operations, Tatyana Arslanova, said: “With the world’s largest fleet of [Antonov] An-124 freighters, Volga-Dnepr is committed to maintaining this capability for our customers with our own services, supported by our worldwide offices.”

The other mainstay of the charter market, the automotive industry, has provided strong demand since 2010, according to Morgan-Evans. He also notes that when the oil price goes down “cars seem to sell quite well, so there’s been a bit of a boom in the auto industry over the past few years”. Van der Stichele agrees: “With automotive shipments, we’ve realised that new upcoming models and engines have prompted more charter flights. So, basically there has been quite a good increase [in this sector] compared to last year.”


A sector that is not often discussed, but is growing in significance, is live animal shipments, according to van der Stichele. “The transportation of animalsis booming at the moment. You’d be surprised how many animals fly over our heads every day.” Chapman Freeborn in fact bought a company specialising in animal transportation called Intradco Global. “We took over the company four years ago, they were simply in animal transportation and this goes from exotic animals to horses and cattle. There is a lot of space for expansion there. They know how to handle animals and it is an expanding niche in the business.” (Read more in our article on live animal shipments)


From oil and gas to jetties and race horses, quantifying the global charter market is difficult, in Morgan-Evans’ view. This is because it is an industry based on demand driven by things going wrong. “The charter market size, as a whole, is a difficult one to judge really as the reason people charter is usually something that comes up at the last minute and is not planned for.”

Oil prices may fluctuate, but the need to move equipment worldwide for fossil fuels, gas plants or airports, as well as the single need of additional commercial freight capacity, means charters will continue to thrive.

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