The Year That Was

Part III: SHIPPERS, AGENTS & HANDLING AGENTS

  • All in all it’s been a positive year for shippers. Freight rates have further decreased, at least on many trade lanes, making air freight transport basically cheaper for them compared to 2013. This ‘new financial attractiveness’ led to an increase of volumes and – to some degree – shift from ocean to air freight. This stopped or even broke a year-long trend seeing a continuous growth of sea freight to the detriment of air transports.
  • Also, shippers were offered new intercontinental supply chain solutions like the multi-modal transports combining trucking, railing and flying by agents such as DB Schenker or Hellmann for getting China-produced goods via the vast Eurasian land bridge and across the South Atlantic to final consignees in Brazil. An attractive offer for the producing industry because this way the amount of tied capital can be reduced significantly in comparison to goods transported by vessels that need twice the time for completing the trip. Getting the shipments this way from the door of the consignees to those of their clients is also much cheaper than air freighting them all the way from China to Viracopos or other Brazilian airports.
  • In addition, shippers could in the future benefit from the declining fuel prices, provided the carriers pass on the reduction to their agents and these actors behaving the same way when billing their customers for the air transports.
  • Most forwarding agents and GSAs must also have benefitted from last year’s upswing in air cargo movements, although not necessarily when doing biz in crisis-hit Southern Europe and sanction-struck Russia, where the flow of shipments was reduced to a mere trickle in the aftermath of Putin’s Crimea annexation and his undisguised military support for the occupants in the eastern parts of the Ukraine.
  • But the bottom line is that most agents reported growing their business in 2014, predominantly the big multinationals. This is indirectly documented by IATA figures which evidence an increase of air freight volumes throughout the entire year in the region of five percent. Says IATA: “The good results reflect the improvements in world trade and business activity which have been evident since the summer. World trade is growing steadily, supporting increased air cargo shipments.” Whether this is actually the case remains to be seen as IATA in the same breath in its year end rundown also states that it is not convinced of the economy entering into an era of global upswing.
  • However, not all that glitters is gold. Shippers keep complaining about the lack of electronic data transmission efficiency predominantly when doing business with mid-sized or smaller forwarding agents. And when shipping specialty products such as pharmaceuticals or other temperature sensitive items that require cold chain control the participants expect seamless quality from end-to-end, emphasizes IATA Chief Tony Tyler.
  • The above relates particularly to many ground handling agents that often have to invest fortunes to set up cold storage rooms at airports if they want to stay in business. Also installing monitoring systems for controlling the refrigerated areas cost them a lot of money, not to mention investments in security systems.
    This all only pays off if there is a steady flow of temperature sensitive or special shipments going in and out. A good example is Brussels airport where the local management in November of last year set up a Center of Excellence for handling pharmaceutical and biotech products. This was implemented in view of the fact that this segment is expanding constantly, outgrowing most other products transported by air. “About 75 percent of all pharmaceutical products are flown in the holds of passenger aircraft or main decks of freighters,” states CEO Arnaud Feist of Brussels Airport, in outlining the importance of BRU’s initiative to enable the market an uninterrupted cooling chain when using facilities run by local forwarding agents or ground handlers.
  • However, overall the economic situation of many handling agents remained critical in 2014 and is expected to continue being difficult in 2015 as well. The margins are extremely low, qualified and experienced personnel hard to find. All this makes it difficult for many handlers to deliver constant quality to their clients.
    It can be presumed that M&As will continue in 2015 because only if reaching a critical mass firms can earn money in cargo handling nowadays and in the coming years.
  • Handling Agents generally do a great job all over the world. They need the support of the carriers and freight agents alike. All realize that cost is a paramount factor, but many of the handling agents, including the world’s largest ones, are constantly being pressured downwards by airlines and agents on handling rates. At the same time they are expected to keep pace with initiating even more modern handling methods and equipment. Not a healthy situation to be in!

Heiner Siegmund  /  John Mc Donagh

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