By Alex Lennane 03/02/2018
Air freight capacity is very much on the minds of forwarders this year – and Flexport, flush from its latest round of funding, has signed a three-year contract with Western Global Airlines (WGA) for a 747-400F.
WGA will operate the aircraft for the forwarder twice a week between Hong Kong and Los Angeles, until September when it goes up to three times a week. Flexport will shortly have its own livery on the aircraft.
“We are a young, rapidly growing company,” Neel Jones Shah, head of air freight for Flexport, told The Loadstar. “We are using the aircraft for our own growth.”
“Airlines have been slow in adding capacity, to keep yields high, so we have had to act. From September, nearly all the weekly capacity on the aircraft will be dedicated to Flexport.
“The response from both our customers and the market has been very positive. Customers think it is wonderful news after a very challenging 2017. It’s a really great opportunity to take care of them.”
The lane between Hong Kong and Los Angeles is “very important” to Flexport, but Mr Jones Shah indicated that Flexport might extend the service.
“We don’t see this as the end – there could be more opportunities. We are very fortunate to have a partner in Western Global. It’s more of a strategic agreement, rather than transactional.”
Forwarders are increasingly looking towards longer–term agreements with airlines this year, concerned that the crisis of 2017’s fourth quarter could be repeated, with little additional capacity coming on stream this year. Panalpina, famously, has had its own capacity for years, while DHL Global Forwarding has dedicated capacity with Atlas.
But a three-year contract is “not for the faint of heart”, said Mr Jones Shah.
“It will depend on individual companies and business plans whether to get into charters,” he said. “There is a growing trend of forwarders making sure they have dedicated capacity this year. I don’t know if it’s a groundswell, but I see more and more forwarders wanting to be in control of their own destiny.”
Pricing, he says, will depend on the contracts with customers.
“It will depend on type of cargo, long-term commitment – a number of variables. But it obviously has to be competitive.
“Some customers want to be on fixed pricing, others transact on a spot basis and are comfortable doing that. But we will honour the agreements that we make.”
Last month, Western Global won permission from the US Department of Transport to expand its scheduled cargo operations beyond its flights between the US and China/Hong Kong. It requested flights between the US and its open skies partners, as well as transiting intermediate counties.
It was also given permission to serve Brunei Darussalam, Chile, Cook Islands, New Zealand, Samoa, Singapore and Tonga, all signatories to the Multilateral Agreement on the Liberalisation of International Air Transportation.
Mr Jones Shah added: “WGA is a super-run company. Its operational performance for the US Department of Defense and UPS is unbelievable. We are very impressed.”
Western Global Airlines has been selected by freight forwarder Flexport to run its Hong Kong-Los Angeles scheduled freighter service, revealed earlier this week.
The three-year deal will see Western Global provide a dedicated Boeing 747-400F twice-weekly service between the two hubs starting on April 5.
In September, as the industry begins to head into the peak season, the service will be ramped up to three times a week.
Air Cargo News reported the start up of the service earlier this week, although at that time it was not known which firm would be flying the aircraft.
The decision to launch the scheduled services is in response to airfreight capacity shortages, climbing rates and growth targets.
"When your freight flies private with Flexport, we control the shipment end-to-end at a fair and predictable rate," Flexport said in a customer flyer.
Late last year, the freight forwarder chartered in B747 freighter capacity, chartered from Atlas Air, to cover capacity shortages caused by the pre-Christmas rush and strong growth in air cargo demand.
At the time, head of airfreight Neel Jones Shah revealed the company had set ambitious growth targets - a 300% increase in revenues - for 2018 and it would need to be able to have access to enough capacity to meet the extra volumes that would come with this increase.
He added that the company would look to continue its airfreight operations this year and grow them in 2019 and 2020, assuming market conditions do not weaken.
Meanwhile, it appears that Western Global will be looking to further expand its scheduled services in the future.
In mid February, the US Department of Transport (DoT) gave its approval to Western Global's plans to expand its scheduled cargo operations beyond its current flights between the US and China/Hong Kong.
Western Global’s chief executive and founder Jim Neff said: “Our partnership with Flexport is a significant milestone because it will enable our two companies to join forces to revolutionize the traditional air cargo platform for the 21st century.
"Both Flexport and WGA were founded in 2013, and both have taken customer-focused approaches based on new technology.
"They have grown rapidly to become leaders and innovators in their respective business segments, and as such are natural partners in changing the air freight dynamic together. I believe that WGA’s responsive and robust service will allow Flexport to strongly serve their customer base both in Asia and the US.”
Ryan Petersen, chief executive of Flexport added: “At Flexport, we are always striving to improve service to our clients. Our partnership with Western Global helps us achieve this goal, because we will have consistent and reliable air freight capacity that our clients can count on.”
Neel Jones Shah, Flexport’s global head of airfreight, said: “This new partnership allows Flexport to offer predicable, affordable and a custom-tailored service to our customers with guaranteed capacity through seamless, dedicated scheduled service in the important Hong Kong to US markets.”