Mike Hill, Director – Group Freight, explains in this interview the importance and benefits of working with a charter broker as well as how the future for the freight charter business will look like.
The charter business can be very competitive for a forwarder and margins are usually very tight, surely I have a competitive advantage if I can save on the broker commission and work directly with the airlines. So why do I need a broker?
I think there are 2 parts to this, firstly commercial and also operational reasons.
First of all, a broker has the experience and ability to study the load and then to source the most suitable and competitive aircraft for the requirement from a wide range of operators whether it be a well-known flag carrier or an obscure private aircraft operator. Along with our volume buying power, this can provide a significant saving for our clients.
As well, especially important in these times, is our quality department which is constantly vetting the airlines for their financial and operational reliability. Also we are checking that operators comply with our ethical criteria, in other words, that they have no prior links to sanction busting, arms smuggling or fraud. Air Partner is proud to uphold its standards to anti-bribery and anti-corruption regulations which is sadly becoming more of a threat in some parts of the industry.
So as well as compliance, the broker’s role is to have a fixed eye on the market which is of course constantly changing, with new airlines, new routes and daily changing availabilities.
As we are major clients of the airlines, we have good contacts and long personal working relationships and thus we have certain beneficial conditions with them, especially regarding payment and cancellation terms.
There are numerous pitfalls and risks associated with chartering an aircraft. An airline obviously has expensive fixed costs and therefore must protect their investment. That’s why all airline charter contracts very much protect their own interests and place all risks at the side of the client.
Our position as broker is to mitigate these risks on behalf of our client. This means that we would be checking the airport suitability, coordinating with the handling companies, checking weather forecasts and processing the permit applications - all this as well as having a backup plan to counter any unavoidable issues.
Don’t the airlines do this anyway?
No not always. For example, in most cases, the weather forecast is first looked at by the flight crew of a freighter shortly before the planned departure. By which time of course the cargo is already delivered at the airport and often already on loaded. Any delay to departure time can therefore incur extra costs, which are excluded from charter contracts and are thus to the client’s account. However, we would be checking in advance, well before the aircraft and cargo have even positioned, so that no unnecessary costs are caused, and everyone has good time to prepare in case of a weather delay.
This is just one example where the role of a broker can save money and a headache.
It is the same with permits. An airline might not fly to a certain country often, probably less often than we do, so therefore we can arrange flight permits to certain places where the airline does not have the specific experience.
How much do you charge as broker commission?
Compared to how much we can save for our client, very little, and it will differ depending on the complexity of the flight. It is certainly a very negligible fee compared to the potential loss that can be avoided by our involvement.
There seem to be many charter brokers around, what makes Air Partner any different than the others?
A lot of charter companies have entered the market, especially in the last five years, so it is very crowded – particularly as some airlines and forwarders also offer charter services. But I believe for such an international product, one needs a charter partner who has a global reach with their own office network, an infrastructure, experience and a long-standing reputation, not only with the clients but with the airlines and airports.
In my opinion there are only a few real quality global charter providers. But how we distinguish ourselves even further is that we are probably the most efficiently networked global company. Each of our offices are in daily contact with each other, combining enquiries, capacity and knowledge together. For example, a requirement from Germany into the USA, is best served by involving both of our offices in Cologne and Fort Lauderdale. Also, if I need a Turkish operator to operate a charter ex-Europe, then our colleagues in Turkey, who have the best local contacts, will arrange the aircraft. This seems unique in the charter broker world.
There has also been a trend in brokers entering the airline market either as operators or general sales agents. We don’t think this is always in the best interest of customers. Partnerships like these mean there is an incentive for brokers to promote aircraft types which may not be the most suitable for a particular mission. At Air Partner we have no plans to manage aircraft directly, as we want to remain a neutral consultant to our clients. This also sets us apart.
In addition, the current trend of brokers working directly with shippers is something that is certainly not beneficial to the forwarding industry as a whole. We have been since some time publicly declaring our alliance to the forwarding industry as charter consultants. This is why we have had such a long loyal relationship with forwarders from networks such as World Cargo Alliance. Yet despite this I am always still surprised to see numerous forwarding companies still working together with certain brokers companies who make no secret of their direct to shipper relations. This is surely not in the long-term interests of the forwarding industry to support such behavior.
We see many forwarders placing business with broker companies who also work directly with shippers.
Most importantly of all though, our brokers are all industry professionals, with extensive product knowledge and an industry experience prior to their time at Air Partner. So we have staff with backgrounds from forwarding services, from the integrators, from airlines and from cargo handling and logistic companies.
How was your 2018?
The Freight team enjoyed a very busy 2018, successfully delivering cargo assignments from a variety of new and existing customers. As was announced in Air Partner’s interim results in October, Freight gross profit was up 36.4% for the six months ended 31 July 2018. This followed on from a record 2017. We’ve also enjoyed organic growth as a business in 2018, with an increase in clients to a record high. We have seen particular growth in government flying, as well as increased activity in the aerospace sector.
How does the future look?
We anticipate that it will be business as usual in 2019 with further organic growth. We have recently announced a new freight presence in the Far East and Houston, in order to better serve the forwarders in those regions.
Most importantly, we remain neutral, working with freight forwarders to protect their position in the business and enable them to offer winning charter solutions within their service portfolio.
We have over 50 years of experience, so our people are well trained to deliver superior customer service, along with specialised knowledge of the industry and our products. We shall continue to focus on delivering the highest levels of customer service in 2019 and beyond.
