Driving To Deliver Your Business

Shippers eye longer-term air freight contracts

Stuart Todd | 2017-12-20 13:09:03.0 Cargo owners respond to recent capacity and rates volatility challenges by adjusting buying patterns or seeking alternative modes of transport such as ocean and rail Prolonged strong demand for air freight coupled with difficulties in accessing capacity and volatility in rates is leading some shippers to adjust their buying patterns, with more cargo owners seemingly ready to sign up for longer-term contracts with forwarders.

Meanwhile, others are being attracted to alternative modes of transport such as ocean and rail, according to shipper and freight forwarding sources. “Shippers are pursuing two contrasting strategies in response to the challenges currently faced in transporting goods by air,” Rogier Spoel, air freight policy manager at a senior official at the European Shippers’ Council (ESC), told Lloyd’s Loading List. “Knowing that there is a very positive market outlook for air freight in 2018, shippers who are very dependent on air freight are looking to secure longer-term deals on cargo space availability.

It is definitely a seller’s market for capacity and ad hoc rates have been surging these past months on high demand,” he said. These observations are consistent with separate feedback to Lloyd’s Loading List from freight forwarders. “On the other hand, there are shippers who have simply lost patience with the congestion at ground handling stations at a number of western European airports, where cargo can be delayed for more than a week,” Spoel continued. “Exasperation has seen some of them seek alternatives to air, switching to ocean and also rail – especially in the case of China-EU trade flows.

However, these other modes of transport are not without their own challenges in terms of capacity – which we can assume will continue given the upbeat forecast for economic growth.” While the situation at Amsterdam Schiphol airport had been well documented, Spoel said the ESC had “received signals” from shippers of major capacity issues “both in the air and on the ground”, and congestion at other airports – as well as a lack of personnel. One example was Frankfurt-Main airport (FRA), but Brussels also risked falling into that category.

Last month, there were reports that strikes by handling staff at FRA, Europe’s biggest air cargo gateway, had exacerbated a prevailing situation of serious congestion in cargo traffic and limited capacity, with the effects of the industrial action continuing well into December. And earlier this month, severe wintry weather led to a significant number of flight cancellations at a number of airports across Europe that impacted cargo traffic, Frankfurt included. A spokesperson for airport operator Fraport, told Lloyd’s Loading List: “The consequences of several strikes are still partly the cause of operational delays in cargo.

But Frankfurt, as well as other European airports, is currently experiencing a very high volume of air freight to be handled while at the same time the available workforce is stagnating. “Thus, we see increased process times at various points of the supply chain. We are taking this very seriously and are in contact with all stakeholders involved in order to improve the situation here at Frankfurt.”

Brussels Airport in early December passed the milestone of 500,000 tonnes of flown cargo for the year for the first time since DHL Express moved its European air hub from the Belgian gateway to Leipzig. Head of cargo and logistics Steven Polmans said cargo growth in recent years was “going faster than we can follow with new investments and projects, and that is causing difficulties”. He said it was “the same on the airline side, where suddenly, compared to a year ago, there was a shortage in capacity.

You cannot add capacity that easily and quickly, especially if it requires additional expensive and long-term assets. “Next year, a third handling agent will become available on the market (at Brussels Airport) and we will start building several new warehouses to accommodate the current growth we are experiencing. And with our BRUcloud data sharing platform, we will introduce some operational apps smoothing (cargo handling) processes.”

One of these will be a slot-booking app, scheduled to go live on 15 January and designed to considerably reduce waiting times at cargo handlers’ facilities, he added. Meanwhile, Spoel said the ESC had also been alerted to “the mediocre infrastructure at secondary airports” – a reference to the ground handling facilities and capabilities of certain European cargo-specialist airports that are said to be short on quality, have inadequate capacity, and not enough trained staff. “This has raised questions as to where to go with air cargo when the bigger gateways are congested,” Spoel noted. “A broader discussion in the EU needs to take place to tackle this issue.”

Image: Rogier Spoel

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