News / Capacity constraints pushing forwarders toward block space air cargo agreements

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Capacity constraints have tilted the balance of power in favour of the airlines, with shippers no longer able to pick up and drop carriers on a whim.

Because of the heightened demand – largely caused by surging e-commerce volumes – forwarders in the perishables sector are having to decide between signing block-space agreements or risking losing space.

And any hopes of carriers increasing available capacity are very unlikely, said one forwarder, who told The Loadstar airlines would “choose to increase capacity at minimal levels to enforce yields”.

Another forwarder, managing director of Morgan Cargo Herman Bosman, said exporters now needed to work with airlines during the low seasons to ensure they get capacity in the peak periods.

Speaking to The Loadstar at FruitLogistica in Berlin, Mr Bosman said his company would “definitely” be signing block space agreements.

“This, especially on certain constrained routes, like Chicago, Los Angeles and Miami, will be necessary to ensure we don’t run into problems,” said Mr Bosman.

“It used to be the case that exporters could pick and choose their airlines, but they now need to work more collectively in the low season to get the space in the high season.”

Mr Bosman said Morgan Cargo wanted to “take the lead” in facilitating the growth of this exporter-airline relationship. He said this would, hopefully, help offset the trend in recent years of sudden increases in volumes, particularly through Heathrow.

“Last year’s high season was the first time we had to sign a block-space agreement for flights out of London Heathrow,” Mr Bosman said. “We have of course signed these for other gateways, but it was new for Heathrow, as we realised if we didn’t we would struggle. We were also one of the only forwarders to do this.”

For the perishables sector, the problem has become more pressing, with carriers having to decide between space for lower-paying perishables or other higher-paying commodities. One forwarder said it would not be unreasonable for a carrier “to punt for the commodity that brings in more money”.

Mr Bosman said: “If you look at the big e-commerce companies, the volumes are huge and will only continue to rise, putting more strain on available capacity.

“If an airline can get more from another sector over perishables, this presents further hurdles, which is why we are entering into these block-space agreements.”