Air charter brokers brace for a bumpy ride in the final quarter
Air charter brokers are bracing for an uncertain fourth quarter, uncertain whether this year’s peak season ...
Charter brokers have expressed shock, anger – and sadness – over Volga-Dnepr Airlines’ decision to end its relationship with brokerages and only deal directly with customers.
In a note seen by The Loadstar sent to all brokers and some forwarders yesterday – some of which were informed via Whats App and others by email – Konstantin Vekshin, executive president, cargo charter operations, wrote: “I feel sorry we have to reconnect in this manner, but I have to inform you of the following developments.
“In view of our plans to develop our business further and reinforce our direct sales efforts globally, it would be fair to inform you herewith that Volga-Dnepr Airlines discontinues its business with brokers in general.
“I understand that there may be unfinished projects or commitments, which we will fulfil and finish accordingly. On behalf of Volga-Dnepr Airlines, I am expressing appreciation for your business.”
Brokers have reacted badly, and industry sources are expressing grave doubts over Volga-Dnepr’s future relationship with forwarders and for the future of charter operations at Volga-Dnepr Group carriers AirBridgeCargo (ABC) and Cargologicair (CLA).
“We are pretty upset,” said one senior broker. “We have worked with Volga-Dnepr for 27 years and done a huge amount of work with them. We have always been there for them, helped promote them.
“We can’t understand why there hasn’t been dialogue, instead of an email. We’ve been a big customer, I’ve closely worked with them – and the email is not even from Alexei [Isaikin, president]. It’s very, very disappointing. But you know it was decided by Alexei.”
An insider source noted that the decision had been in the offing for a long time at Volga-Dnepr Airlines (VDA).
More crucially, however, the decision casts doubt on the future charter operations of ABC and CLA, although Volga-Dnepr told The Loadstar in a statement: “This decision applies only to the charter operations of Volga-Dnepr Airlines performed onboard An-124-100 and IL-76TD-90VD airplanes, which represent the biggest fleet of these aircraft types, and the airline is aiming to increase the availability of its fleet for the benefit of its customers.”
But the broker added: “I don’t think Alexei can decide on one part of the business, and not the other. Absolutely, we won’t be inclined to work with ABC or CLA now. I think the group is in for a shock.
“It’s a big question for ABC. There is a lot of competition in the 747 market. And look at the geopolitical situation – surely, you want as many friends at the moment as you can get?”
Volga-Dnepr’s plans to “reinforce our direct sales globally” has also left concerns over whether it still intends to work with forwarders.
It has close relations and direct sales with shippers such as Boeing, GE, Erikson Helicopters and other AN-124 industry customers. While the airline said it would continue to work with forwarders, forwarders did receive the note concerning brokers, and some are similarly baffled.
“Volga-Dnepr clearly wants to work with industry directly, which leaves a question mark over forwarders,” said one senior source. “It could well be that they want to cut out both.”
Another senior broker said it could make relations with forwarders harder.
“This beggars belief. Obviously there will be a reluctance by forwarders to give consignee and consignor information to the group if they then go out and make direct contact with customers.
“Brokers provide a vital service to airlines in filtering out the crap enquiries and dealing with nitty gritty issues. Airlines won’t know how to effectively handle the enquiries they receive. They are cutting off their nose to spite their face.”
One broker, however, broke ranks and argued that it was a good decision from Volga-Dnepr.
“Antonov and Volga-Dnepr are effectively a duopoly. By dealing with brokers, they probably end up negotiating against themselves and also pricing gets leaked, which has the effect of pushing the pricing downwards, as each of the two parties tries to secure the same business.
“I think this is a good move by VDA as they have a unique product and they now have strong enough brand recognition to go it alone.”
But he added: “ABC and CLA are operating in a much more competitive market so brokers can still add value here. Will ABC and CLA stop dealing with brokers? A harder question to answer, but some of these brokers do control large accounts and a broker can always deal with another carrier in this space if ABC and CLA looks to extend the new VDA policy.”
He continued: “It’s a sellers’ market. If VDA wants to execute this strategy, now is the time to do it. People need lift…let them go to VDA directly.”
One forwarder added that it would increase VDA’s margins and cut administrative cost.
The other AN-124 operator, Antonov, said it was “business as usual”. A spokesperson told The Loadstar: “We are not considering a similar move and we value our customers the same, being a broker, forwarders or principals.
“We’ve always been clear about being loyal to all our customers, including brokers.
“Our strategy remains unchanged.
“For sure it reinforces our message to the market when we say that we treat all the loyal customers the same way and it probably shows even better the difference between the approach each company takes.
“But it’s early to know how things will develop and what impact it will have on us, both short term and long term.”
Air Charter Service was the only broker to speak on the record about the “strange decision”.
In a statement to The Loadstar, Dan Morgan-Evans, group cargo director, said: “Volga-Dnepr Group regularly change their strategy. Some years they are best friends with brokers and forwarders, other years they pay more attention to end users. So we are used to this sort of announcement.
“From ACS’s perspective, we arrange around 15,000 charter contracts a year, of which fewer than than 100 are on Volga-Dnepr Group aircraft. Being such a small percentage of our charters means that it will not significantly impact our business, especially considering that many of these 100 charters are for our freight forwarder clients.
“Our general approach is that it’s business as usual for us, and we are looking at a number of new opportunities which will be opened up from this strange decision.”
Brokers also claimed they were an adaptable bunch.
“It’s quite ridiculous, because brokers always find a way,” said one. “There are always ways of booking aircraft, so it doesn’t make a lot of sense.”
He supported the comment that brokers act as filters. “Everything that doesn’t make sense, we filter out.”
He added that after the recent loss of staff at the airline, there were now junior people “who don’t really understand the business” and could struggle fulfilling the role of broker.