COVID lockdowns, military conflicts, fuel prices, trucking shortages, cargo capacity issues, supply chain interruptions…it sure feels like we have had a buffet of all-you-can-eat problems these last couple of years. Sometimes it seems that one issue leads to another, into another, into another, and so on. As industry professionals, it really requires us to stay on our feet and adapt at a moment’s notice or risk shuttering the doors. As a cargo airline, we have really been tested during these periods and have truly made the best of what could have been a very devastating situation.
Geo-Political Challenges
From the early 2010’s up to just a year ago, GFS and Silk Way were heavily invested in supporting various governmental, diplomatic, NGO, and private business movements in and out of Afghanistan. During that period, we operated 3-4 flights weekly and moved millions of tons of goods a year. So, when this lane was abruptly shut down, it represented a massive blow to yearly revenue. Thanks to forethought and planning, the leadership pivoted quickly and opened new lanes to India, Vietnam, and Thailand. Today, we are faced with the war in Ukraine that brings up an all too familiar set of challenges.
With Russia being sanctioned by nearly every Western country, air space closures, and an active war zone, we were forced to suspend service to Ukraine and Russia. While this, too, represented a revenue decline, leadership was quick to react and refocus that capacity to offer more charter availabilities which have proven to be quite successful.
Fuel Prices
The subject of fuel prices around the globe has become one of the biggest hot-button political issues. Regardless of where you stand politically or what you believe to be the cause of the sharp increases in the price of fuel, one thing stands certain for all consumers…it is painful. You don’t really need an advanced degree in economics to understand how high fuel prices affect the price of nearly every commodity across the globe.
Specifically, in the air cargo industry, we are caught in a very tough position. Our planes won’t fly without fuel…if we can’t pay for the fuel then we can’t fly…if we aren’t flying then we aren’t making money to pay for fuel. At the beginning of every week, the fuel surcharge is announced based on a 2-week average of price per barrel of oil. In an effort to remain transparent, we send out an email blast and post the current FSC on our website. At GFS and SWW, we have tried our best to limit the impact of fuel increases by being flexible with our rates to help our customers win the business while maintaining profitability.
COVID-19
Unless you have been living under a rock or on a remote uninhabited island, there is little to no chance the COVID-19 pandemic has not affected you in some way. In the aviation industry, we saw passenger flights canceled at a rate never seen before. That then leads to a massive reduction in lower-deck cargo capacity, leading to a massive surge in freighter capacity demand. While that demand did lead to opportunities for new business, it also led to a spike in per-kilo rates due to supply and demand. It extended transit times to many popular destinations.
In addition to consistently full flights, GFS and Silk Way operated numerous charter flights moving various medical supplies, PPE, test kits, and vaccines. This, in turn, highlighted the need to offer customers Pharma and temperature control solutions on scheduled commercial operations. Again, leadership recognized this early and immediately began the process of training, equipping, and certifying the airline for the transportation of medical products for human use. In June 2021, Silk Way became GDP Certified for Pharma and Temp Control Products and began offering this as a viable service.
Lockdowns
While the pandemic did present many challenges and opportunities, it seems that one of the most significant issues we are still facing is lockdowns. In short, when one of the busiest global hubs of commerce and logistics is shut down (i.e., China), it creates a domino effect that reverberates throughout the world and actively disrupts the global supply chain. We saw this actively affecting the global market during the beginning of the pandemic, but stress somewhat subsided as businesses, logistic companies, and governments adapted and created strategies to deal with the “new normal”.
Lately, however, in China’s effort to become COVID-ZERO, extended strict lockdowns have essentially shut down manufacturing and limited movement into and out of major Chinese logistical ports. In addition to severely reducing export goods normally filling outbound flights, these lockdowns also limit the manpower necessary to conduct normal flight operations into the country. The combination of these devastating factors has led to several canceled inbound flights to the U.S. that normally carried these goods and created a situation where outbound capacity is very limited.
GFS Strategy for Limited Capacity
Over the last 3 years, we have been challenged at every turn to be inventive and proactive in our approach to tackling these issues. We have worked diligently with our customers to provide effective solutions that address their air transport needs. As we move into the future, we remain committed to offering the very best customer service at the very best rates possible and discovering the best possible strategy for demanding logistics requirements.
As always, our team is standing by to answer questions, provide the best rate possible, and book your next shipment. Please don’t hesitate to reach out to us at any time.
Given the lack of capacity caused by limited inbound flights, we are finding that priority/guaranteed first-flight-out service at an affordable rate is becoming one of, if not the, most sought-after product. On any given flight, there are upwards of 150-200 different AWBs, and after space is given to priority bookings and/or part charters, many times freight is rebooked or rolled to another flight due to space. As such, we would like to start working with customers to create Block Space Agreements (BSA) that would guarantee space at a contract rate. Essentially this gives the customer priority service at a deeply discounted rate, guarantees space, and insulates from extreme fuel price swings. In the past, the very thought of a BSA has turned customers away almost immediately. Understanding this, we are eager to work with interested customers to find an appropriate solution that meets their needs and is not punitive in nature.
