That's Just Plane Unfair
By Mike King
Soaring air freight rates as a result of slot shortages at leading international airport hubs have forced project cargo airlines to look elsewhere for handling facilities – and the ramifications of the shift could be far-reaching.
Less suitable secondary facilities do not offer the specialist handling expertise needed to safely shift project cargo, experts warn. Shippers believe regulations should be amended to prevent freighters being squeezed out of airports able to offer the expertise project shipments require.
Air freight rates rocketed in the final quarter of 2017, as demand for chartered and scheduled freighter capacity shot up. One Stifel analyst contacted by Breakbulk playfully suggested forwarders were enjoying “more Air than Michael Jordan.”
Lucas Kuehner, Panalpina’s global head of air freight, said in Asia and Europe the dearth of available space ahead of the holiday season had moved beyond a “capacity shortage.” Rather, he argued it had swollen into a “capacity scarcity” with “overwhelming” demand and freighter and bellyhold space only available to shippers at premiums.
While the short-term demand surge in the latter months of 2017 was a welcome boon for many in the air cargo sector, it also highlighted a problem of long-term importance for project and heavy-lift air freight shippers – the glaring shortage of landing slots for freighter operators at leading hubs, a shortage that most expect to get worse in the years ahead.
Capacity at Breaking Point
According to the International Air Transport Association, or IATA, some 177 airports around the world are already capacity-constrained, about 100 of which are located in Europe. With passenger levels set to double in the next 20 years and strong air cargo growth also predicted, deciding how to allocate limited capacity is a debate that increasingly pits wider economic needs against the desires of voters for affordable and regular leisure options. Critical to the debate is the system used to allocate aircraft landing slots.
The glare fell on the landing slot shortage most brightly last year at Amsterdam Schiphol Airport, or AMS. The airport can handle a maximum of 500,000 slots per year, but rapid growth saw the limit breached, and cuts had to be made for the winter season. Under “use it or lose it” IATA regulations, this left freighter operators, whose schedules are open to multiple vagaries, at a distinct disadvantage versus budget leisure passenger flights more easily able to abide by schedules. As a result, some 37 freighter flights per week were initially lost by all-cargo carriers at AMS over the winter due to slot restrictions, although this number was tapered somewhat when AirBridgeCargo Airlines, or ABC, with the support of the Russian government – which reportedly threatened to ban Dutch airlines from Russian airspace – reached a code share agreement with Dutch national carrier KLM.
Sergey Lazarev, general director of ABC, told Breakbulk that many leading global airports are struggling to find the right balance for cargo and passenger airlines, and priority was generally given to the latter. “With the high growth rates of passenger travel demand, airports started to prioritize passenger over cargo,” he said. “But last year, when demand for both passenger travel and air freight was very high, the problem became more obvious.
“High export/import demand on certain trade lanes and uplift on international markets have led to congestion, both in the air and on the ground. The Amsterdam situation is not isolated, as there are similar overcrowded landscapes in Frankfurt, Shanghai, Hong Kong, Chicago and other major hubs.”
ABC operates a fleet of 18 Boeing 747 freighters, including 11 Boeing 747-8Fs that offer payload capacity of 130 tons on a single flight and can accommodate cargoes of up to 45 meters in length.
According to Lazarev, the introduction of new regulations in terms of strict night curfews, on-time performance and other operational restrictions has made it increasingly difficult for cargo airlines to secure and hold slots at the most popular hubs. “With the situation getting worse every year, ABC, being a freighter operator, is trying to find the best solutions in the interest of our customers,” he added.
As freighter operators are squeezed out of preferred airports they are instead relocating to secondary airports. The freight cull at AMS, for example, saw the diversion of services to secondary hubs such as Liege and Brussels. However, Rogier Spoel, air transport policy manager at the European Shippers’ Council, said these facilities often face tougher environmental restrictions, a major problem for noisy heavy-lift aircraft. They also often lack suitable infrastructure and equipment, while competition among logistics and handling service providers within these airports is usually limited.
“Secondary airports also often lack expertise and supply chain know-how,” he added. “The customs regime might not be 24/7 or they don’t have state-of-the-art warehousing. Some don’t have big enough runways for long-distance fully loaded freighters, some face environmental restrictions and others don’t have the right equipment.
“If the trend of cargo operators being forced to these airports continues, shippers feel that a lot of investments need to be made to get them at the same quality levels as major hubs.”
Dealing With U.S. Issues
Charles “Chuck” Clowdis, a prominent air freight consultant for more than 30 years, said that when freighter operators can secure slots at leading U.S. hubs, they are often at unsuitable times. “There are also issues in the U.S. with ground operations space, especially in places such as Las Vegas and Orlando and even LAX (Los Angeles International Airport) which are popular passenger destinations,” he added.
“Unfortunately, the problem is escalating and we’re seeing a shift to alternative airports which can add to drayage costs,” he said. “It also puts upward pressure for shippers on charter costs.”
Staffing is also a problem at secondary airports and airlines might need to set up a second office, for example.
“Project shipments already have added costs,” Clowdis said. “Diversion from hubs equipped to handle them only exacerbates the time it takes to deliver. It also ups the cost and increases the potential for damages and safety issues. Very heavy-lift aircraft, Lockheed C-5s as an example, require special ground ops to facilitate loading/unloading and this is not always available at secondary air fields.
“If you are shipping a gigantic girder, for example, you need specialist logistics support. If a flight is diverted then this becomes an issue and a new cost.”
Panalpina’s Kuehner added that crew and equipment availability at secondary airports is critical for project cargo, which tends to be more challenging than general air cargo from a handling perspective. “Experienced personnel and special equipment have to be available, which is not a given,” he said.
Many secondary, cargo-friendly airports are urgently seeking to improve airport ground infrastructure and highways access, while also trying to attract the highly qualified logistics specialists required to handle heavy or project cargoes. But, Lazarev added, making upgrades takes time.
“Transportation of special cargoes requires expertise, experience and highly skilled specialists,” he said. “Secondary airports will need to take quick steps in order to attract skilled staff, adopt handling procedures, purchase specialized handling equipment and develop essential airport infrastructure.”
Michael King is a multi-award winning journalist as well as a shipping and logistics consultant.
Photo credit: Shutterstock
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