question of the month
With one year nearly over and another just around the corner, what challenges will face the industry in 2011 and how best can those challenges bemet?
TONY BAUCKHAM Managing director,
Air Charter Service (ACS)
“At the start of ACS’2009-10 financial year the industry was in turmoil, recession was the buzzword and marketsworldwidewere perceived as being depressed. ACS drewup a plan of cost-saving measures and immediate savingswere recognised against these policies. “But, in parallelwith
these cost-saving strategies, ACS continued itsmarketing push without pause in order to boost sales. SamWalton was once asked by a financial journalist: ‘In these recessionary times why have you not reduced yourmarketing spend fromthe pre-recessionary levels?’ “Walton replied: ‘I have heard about this recession
“The airline and air freight industrymust continue to battle the demon of over- capacity”
but I have decided not to participate’. In thisway Walmart continued to growdespite the economic woes surrounding it. ACS, currently, does not reflect the revenues ofWalmart; however it follows a similar mantrawhen times are tough, and, in doing so, has continued to grow. Thismay seema somewhat cavalier attitude to take, but, it is a policy that has worked for ACS, both last year and this year. “So,what of the year to come? The airline and air
freight industrymust continue to battle the demon of over-capacity early in the year, but,with time being a healer, the cargo community can expect an improved situation post the first quarter. “Survivalwill bemost important during the first and
second quarters, and thosewho implement survival strategies late,will suffer. Theremay be insufficient fat during peak to build the necessary reserves but that remains to be seen. Air freight is the litmus paper of the global economy and, at present, it is difficult to predict towhich colour itwill changewhen dipped into the turmoil of forecasting.”
3 AIR LOGISTICSCHINA 0 TON SMULDERS
Managing director, Active Airline Representatives, and president of general sales agent grouping EGSAC
“Many challengeswill face the air cargo industry in 2011. But probably themost significantwill be howto address the eternal problem of over-capacity, and its devastating impact on rates and yields. “This is a problemcreated
mostly by the passenger-led management decisions of airlines,which regularly result inmore routes, greater frequencies and larger aircraft – but it’s onewhich creates a gross imbalance between available cargo and available capacity. ”There are only three
realistic solutions to this problem, and two of themare no longer legal: that airlines collectively agree to artificially restrict capacity,whichwould be regarded by the EU and otherworld administrations as anti-competitive. “Or that airlines collectively agree tominimumrate
“Airlines (must) start to calculate the true cost of carrying a kilo of cargo, and set their rates accordingly”
levels: a return to the golden age of IATA rates that were actually applied. Again, thatwould no longer be accepted, and recent alleged attempts to do so have resulted in fines for airlines and imprisonment for their staff. ”So, that leaves only one possible solution: that
airlines start to calculate the true cost of carrying a kilo of cargo, and set their rates accordingly. That means including the costs of handling, cargo processing and administration, sales commissions, in- housemarketing and sales, additional fuel burn, plus a fair contribution to central airline overheads such as staffing, aircraft finance and/or depreciation, premises and so on. “Will airlines identify this at last?Will they then have
the courage to act unilaterally in the hope that others will follow?Will shippers,who have had such a great deal for 20 years, finally accept that ratesmust rise to realistic levels? Something has to change. “
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