FROM MAGAZINE: Charter business remains crucial

FROM MAGAZINE: Charter business remains crucial

Posted By : STAT Trade Times

Besides the point to point scheduled services market, charter has not lost its place in the industry. However, just like the air cargo sector, freight charter business has also become more challenging than previously.

Twinkle Sahita

Amidst the tough air cargo market scenario, charter still remains a crucial business. The charter business is increasingly about responding to unpredictable events, whether it’s a production line going down or a humanitarian situation. This was clearly seen in the last weeks with the Hanjin Shipping collapse.

However, the charter business has always been challenging. Currently, it is more challenging than previously due to unpredictable demand scenario. Markets are changing all the time.

The cost of charter, being more expensive than scheduled lift, also presents a major challenge to the industry. Previously, oil and gas companies were one of the mainstays of the charter business as the cost of the loss of production if a well stopped working far outweighed the cost of a charter. However, with low oil prices, many in-house logistics teams are working more closely with their freight forwarding partners to rationalise their supply chains and only charter when absolutely necessary. Even when organisations are forced to charter, for example when responding to emergency situations, our more sophisticated clients will ensure that every spare bit of capacity is used so that they do not pay for air and that the charter delivers the maximum possible value.

A lot is changing in the segment. Talking about the current charter market situation, Shailendra Seth, country manager-India, Chapman Freeborn, said, “The air cargo industry is changing all the time so you have to be flexible in your approach – for example the peak season isn’t what it was a few years ago and it’s difficult to predict demand.”

He adds, “The air cargo market globally is challenging but we’re pleased with how the year is going and very positive about the outlook. A lot of the work we do around the world is project based and this has been a big plus in the last few months. This kind of work typically centers around supporting industries with complex requirements such as the energy industry.”

Charter specialists Chapman Freeborn recently helped Solar Impulse 2 achieve its mission of circumnavigating the globe using a solar-powered aircraft. The mission was achieved with Volga-Dnepr Airline’s IL-76TD-90VD and ATR-72 and Chapman Freeborn’s Wings 24 in-house flight support team managing the project’s operations ranging from flight permits and customs clearances to ground handling and immigration arrangements for the transport airplanes.

Recently, it also transported outsize oil and gas equipment totalling 232 tonnes from Germany to Abu Dhabi. This project was successfully completed with Fiege Logistics Switzerland. It utilised an Antonov AN-225 freighter and an additional Boeing B747-400F aircraft to deliver the time-critical cargo from and Frankfurt–Hahn Airport to Abu Dhabi International Airport on May 20.

Broker Air Charter Service (ACS) that was founded in 1990 has expanded to include a network of offices spanning North America, South America, Europe, Africa, CIS, Middle East and Asia. The company will provide airlift services for the British government’s humanitarian missions around the world for the next two years, the charter company announced. The contract is for two years and builds on the aviation company’s record of providing services during humanitarian and natural disasters.

There are several current trends in this segment changing the dynamics of the industry.

Shailendra Seth, Chapman Freeborn, finds increased flexibility on the side of freighter operators as one positive change in the industry. He adds, “We have an excellent relationship with airlines and there’s is a growing readiness to work in partnership to take advantage of sudden opportunities.”

antonov-cargo“I think that the main force changing the dynamics of the cargo charter industry is a drive to deliver more value to both customers and asset-owners. I would say that there is also a push for charters to deliver more value to asset-owners, particularly with yields down and an oversupply of capacity. A lot of airlines work with brokers but also have developed their own in-house charter divisions to better exploit any opportunities that arise and are coming to regard cargo as a separate cake rather than just the icing on it. In addition to this, they are looking at more flexible solutions, combining scheduled and chartered lift within their own networks. We do this also – in fact we believe that this is one of our value-adds when it comes to charters, although we are not constrained by our own network and have the advantage of being able to turn to any one of our interline partners,” opinionates Liana Coyne, director, Coyne Airways.

UK based Coyne Airways, was recently involved in moving a large amount of livestock into the UAE in preparation for traditional celebrations.

With all cargo carriers and increasing belly hold capacity of combination carriers, there is a threat to the charter industry. The air charter industry will have to deliver more value to customers in order to stay in the game: that means, developing a real understanding of a customer’s business and finding better solutions for them than they can find themselves.

“I think that there will still be room for surge charters, but I think that these will reduce with trends like near-sourcing and increased focus on reducing logistics costs to increase profitability. I think that there will also still be room for specialised charters, for example, humanitarian responses, live animals, heavy-lift and so on, but these will require the development of product-specific expertise which is not generally accessible to the one-man-and-his-dog operators,” said Liana, Coyne Airways.