Chartering new heights
Following reports of an upward moving trend in the air cargo industry, charter operators and brokers are reporting good figures and key developments in its field. Many are widening its offerings by providing a well-rounded service and expertise. With e-commerce opening many more opportunities across industries, these players are tapping in on the transportation of e-commerce cargo. Cheryl Soh reports.
November 23, 2017
According to the Baltic Air Charter Association (BACA), many brokers and operators are considering the implications of Brexit and the uncertainty it holds- this is an especially prominent issue to the UK and European players. In spite of this, the association believes that specialist brokers will take upcoming changes in their stride, and stresses the importance for the industry to work hand-in-hand.
However, the air cargo industry still reported a pretty good year so far, and it is no exception that the air charter sector is raking in good numbers and a bounty of new opportunities too. According to the International Air Transport Association (IATA), air freight volumes are continually scaling, with year-on-year growth of FTKs rising to 10.4% during the first half of the year – the strongest first half year since the rebound from the global financial crisis in 2010.
ACS sees growth
In 2016, Air Charter Service (ACS) had a record year with 12,462 contracts arranged- an average of more than 34 every single day of the year-, marking an 11% increase from 2015. In Q1 of 2017, ACS reported strong numbers with a 24% increase in revenue year on year and a significant increase in turnover and profit by 20% up the same time last year, across 20 offices.
“2017 has not been like previous years – it has been busy essentially the whole year and just even busier in the traditional peaks than usual. Since February, we have been asked by multiple customers for large widebody freight programmes on a variety of routes in order to keep the more common ones at a constant price,” said Stephen Fernandez, Managing Director of ACS APAC.
Volume of bookings has increased by 11% compared to 2016, an indicative number on how well the year has begun for the charter operator in terms of market share. Far East offices had a 72% increase in charter numbers since the beginning of the financial year. Furthermore, CIS offices in Moscow, St Petersburg and Almaty saw a 53% increase in volume over Q1, that is buoyed by an increased private jet demand. Flight numbers for its private jets division are reportedly up 18%.
This year, the ACS Beijing sales team had doubled in size across three divisions which includes cargo, private jets and group charter. The team will be moving to a larger premise very soon to better accommodate their growing team. ACS Sydney is also expected to make the shift in the near future, as the sales team is expected to double within the next few months.
On top of record numbers, ACS will continue to invest in people, facilities and infrastructure to maintain its standing in the industry. Earlier in March this year, ACS revealed that its 2015 investment in its onboard courier division is now paying dividends with 1,093 jobs arranged last year, with revenues amounting to more than £6 million. ACS’ expansion in Asia last August has boosted growth in the region and contributed significantly to the numbers. The expansion is led by Hugo Liu in the Hong Kong office, where it will mark its 10th anniversary next year.
Fernandez elaborated, “in Asia, as on the other continents, the leaders of ACS offices are essentially trying to recreate what we have all experienced and learned in ACS London. Maintaining our corporate culture, hiring and mentoring people who share our values and seeing them grow from trainees to leaders within ACS is extremely rewarding. Our plans moving forward are expansion, and at a more rapid pace.”
In recent weeks, the market for charters to transport consumer goods has cooled off slightly. In spite of this, Fernandez sees that there is still an immense amount of cargo weighing on little capacity. He says that with very few reasonably priced charter programme options available for the last few months of this year, he encourages those who are financially capable to take up year-long commitments to lock in capacity at more reasonable rates.
Tackling the e-commerce boom
E-commerce has also opened doors for air cargo players, with the transportation of e-commerce cargo on a steady rise. Air cargo is the fastest form of transport and the industry needs to keep up with the pace of the e-commerce boom. The transportation of e-commerce cargo is rapidly growing because consumers now expect deliveries in record time.
According to Fernandez, there is a year on year growth in e-commerce cargo ‘chasing the finite pool of air cargo capacity’. ACS has seen an increase in requests for charters for e-commerce cargo this year, particularly for flights along the intra-Asia network. The e-commerce scene has evolved from a few pallets worth of e-commerce or express cargo flying out on a handful of aircraft each day from Hong Kong and other major hubs, to multiple whole freight aircrafts carrying cargo each and every day.
Scaling logistics capacity is always a challenge for retail giants, and this inevitably means that at times, charters are required to serve new global markets and respond to surges in demand. In 2017, Chapman Freeborn has seen a significant increase in e-commerce related charter business, particularly out of Asia to Europe. Contract numbers, flight numbers and revenue are all up.
Chapman Freeborn expands market
On the other hand, Chapman Freeborn is fast approaching its 45th anniversary in the aviation business. This year has also been very positive for the charter broker, with an expected high demand for the final months of the year. As the industry enters the traditional peak season period, there is inevitably a lot of speculation going on, with everyone hoping to optimise their bottom line.
Chapman Freeborn are seeing the changes in the market all the time in terms of charter demand. For example, its business in Asia is going from strength to strength, with requests increasingly shifting from traditional trade routes (Asia to Europe and North America) to markets like Africa, India and the Middle East.
According to Reto Hunziker, Group Cargo & OBC Sales Director of Chapman Freeborn, the air cargo industry as a whole, relies on a healthy, flexible pool of aircraft that is available in the marketplace, as it allows companies to respond to new arising opportunities. “That’s true whether you’re a freight forwarder, a shipper or another charter broker,” says Hunziker.
