Given the present rate hikes in air freight, forwarders should be more than happy. Under normal circumstances they are unable to earn as much money to fill their coffers as is currently
possible. However, despite skyrocketing prices, the reality shows a different, sobering picture, as illustrated by medium-sized agent, Quick Cargo Service.
Similar to Frankfurt-headquartered QCS, hundreds of freight forwarders around the globe are currently struggling to safeguard daily operation.
Soaring air freight rates of 11 or even 15 euros per kilogram demanded by carriers to fly goods from central Europe to the USA, are daily practice. CEO Stephan Haltmayer of agent Quick Cargo
Service even speaks of 50 euros (sic!) a carrier had quoted in order to guarantee the transport of an ultra-urgent shipment across the North Atlantic on board its jetliner.
At first sight, it looks like good and easy money, he admits, but “the earnings compensate at best for our massive volume losses and thus revenue decreases, that we are facing since the outbreak of the coronavirus pandemic.”
QCS is no exception; most forwarding agents, including GSAs, are currently in the stranglehold of the virus. Shipments are piling up in their warehouses while additional transport orders from producers are pouring in. The bad news is, however, that only some of them can be processed as desired by the industry. The lack of lower and main deck aircraft capacity does not tolerate more air haulage, owing the near collapse of international air traffic.
Capacity is badly needed
Currently, QCS and other European agents have enormous problems to fly air freight to the USA, in a desperate attempt to secure the integrity of their customers’ goods. Since Trump imposed a 30-day long travel ban for Europeans, lasting until mid-April, the number of flights between both sides of the North Atlantic has trickled down, resulting in a huge lack of air transport capacity.
“We get repeated calls from companies in Italy or France begging us to pick up U.S. destined consignments at their warehouses or production sites and fly them from Frankfurt to destinations in the USA. Unfortunately, however, we must turn down many of these requests, because we cannot guarantee the timely uplift of their shipments given the capacity squeeze,” Mr. Haltmayer regrets.
Air freight tends to bypass the USA
As an alternative, QCS offers customers to fly their goods to Canada or Mexico, to transit from there to their final destination in the USA. However, these are time-consuming transports, comparable to ocean freight shipments needing ten days to travel from Hamburg or Rotterdam to ports located at the U.S. East Coast. Haltmayer's conclusion: “If air freight loses its most important advantage: speed, it is deprived of its key attractiveness.”
Another challenge results from the currency fluctuations, are stock market prices that are going crazy. Evidenced by Brazil’s real that lost 10% of its value against the euro between 12th and 14th March. “We settle accounts with our Brazilian partners once a month on euro basis,” illustrates the QCS Chief. In contrast, they bill their local customers in real. “This way our partner agents lose a lot of money caused by the devaluation of their local currency.” Payment default or – worst-case scenario – insolvency might be the result, QCS CEO Stefan Haltmayer warns.
Fighting on two fronts
As a matter of fact, it is a fight on two fronts that agents like QCS must currently master. In addition to the fast-changing external challenges, the pandemic is disrupting internal processes.
Some of the 260 QCS employees do home-office work, which needs to be arranged. Given the politically enacted current school and kindergarten closures, solutions must be found for the care of the employees' children. Simultaneously, the productive working atmosphere within QCS’s offices must be maintained, because there is growing mistrust among the staff that a colleague might be infected, involuntarily passing on the virus to others.
"All of our 11 offices are working at full manpower, but if one station should be down due to the epidemic, we have developed plans on how their tasks can be taken over most efficiently within the company," says Stephan Haltmayer.
The situation is tense. “We're in a crisis mode with no fast end in sight,” he concludes.
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