Forwarders’ own-controlled networks to persist post-pandemic

Forwarders’ own-controlled charter networks are here to stay but their scale will decline during the next three years as bellyhold capacity recovers. Meanwhile, forwarders’ charter networks remain robust and continue to expand as they contract directly with ground handlers, say experts at CEVA Logistics and DSV. [caption id="attachment_95358" align="alignright" width="400"] Photo courtesy of CEVA Logistics[/caption] “The current number of charter operations is a direct result of the industrywide disruption that began with the COVID-19 pandemic,” said Peter Penseel, chief operating officer of air freight at CEVA Logistics. “The capacity constraints and volatility that remain in the supply chain continue to create an environment where our customers are looking for consistent pricing and capacity.” June 2021 data from IATA shows industrywide capacity, measured in available tonne kilometers (ATKs), remains constrained at 10.8% below June 2019. Bellyhold capacity, in particular, was down 38.8% in June 2021 from June 2019, according to IATA. The losses were partially offset by a 29.7% increase in freighter capacity over the same period. “As disruption and volatility in the market subside, we anticipate shifts in the supply of capacity,” said Penseel. “When COVID-19 restrictions allow increased passenger flight activity, we will see fewer charters as capacity will naturally swing back toward the passenger flights coming online.” Transition back to bellyhold The recovery of bellyhold capacity will take two to three years, according to DSV’s Mads Ravn, vice president and head of global air freight procurement. “There will be a slow transition, as the passenger flight load must be stable in order to provide reliable, consistent capacity. The implications on owned, controlled networks like the CEVA Skycapacity program are similar,” said Penseel. “The mix between chartered activities and pax capacity in the programs will likely shift with the broader market dynamics while the underlying principles of consistent pricing and capacity will remain the same.” How long own-controlled charter networks will remain prominent will vary from region to region and lane to lane, Penseel said. Both demands on individual lanes and regionwide constraints will be determining factors. Trans-Pacific lanes, however, “will likely continue to see charter activities as part of owned, controlled capacity networks as a result of the strong demand on these lanes, even as passenger capacity returns,” Penseel said. According to data from IATA, carriers based in the Asia-Pacific region recorded a 3.8% increase in cargo tonne kilometers (CTKs) in June vs. the same month in 2019. At the same time forwarders predict charter capacity will slow, many have continued to expand their own-controlled networks. Dachser in July launched a weekly charter service between Hong Kong (HKG) and Mexico City (MEX) via Vancouver (YVR). The forwarder’s charter program also offers regular Asia-Pacific connectivity between HKG, Shanghai (PVG) and Frankfurt (FRA). Likewise, DSV in October of last year added links in both Europe and South America to its own-controlled network, including a weekly charter between Luxemburg (LUX) and Huntsville (HSV). Geodis also recently secured its first A330 which will provide capacity to the forwarder’s network for at least the next five years. “More providers will maintain their capacity network programs because the overall service portfolio is now a part of our ongoing, normal operations and execution models,” said Penseel. Forwarder-focused handling In order to expand its slate of services targeted at freight forwarders, ground handler Worldwide Flight Services (WFS) recently acquired French forwarder handling specialist R.A.Hand, which contracts directly with forwarders. The company has about 50 employees and 6,800 square meters of dedicated warehouse space. Handlers specializing in forwarder-focused services may expand in some regions but are unlikely to become a worldwide trend, said Penseel. On the forwarder’s end, contracting directly with handlers and with carriers who hold their own handling contracts makes very little difference, he said. The question of who is liable in cargo handling is more significant. “We're looking for consistency, which we don't see today,” said DSV’s Ravn. “There's zero stability in terms of the turnaround time, from recovery, or breakdown. “We’re not seeing that if we have full control with our own warehouse with a dedicated staff doing it. Then we can better put boots on the ground to oversee the process, see when more manpower is needed, and call that in.” For its part, DSV contracts directly with ground handlers at airports like HSV, Rockford (RFD), and LUX. Contracting directly with handlers at larger airports isn’t possible, according to Ravn. For this reason, DSV tries to avoid larger airports within their own-controlled network.

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