Australia’s Air Freight Industry

A brief overview will soon put it into perspective. Ansett has the Mayne Nickless contract and is half owned by TNT (and carries most of the latter’s freight); Australian currently has the Australia Post contract. Most other air express forwarders in Australia are owned by TNT or Mayne Nickless. Mayne’s, for example, own the lpec fleet and the Wards Learjets.

Australian Cargo, Australian Airline’s airfreight division, utilise an Airbus A300, a 727-100 freighter and a BAe 146-100; Ansett Airfreight utilise a 707, a DC-9s and two BAe 146-200s as their core aircraft on a nightly basis. Both airlines also let contracts to a number of third level operators.

The interesting thing is that both airlines buy space from one another, and carry freight that would certainly surprise the uninitiated. For example, Australian Cargo carries ad hoc shipments for Ansett and TNT (and its subsidiaries); Ansett also carries Australian airfreight – especially to enable Australian to fulfill its enormous obligation to the Australia Post contract (which Australian won away from Ansett on 2 April 1990, but more on this

later).

One could almost derive from this that some sort of cosy cartel exists. The response from either party is “definitely not”. Both will assure you that the current arrangements exist purely because they are both expedient and pragmatic; further, that no tears would be shed at the unlikely demise of the other-it would simply mean that the victor would have to increase capacity to compensate for the inconvenience of the other’s departure.

Does this then indicate another feature? That is, that Ansett and Australian are comfortably sharing the Australian domestic market to ultimate capacity, and that the only opportunity that would exist for a third contender would be if either of the incumbents faltered.

It would appear that there is no short answer to this question. First, what would the new operator want to offer? A door-to-door service, with all of the enormous cost outlay that it implies? (For example warehouses, drivers’ vans and sophisticated computer networks. ) A wholesale service that offers only linehaul space to door-to-door operators? Would the new service be Australia wide, or merely between the major capital cities? Both airlines currently offer all of the above.

Second, is the overall Australian airfreight market continuing to grow? What if the country was subjected to another domestic pilots’ dispute? How would that affect a third entrant? For that matter how would it affect the existing two airlines in light of the events of August 1989? Certainly Ansett’s and Australian’s experiences can be documented.

Within one week of the dispute’s commencement, Ansett had leased a DC-8 from Arrow Air of Miami and was servicing Australia’s capital cities (except Darwin). Three weeks later, the two Ansett Airfreight BAe 146-200s were back in the air.

“Prior to the dispute, Ansett was uplifting about 400 tonnes a night,” Tony Markou, deputy general manager said. “By Christmas of 1989, we had recovered to about 90% of our previous capacity. This was helped in part by some huge shipments of Atlantic salmon, crayfish and scallops out of Tasmania. I can safely say now we are back to our previous levels. ”

Australian Cargo was slower to recover, although managing director, Emmet Hobbs, was not in a good position to give an accurate account of the airline’s performance since he was only appointed in October 1989, in the throng of the saga. “What I am able to say is that the capacity was only about 20% when I was appointed, and that we had returned to full capacity by February 1990,” he said.

Both airlines make no secret of how much the dispute hurt them, both financially and with client goodwill. It is also no secret how both airlines were assisted during the dispute. If there was another dispute (and all things are possible under the sun), would a third entrant be assisted?

One of the clearest messages that has come to light is that the recovery of airfreight for the airlines within six months has clearly surpassed that of the passenger contingent which continues to linger as this article goes to print. Apparently airfreight has no memory. According to Emmet Hobbs, airfreight probably makes the most contribution to net revenue for Australian at present. Australian Cargo buys belly space from its aircraft at market rates, and is compelled to pay regardless of its utilisation. This space is invariably filled due to the Australia Post contract.

“Essentially we won the contract through service and price,” Emmet Hobbs explained. “We deal with numerous light aircraft operators and buy space with our competitors to fulfill our contract. This is not simply a base load contract – we make money on Australia Post alone. ”

Perhaps Australian’s winning of the Australia Post contract partially alleviated the shock of losing Mayne Nickless to Ansett in November 1988, an event that forced Australian to “rethink its cargo objectives”. These have been many: a new general manager twelve months later; a customer survey that prompted Aus- tralian to dispense with contract drivers and employ their own. In NSW alone, the outlay was $85,000 in April 1990; it’s stated that the amount was fully recovered by June. A change of name is also in the wind. Apparently the connotations of ‘cargo’ do not auger well with clients, who perceive it more as a term associated with bulk ocean freight.

The customer survey also revealed that most clients valued service above cost (at last!); this contrasts greatly to the price wars of the early eighties, when many customers used to play air freight forwarders off against each other in order to get the lowest rates. Australian is also investing heavily in its customer service section, with training and a new centralised telephone. system based in Melbourne. A competition exists, designed to prevent consignments going astray-it is called ‘spot, stop, and tell’. An obvious example of this is a carton with an incorrect destination sticker or the like. To the astute operations person, such an aberration is readily detectable.

Gerry Rowe, Ansett Air Freights’ general manager, avows that Ansett are not resting on their laurels in any way. “We are constantly looking for ways to improve in terms of service and in a customers’ choice of services,” he said.

Ansett are much less reticent to reveal figures and reasons for events. If one of their aircraft is late, they say so, and why. They feel that they lost Australia Post more for political than for other reasons. While being duly concerned about this loss, they still maintain that their market share speaks for itself, especially in terms of the number of aircraft that they launch into the air on any week night.

Those not in the industry could be forgiven for asking “Well what is the fuss all about why is there this frantic effort every night to diligently move packages and the like around the country?”

Perhaps a brief definition of what constitutes “fast freight’ is in order. Essentially, it is freight which can be picked up from the consignor’s address in the afternoon, say up to 1800, and delivered to the consignee the following morning by 0930. Of course there are exceptions. Caims to Geraldton, for example, might be realistic, say 1800 to 1130.

So, that’s the fast freight, or air express, concept. Why do people need such a service?

Perhaps one of the most qualified persons to answer this question is Dick Creak, manager of the Overnight Airfreight Operations Association (OAOA), and with a long history in avition and the airfreight industry. “Key reasons for growth include the expansion and diversification of Australian business, and the quickening pace of business itself,” he explained. “Customers now demand a service that will deliver freight, whether it be a valuable takeover document or a 5 metre crocodile, quickly. reliably, efficiently and in ‘one piece’. ” People who make it their business to analyse airfreight needs, are now using such terms as ‘just-in-time management’ and ‘central warehousing’. What do they mean? Again, Dick Creak explains.

“Many industries are now adopting these philosophies, which have proved popular overseas, to keep inventories at a minimum. The motor industry, for example, is able to keep inventories at optimal levels at both manufacturing and distributorship/deal- ership locations by using airfreight to move parts. Airfreight has also proved very effective in the servicing professions, including law, medicine, finance and graphic design, all of which often require the quick transportation of urgent documents, artwork or medical supplies. ”

And of course, one must not disregard the airfreight needs generated by the on-carriage of international imports and exports. Both airlines are geared to play a major role in this area.

So, this is a brief overview of the state of the airfreight industry in Australia as this article goes to print. Is it likely to change with deregulation?

Initially, the OAOA expects something of a price cutting war in the commonly termed ‘airport to airport’ business. However, they expect the ‘door-to-door express’ market currently dominated by airfreight companies with a large, established infrastructure-to remain as such, considering the huge outlay costs previously mentioned.

But as the recent pilots’ dispute showed, and as imminent deregulation will no doubt show, those airfreight companies that survive will do so to offer an even leaner and more efficient service for their customers.