Shippers up in arms as air cargo carriers shift the goalposts on fuel surcharges

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A row over surcharges is threatening to destabilise the fragile relationship between airlines, forwarders and shippers. Moves by Lufthansa, Emirates and Korean Air to base all or most surcharges on chargeable weight have caused consternation among shippers – but carriers claim they are trying to simplify the system, not increase revenue.

Lufthansa is to introduce a chargeable weight system at the start of its winter schedule, Korean Air will do the same from 1 September on all shipments out of Europe, while Emirates will apply the new mechanism to both fuel and security surcharges, also from 1 September.

Chargeable weights are already used in many parts of the world, including India, and according to one airline source, it is a legal requirement in some Asian countries. Introducing it across a whole network simplifies the process, he added.

But shippers have pledged to fight the change.

“A surcharge is the one thing that is not negotiable,” said Joost van Doesburg, air freight policy manager at the European Shippers’ Council (ESC). “And because airlines have been fined for illegal price-fixing on surcharges, shippers are always concerned about them, and get a little bit angry.”

Mr van Doesburg argued that the change in mechanism would break the tripartite contracts many shippers have with forwarders and airlines. “They can agree on rates, not on surcharges. But if airlines increase surcharges by changing the mechanism, this is a violation of the tripartite agreement.”

But, with carriers giving at least a month’s notice, they argue that the contracts currently being negotiated for the new season’s schedule will include the change.

The ESC, however, has called on forwarders to reject the change, and indicated that its members might vote with their feet. Mr van Doesburg said: “I discussed this with a pharmaceutical shipper this morning, and one option was to use alternative carriers. But the other point is that shippers are constantly evaluating their use of air cargo – they want to use less. And when the price goes up it has a negative impact on air freight.”

The changes threaten to trigger something of a squabble between all three parties. While shippers want forwarders to pressure airlines into not introducing chargeable weights, forwarders claim they may have to absorb the cost. Mr van Doesburg added: “We have asked forwarders if they are the sales office for the airlines, or whether they represent the shipper – and they claim to be logistics service providers for the shipper. So we are asking forwarders not just to say ‘yes’. We don’t see the argument that supports this increase. We want forwarders to keep it as low and fair as possible.”

One European head of air freight for a major forwarder, who believes most carriers will have made the change by the end of the year, said: “For the time being we are not fighting it – but we also do not actively support the carriers. We are expecting a lot of resistance from customers, especially global players with a high percentage of volumetric cargo. Probably, forwarders will have to buffer a transition period until the market accepts the new calculation method, or the initiative will fail.”

He added: “Short-term for the forwarders, this involves the risk of losing money on customers that do not accept the new methodology, while long-term it could help to maximise forwarders’ profits in consolidations – as long as volumes can be absorbed.”

One source close to a carrier which has made the change argued that forwarders were the ones benefiting from the current surcharge policy. “Forwarders mix high-density, high-gross-weight shipments with high-volume ones, thus killing the higher volume in the overall consolidation, and pay the airlines based on gross weight.

“Of course, their collection will be a lot higher, as they have had the benefit of charging individual customers based on whichever is the higher number. This goes straight into their bottom line profit. Airlines sometimes struggle with loaded volume loss when shipments are on gross weight. Typically this occurs when shipments are delivered on skids, and because of the shape/size of the skid, they are unable to optimise contoured containers [ULDs].”

He added that trucking companies and ocean carriers already based surcharges on chargeable weights.

But another forwarder argued: “It’s not true that forwarders always make a margin through consolidation. Our company specialises in garments – they are all the same and there is no benefit in that respect.

“This is about the airlines looking at a way of making more money. All we have to do is to try to recover the cost from the customer, and in this environment, it’s extremely difficult. The airlines clearly think they can do it, and if Emirates and Lufthansa are doing it everyone will follow, as they are market leaders.”

He added that he didn’t think the shippers would necessarily be able to find alternative carriers. “The carriers have cut back capacity and there are fewer freighters now. Capacity is more in line with demand – so there aren’t that many options.”

The European forwarder added: “You can rest assured that the carriers will make additional money on this, and that is the key driver.”

But one source at a carrier, which has cut its standard rate for chargeable weight surcharges, said: “It is not the goal to make money. There will be an impact, but it will benefit some shippers and not others. But you won’t hear from the ones it benefits.”

Carriers are, naturally, reluctant to talk about surcharges following the antitrust issues they have faced in the past, but one source questioned whether an early announcement to the market could be construed as “signalling”, or illegally encouraging other airlines to follow suit. However, despite contacting four law firms, no lawyers were able to respond to The Loadstar to clarify the issue.