The Covid-19 pandemic and continued uncertainty around Brexit have combined to make chartered flights an attractive proposition for the cargo sector. Here, Group editor Colette Doyle hears from PML’s Nick Finbow on how the company has set up its own in-house charter service.
The ability to transcend closed borders, overcome existing disrupted supply chains, move large volumes of cargo and, of course, the speed of transit are all clear benefits associated with air freight. As the demand for this service grows, however, logistics companies need to adapt their businesses to ensure they are able to compete in the sector.
With coronavirus continuing to wreak havoc on the industry and negotiations regarding Brexit still ongoing, the commercial landscape for those wishing to maintain profitable operations is certainly challenging. We anticipate that there will be a greater emphasis on trying to access the highly competitive race for space on chartered aircraft and other businesses may follow the precedent set by PML of setting up their own in-house, dedicated charter service in a bid to build stronger relations with those airlines offering chartered flights.
High running costs
The costs associated with entering this sector are undeniably steep: fuel and running costs are naturally much higher than those associated with shipping. Add to that the fact that the global demand for PPE, primarily out of China, has meant charters are quickly being filled, thereby enabling the airlines to charge a premium for space.
Furthermore, many carriers are holding off on any long-term trade commitments, due to their belief that when a vaccine for Covid-19 becomes available it will be far more lucrative to agree trade deals based on moving the vaccine, compared to traditional cargo.
The outcome of this is that while it is unlikely that there will be a raft of new aircraft charter services coming into the marketplace, those that already exist will be able to command even higher prices. Our belief is that additional space is likely to be created by retrofitting now-defunct passenger aircraft, such as the Boeing 747, to make them suitable for the transfer of cargo.
Bringing in experienced resources to help a logistics company navigate its way to achieving the best air freight deals for its customers represents an investment in its own right. At a time when countless companies are faced with the prospect of reducing staffing costs to survive, this is simply not financially viable for many businesses.
Moreover, the current situation regarding Brexit has done little to enhance trading conditions in this difficult climate, not least because the two customs clearance systems, GVMS and SMART Freight, have yet to be given a confirmed launch date.
With just weeks to go before we leave the European Union, there will be limited time to train staff on the new systems – plus, of course, the whole Northern/Southern Ireland divide and the much-debated border between both countries has yet to be resolved. This adds even more confusion, a significant increase in admin costs and ultimately will inevitably make any movement of freight between the UK and Ireland more expensive.
All of this creates an unpredictable and incredibly demanding business climate. To add insult to injury, no grant funding has been discussed to overcome any of these obstacles, unlike in other countries. One of PML’s customers in the UK is exporting to the Middle East and not receiving funding, but the same industry operating out of Australia is receiving financial support to help with the added costs associated with air freight in these difficult times.
With UK ports being given in the region of £200 million to ensure their survival, it is staggering to note that currently no such funding is being made available to airports. Given that remarkably large volumes of fresh produce are transported by air, the Fresh Produce Consortium has been lobbying hard to try and establish why there is such a marked divide in how the two sectors are being treated.
Looking for lifelines
At PML we specialise in the transfer of temperature-sensitive goods, especially fresh produce, and can handle product with an unbroken cold chain thanks to our unique relationship with Heathrow’s dedicated chilled airside facility. With fresh produce representing such an important aspect of our business, we have grave concerns about the plight of the air freight industry if it is denied any lifelines, including how this will impact on the consumer. One outcome will almost definitely be a shortage in the supply of fresh produce and a resulting hike in prices to the end user.
It is a sad irony then that the government’s failure to support the air freight industry – which has been ravaged by the pandemic – may actually negatively impact consumer ability to survive Covid-19. This could very well be the case in light of well-publicised claims that sound nutrition and access to good quality food are important weapons in the fight against the virus.