In the last 12 months, the broker’s activities in the commercial sector has been wide-ranging- from AN-124 and AN-225 outsize projects in support of the energy industry, to time-critical movements of hi-tech cargo and pharmaceuticals. The automotive sector also represented a growth in business in several key markets, more prominently, with the provision of a B747-400F for Senator International’s “Atlantic Air Bridge”, where it ferried time-critical auto components between Europe and US.
Hunziker continues that in addition to consolidating its core charter activities, Chapman Freeborn has also seen some of their subsidiary services go from strength to strength. “Our customers see us as much more than a charter company which books simple point to point charter flights. A significant percentage of our work is project based. Having specialist subsidiaries contributes to our depth of experience in-house – for example our animal transport company, our on-board courier business and our 24-hour flight operations division,” he continued.
Its animal transport division, Intradco Global, had an excellent year so far and is expanding into new markets. Earlier this year, Intradco broke records with a movement of thoroughbred horses to China via a B747-400F charter from Shannon to Beijing. As part of conservation programmes, Intradco had worked with Etihad Cargo, where the former helped to charter two Etihad Boeing 777 freighters to transport 19 black rhinos from Johannesburg to the Rwandan capital, Kigali, in May this year.
“As a business, we are extremely agile and well-suited to the changing global demands of the market. There are always going to be challenges in the air cargo business, but with our global office coverage we are well-versed in adapting our business model and leveraging on new opportunities,” said Hunziker.
Earlier in May this year, Chapman Freeborn had increased its stake in UK-based Magma Aviation to a majority shareholding of 75% to help support the company’s long-term growth plans. As part of the expansion, Magma has also taken operational control of a second B747-400F from Air Atlanta Icelandic.
Magma currently serves a global client base of freight forwarders, block space consolidators, charter brokers and airline partners with regular freighter flights to key niche African hubs, via its cargo operations centre at Brussels Airport. The niche markets they serve caters to customer profiles including freight forwarders, shippers or charter brokers – both for regular kilo shipments to locations in Africa, and ad hoc charter capacity.
Air Partner makes key developments and projects
Since its inception in the commercial jet charter in 1961, Air Partner has a well-established relationship with many airlines over the world. The group and its acquisitions all have an excellent reputation for offering high quality services in their respective fields. Recently in February, Air Partner officiated the rebranding of Cabot Aviation, which was acquired in May 2015, to Air Partner Remarketing. Cabot Aviation has been providing a comprehensive remarketing and acquisition service for all types of commercial aircraft since 1998.
With the rebranding, the Air Partner Remarketing division will leverage on both companies’ networks. In July this year, Air Partner was appointed by Saudi Arabian Airlines (Saudia) as its exclusive remarketing agent for 15 Boeing 777-200ER aircrafts, powered by GE90 engines and have a total of 232 seats in a tri-class configuration layout, comprising of 24 first class seats, 38 business class and 170 economy seats. Saudia is currently undergoing a revitalisation of its fleet, including phasing out these Boeing 777-200ER aircraft as it makes room for a higher-density aircraft to align with its upcoming network growth plans on both regional and international routes.
Tony Whitty, Head of Air Partner Remarketing, said “we are delighted that our strong track record in remarketing aircraft – and B777s in particular – secured the mandate for us. This appointment will keep Air Partner Remarketing firmly established as one of the world’s leading independent aircraft remarketing companies.”
Furthermore, the remarketing division has also completed the sale of a third B777-200ER from Kenya Airways to Omni Air International, and also arranged the sale of a GE90 engine and the sale and leaseback of two B737-700s for Kenya Airways. They also completed the sale of two B747-400s for China Airlines to Jet Midwest Group, despite an oversupply of used aircraft in the widebody market.
“China is a very important market due to the number of commercial aircraft operated in the country and the number of aircraft on order,” says Whitty. “This is a market that we are very interested in. With regards to aircraft remarketing, we continue to win repeat business from existing customers, as well as attract new ones. We are looking to expand operations particularly in China.”
Despite strong competition in the air charter market, Whitty says the group believes that they can continue to attract good businesses from its existing client base, on top of attracting new clients. He continues, “a significant amount of time has been spent over the years engaging with customers to really understand what they expect and value from us. These findings became the foundation of our clear and long-term strategy to become a world-class global aviation services group.”
On an overall scale, Air Partner’s performance in commercial, private and freight charter continues to be very strong. They have carried out a number of significant projects this year, including the charter of the first ever commercial passenger charter flight to St Helena in the South Atlantic Ocean.
Air Partner’s other acquisitions, which includes aviation safety consultancy Baines Simmons and fatigue risk management consultancy Clockwork Research, have also enabled the business to extend and enhance the services it offers to customers, and both continue to perform well.
More notably, Baines Simmons was recently awarded a four-year contract with the European Defence Agency (EDA) to provide consultancy and training services to all 27 of its Member State, supporting the continued development and deployment of the full suite of European Military Airworthiness Requirements (EMARs). The programme will cover a continued evolution of the European Aviation Safety Agency (EASA) baseline requirements, Safety Management System (SMS) implementation, and a Remotely Piloted Aircraft Systems (RPAS).
The acquisitions of Cabot, Baines Simmons and Clockwork Research have enabled Air Partner to expand its relationships with both existing and new customers, who may be interested in the additional services these divisions can offer. The group continues to see strong cross-selling opportunities across divisions and are well positioned to leverage on these.