Airline terminal handling and storage pricing strategy wrong
Ground handling of air freight cargo is a critical element in the time-sensitive mode, which has a profound impact on the speed and cost of a shipment.
At the end of last year, one of the world’s biggest ground handling organisations and one of the biggest at London Heathrow issued new terminal handling and storage charges, which together constituted a particularly big rise, as the handler also reduced free storage times from 24 hours to 18 while massively increasing costs after 36 hours and 54 hours of dwell in their airline sheds.
Critics say that the storage charges are completely unjustified and that the handler is taking inflation measures to another level, while reducing the free period, in a move that other handlers may follow. This also redefines the model of how charges are levied that has been in place for decades with a tiered system of elevating costs as the time period increases making management of storage costs almost impossible.
From our perspective, the fact that it can take up to five days to get freight out of the airline sheds, due to congestion and airline handling inefficiencies, clearly demonstrates how handlers lack customer-focus in imposing increases of up to 500%.
Handlers have pointed out their huge rise in costs and blame increasing congestion on forwarders failing to pick up freight on time which, in our experience, is almost never the case. Particularly now, when a big shipment left with the airline, will generate five figure charges in just days.
Congestion in the cargo handling operations is much more to do with the sustained demand for air freight that we have seen throughout 2021 and means that handlers need to increase their capacity, with more labour resource and additional truck bays to accommodate the loads and reduce delays.
Other handlers have yet to increase their rates for 2022 and there are big disparities, with some airline’s handlers charging up to £70 a day for storage of 100 kilos, or more than four times the more than those currently reasonably priced, at around £14 per 100 kilos per day.
In addition many airline handling facilities introduced additional costs in the guise of ‘covid surcharges’ in 2020 which had already, by stealth, increased ground handling costs per kilo significantly.
If costs become too prohibitive we will have to ensure that certain handlers are avoided, which means instructing our network partners not to book with airlines that use handling agents that are charging excessively compared with other players in the market.
This in itself can be an issue as it reduces the airlines that we can use in an already limited and under supplied air cargo environment, due to the lack of passenger flights operating, due to passenger sentiment during the continuing pandemic. This is especially harsh on long-haul routes, many of which are the world’s main manufacturing and consumer markets, such as Asia and the Indian subcontinent.
A delicate situation needing creativity and consideration, to ensure that we deliver the best value for money to our customers, has just got a lot more complicated.
There is also the danger that excessive charges will have a domino effect, with hauliers adding surcharges, in order to collect pre-6pm and avoid storage costs. This we are already seeing from some transport companies at Heathrow – so to avoid storage charges in certain airline facilities we are having to pay additional transport costs of up to £0.10 per kilo to ensure freight is collected within the ‘free time’ collection window.
However you look at it, costs have been and are continuing to increase for the handling element of export and import air cargo movements, which we are trying to keep at the most competitive levels, as part of our time critical platform and solution to our clients.
Our air freight team continue to find solutions for urgent and time-sensitive shipments, to every destination and from every origin, using a blend of scheduled and dedicated cargo services.
We work closely with our global network, to continuously monitor market capacity and service opportunities that might benefit our customers.
Evaluating and blocking space on viable services early, is a critical factor in achieving the most demanding deadlines.
Please call Elliot Carlie for insights and advice on how to move your express time sensitive products globally.