Ups and downs in the air cargo charter market

posted on 6th December 2022
Ups and downs in the air cargo charter market

Neil Dursley, group CCO of Chapman Freeborn Airchartering, talks to CAAS about another volatile and changing year for charter brokers and their customers

How would you describe the dynamics and characteristics of the air cargo charter market this year, particularly in the last few months?

It has been an unusual year. The market was booming prior to Chinese New Year – January and February were record months in Chapman Freeborn history, driven by back-to-back AN225 and AN124 flights as well as large volumes of humanitarian goods in relation to Covid-19. However, events coinciding with Chinese New Year and Ukraine have created an unusual dynamic. The grounding of eighteen 747s and eleven AN124s due to (Russian) ownership of the aircraft has taken enormous capacity out of the market at a time when volumes are booming. Also, the reduction in the fleet size of Antonov Design Bureau and the necessity to utilise those airframes in support of Ukraine has meant that the oversized market (oil and gas, for example) has struggled with capacity. It’s improving now and there are many commercial flights utilising Antonov Design Bureau on the humanitarian side (Ukraine), as well as for commercial purposes around the globe, for aerospace and energy for example. The market struggled to recover following Chinese New Year. The volumes did not return to the levels they were prior. It’s been unusual but, at this point for Chapman Freeborn in combination with the products within our portfolio, still a record year in terms of our volumes around the world.

With air cargo demand and prices softening as the year has progressed, and passenger belly hold capacity returning to the market, how do you see the outlook for air cargo charters in 2023? What are customers indicating about their plans, expectations and intentions?

Demand has softened and belly capacity has returned, with passenger (charter) movements at record levels, especially during the holiday period over the summer. However, Chapman Freeborn, in conjunction with its internal and external airline partners, has long-term agreements with its clients to support supply chains. These are continuing and will continue past 2023. The ad-hoc market, in collaboration with our internal and external partners, is still giving us the ability to support the supply chain requirements on a global scale, specifically automotive, humanitarian, governmental, oil and gas, aerospace, high-tech and e-commerce.

How does the air cargo charter market and outlook appear in terms of its various main verticals and segments? How has that evolved this year?

In terms of industry verticals, Chapman Freeborn handles all verticals globally. However, we have specific areas of focus and are increasing these areas throughout 2022 and beyond. We are seeing, for obvious reasons, large demands in humanitarian and governmental business. We saw surges in e-commerce volumes, but those are currently challenged due to the cost-of-living crisis on a global scale. We still see a large demand for automotive, pharmaceutical and healthcare products, government and humanitarian, and with the cost of crude oil close to $100 per barrel (not record levels, but increasing), that is creating a more viable solution for the energy sector to fly products rather than using shipping.

A number freight forwarders have been more active putting in place long-term air cargo charter programmes in the past two years. How do you see that situation evolving?

The Covid-19 pandemic, which was an event like no other, gave an immediate urgent requirement for freight forwarders and their clients to ensure they had the capacity and availability of the supply chain at a time when air freight rates were at record levels. Many of those clients who signed long-term agreements are tied into them regardless of what is happening with the market pricing, and that of course can be an enormous challenge to those freight forwarders and their end clients. Chapman Freeborn as a group, in conjunction with our internal and external clients, are doing everything possible to support our clients, and to ensure they have viable long-term solutions to meet the needs of their clients and ours.

What about the role of e-commerce shippers and their representatives in the air cargo charter market? How has that dynamic played out this year, and how do you see it developing in the future?

E-commerce was booming during the pandemic – we saw record e-commerce numbers. This year, the e-commerce clients, especially in Asia where the majority of the products were being sourced, had enormous challenges due to the grounding of the Russian fleet, cost of living increase, cost of fuel increase. And because of the cost-of-living increase impacting end customers, I believe the volumes would have dropped considerably. It’s been a challenge for e-commerce companies, many of them well-known brands on a global scale. However, they are still expanding their footprint globally, and their fleet – tying in their own or leased aircraft on long-term basis to ensure they have supply chain continuity.

What are the biggest operational challenges currently affecting the air cargo charter market?

The biggest challenge across the board is the lack of (staffing) resource. Anyone who has travelled on a business trip or on vacation has had personal experiences or business-related experiences of ground handling issues on a global scale, be that aircraft waiting to be offloaded, or an individual waiting for their luggage to arrive on the baggage belt because of the lack of staff. Many people were furloughed across the globe, and a lot of people decided to take other positions in other industries. The nature of aviation and the security requirements of recruitment (they have to go through months of security checks before they are onboarded) has had a detrimental effect on the supply change and has been a challenge across the board.

How have airport or air cargo handling difficulties and limitations this year affected your choices and decisions regarding origin or destination airports or handlers for charters?

Chapman Freeborn’s internal and external airline partners have worked very closely with airports and ground handling companies around the world to ensure constructive criticism where needed has been addressed, and I’m pleased to say we’ve seen fantastic results as a result of this open, honest dialogue to ensure we meet our clients’ requirements.