Targeted Cost-Cutting | Breakbulk Asia

By Andrew Willis

If there’s a silver lining to the relentless pressure from competitors and ever-evolving regulations, it’s the greater business efficiencies that can result from these two forces.

Project cargo transportation by sea and air is no exception, with competition both within and between these two sectors forcing ship and aircraft charterers to seek new ways to cuts costs.

German multipurpose vessel owner Briese Schiffahrt and its partners have responded to this pressure by developing a next-generation vessel, as they seek to gain an edge in a tough market that has suffered from overcapacities in the past. Based in Leer, Briese manages a fleet of about 150 ships, with most of them operated by Briese’s subsidiary, BBC Chartering. Recently things have started to look up.

“We certainly see increased activity worldwide,” said Raymond Fisch, senior vice president of strategic projects at BBC Chartering, pointing to an uptick in wind energy and oil and gas investments. “All of these are driving demand for project shipping capacity.”

Despite these improved conditions, shipowners still need to invest in innovative technologies if they are to meet changing client demands, cost pressures and new environmental regulations.

Being both “economical” and “flexible” are crucial to ensuring operational success, Fisch said. To achieve this, determining the correct size of the ship, optimizing its hull for the intended cargoes and operating modes and selecting the most suitable propulsion system and cranes are key.

After a statistical analysis of the speed, draft and trimming records from the roughly two-dozen ships in the Briese fleet, the company and partners developed the future operating profile and optimization targets for its next generation vessel, the 12,500-deadweight-ton Eco Trader.

Based on market observations and statistical evaluations of the company’s fleet and its operating profiles, the Briese newbuilding team identified seven areas where the new ship could perform better than its predecessors. These were fuel consumption, loading and unloading times, ability to circumvent certain shipping route restrictions, optimization for project cargo, flexibility, operating costs and emissions.

Several ships have already been built at the Chinese shipyards Jiangsu Hongqiang Marine Heavy Industry and Jiangxi Jiangzhou Union Shipbuilding. The improvements have enabled the Eco Trader to cut fuel consumption and CO2 emissions by roughly 30 percent compared with existing tonnage.

“We are very satisfied with the results we have seen so far in terms of savings and efficiency gains,” Fisch said. “We have helped four vessels come on the market with our tonnage partners. The next delivery will be the BBC Russia which we expect to be delivered this summer. Two more will follow then early next year.”

Taking to the Air

The air freight industry has also had to deal with similar pressures. Antonov Airlines is a project cargo specialist airline that offers a charter service. Clients come from the aerospace, oil and gas, mining, defense, and humanitarian relief sectors, among others. The company is headquartered in Ukraine.

“For us it’s all about ad hoc charter flying. Calling a taxi, rather than going to a bus service,” said the company’s Michael Goodisman.

The company owns and operates one Antonov An-225, the world’s largest aircraft with a payload of 250 tons. It also has seven Antonov An-124s that typically have a 120-ton payload, although the payload on two of them has been increased to 150 tons.

“People are always trying to push the limits of the Antonov An-124,” Goodisman said. “We will be slowly adding that capability to additional airplanes. And the idea is to have them all up to a 150-ton payload.”

Several design improvements have made the heavier payload feasible. One is an increased maximum takeoff weight of the aircraft. The plane can now leave the runway weighing 402 tons compared with 392 tons previously, meaning an additional 10 tons of fuel if needed. This enables the plane to travel longer distances in zones where there are no airports for refueling, especially useful for Atlantic or Pacific Ocean crossings.

The modified Antonov An-124s also has a strengthened floor and undercarriage to transport the higher payloads that result in a heavier landing. Related to this, the company decided to change the aircraft’s tires and now uses Dunlop. As well as supporting the higher payload, the new tires can withstand more landings than the previous brand, enabling Antonov to reduce their tire cost per landing.

The drive to increase payloads was driven by client requests and now means Antonov can provide a transport option that is cheaper than chartering the larger Antonov An-225 aircraft. This has helped the company win additional jobs, including the transportation of a single piece of oil and gas heavy machinery from Johor Bahru in Malaysia to the Port of Spain on the island of Trinidad.

“If we can offer wider solutions, hopefully we will catch more project cargo that may have gone by sea by offering a payload capability at an acceptable price to the customer,” Goodisman said. “Of course, there are limits to what you can achieve. Now that we’ve got to 150 tons they’ll say, ‘how about 170 tons?’ But if it doesn’t work on paper then we can’t do it.”

Transportation of the dense pieces of cargo requires the design of skids to spread the load. Software will help load planners in the future, predicted Goodisman, adding that three-dimensional analysis and stress analysis are other areas that are becoming faster with the aid of computer programs.

Efficiency Initiatives

As well as the drive to increase payloads, Antonov engineers are striving to meet tougher engine noise requirements and regulations for operating in congested airports.

“The authorities will take their experts and say, ‘where are we today in terms of noise, and what do our experts say is achievable in five or 10 years’ time,’ ” Goodisman said. “And they will set targets that they believe are achievable. It’s then for the manufacturers to do that work.”

Other initiatives include a push to modernize cockpits and reduce the flight crew down to four people.

The company is also gradually increasing the time between maintenance schedules so that planes can stay safely in the air for longer, and there’s a life extension program that has successfully extended the life of their entire fleet – meaning an additional 20 years for the Antonov An-124 and the Antonov An-225.

“It’s to do with keeping the aircraft flying more and getting a larger market share,” Goodisman said.

That’s a goal that’s shared by Air Charter Service. The company sources aircraft on behalf of its customers that want to move cargo throughout the world. Jobs come from the relief, automotive and oil and gas sectors, among others.

Air Charter Service uses very small to very large aircraft, going to the market to find a suitable solution for a customer’s project. But the fleet of planes transporting project cargo around the globe is aging, according to Dan Morgan-Evans, global cargo director at the company.

One reason for this is the high cost of designing and building new aircraft, meaning airlines then need them to be constantly airborne to turn a profit, something that’s extremely difficult to do in the air project cargo market.

Wide Network Pays Off

Given the aging fleet, companies like Air Charter Service, which has 21 offices worldwide, are more likely to find efficiencies through internal operational improvements, Morgan-Evans said.

“We’re always trying to find an edge to reduce prices to our customers,” he said. “We have a huge number of brokers around the world, and we’ve developed an internal system where we can see where planes are and who’s doing what.”

Operators let the company know on a weekly, daily or even hourly schedule where their planes are, with the information passing to Air Charter Service’s brokers around the world. If the company’s New York office decides to charter a plane to go from the U.S. to Europe, for example, it will then strive to link it to a project cargo job departing from Europe, bringing down the cost for both customers.

This process has become easier to do, thanks to the greater visibility of plane locations provided by Air Charter Service’s internal computer system, plus the geographic spread of the company’s offices.

“When we were a much smaller company that was much harder to do,” Morgan-Evans said. “Now that we’re a global company it becomes much easier to put these flights together. There are much more efficiencies in terms of what we can provide to our customers.”

The project cargo air freight industry has faced a tough time since the financial crisis and subsequent fall in oil prices in 2014. The double whammy caused severe investment cutbacks in many of the sectors that traditionally created business for project cargo transporters.

“This year things are picking up,” Morgan-Evans said, noting that oil companies that were forced to streamline their operations are not necessarily enjoying the rebound in crude prices. “It’s a combination of factors. Obviously, we’re trying to create greater efficiencies in order to reduce prices, and at the same time they’re beginning to have money again to invest in projects.”

Andrew Willis has worked as a journalist for more than a decade in countries including Argentina, Belgium and Colombia.

Photo credit: Antonov Airlines

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