Market Overview

Cargo Airlines Prepare For Brexit Demand Spike

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Cargo Airlines Prepare For Brexit Demand Spike

Air cargo carriers are expecting a demand surge for scheduled and charter capacity if the British government overcomes opposition in Parliament and proceeds with a no-deal exit from the European Union Oct. 31, a scenario that even government experts agree will cause logistics chaos at English Channel ports.

Opposition to a no-deal Brexit reached fever pitch Sept. 4 when the Conservative government led by Boris Johnson suffered a heavy parliamentary defeat. The defeat could pave the way for a bill to be passed designed to prevent Britain from leaving the European Union with no deal at the end of October. It also could prompt multiple other outcomes, including a further delay to Brexit, a general election or — and this is a long shot — an agreement between the EU and U.K. being struck in the coming weeks.

However, according to some constitutional experts, even a bill designed to prevent a no-deal Brexit might in theory be circumvented. Such are the Byzantine possibilities and complications of Britain's unwritten constitution.

While the politicians squabble, the logistics sector is doing its best to plan ahead. And history shows a no-deal Brexit or a Brexit agreement that disrupts trade represents an opportunity, at least in the short term.

Peter Stallion, an air cargo derivatives broker at Freight Investor Services, told FreightWaves a no-deal — or disruptive — Brexit would see chartering activity spike if a capacity squeeze or a land/port route blockage occurred or seemed likely.

"Given the price of charters and the perceived risk of committing to them for what is a highly uncertain Brexit scenario, chartering will largely appear during or in reaction to any cataclysmic lack of capacity or holdup at the border," he said. "You may see forwarders laying on charter services into the U.K. as some form of service guarantee to clients."

This is precisely what occurred around the previous Brexit deadline of March 29, before a stay of execution was agreed to by the U.K. and the EU. Air cargo operators reported a flurry of charter and scheduled bookings as shippers and their proxies took steps to secure capacity to keep critical supply chains open in anticipation of chaos at English Channel ports, the critical artery for trade between the U.K. and the European Union.

Raphael De Vannoise, U.K. and Ireland director for Air France-KLM Cargo, confirmed the carrier saw a demand increase in March ahead of the earlier Brexit deadline, particularly from shippers seeking contingency plans for perishable goods that usually ship by truck.

"A number of shippers seemed to want to ship unusual spot shipments and big flows as the deadline approached," he told FreightWaves. "It was hard to link it directly to Brexit in all cases, but Q1 was strong."

The carrier is now taking steps to ensure cargo flows continue whatever the Brexit outcome.

"We are preparing for Brexit in ensuring our feeder service by truck will keep working smoothly after the deadline in case of no deal, and we will work on plans for products — especially perishables — that may create issues at the border if we have no solutions by then," he added.

"Our existing full freighter service stops in Prestwick, London Stansted and Dublin will also provide solutions for shippers and forwarders wanting to avoid crossing the channel," De Vannoise said.

A Lufthansa Cargo representative said its freighter network would be realigned if Brexit caused a change in cargo flows. "It remains to be seen what effect a possible Brexit will have," he added. "In the event of a short-term increase in demand for air freight services, we are generally available both with our scheduled capacities and on request with freighter charter services."

Christoffel Nielen, vice president of Europe, Africa and the Middle East at cargo airline Cargolux, said the carrier would maintain service levels irrespective of how Brexit was resolved.

"In the event of a hard Brexit, customs delays would inevitably occur at the border, impacting road traffic and trucking activities," he added. "In this case, air freight could be a potential solution for commerce and the movement of goods. We are currently analyzing and monitoring customer demand and could potentially devise a flight schedule including the U.K., should the need arise."

The carrier also has taken steps to ensure it has the correct permits post-Brexit. "Cargolux has been in contact with the Luxembourg, U.K. and EU authorities to ensure a smooth transition and business continuity," said Nielen.

"All preparations have been made to ensure that Cargolux will hold all permits that will be required in the U.K. once it has left the EU, should a no-deal departure occur."

Image Sourced from Pixabay

Posted-In: air cargo Brexit FreightNews Eurozone Global Markets General

 

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