Major air cargo handlers close to collapse

4/4/2020

European and global business leaders from the main airport cargo and ground handling companies are warning of the imminent collapse of their sector because of the collapse of European and global air transport markets, bringing airports to a halt and severely impacting supply chains during the COVID-19 pandemic.

In a message that is being repeated across Europe’s main capitals, business leaders from the four main airport cargo and ground handling companies – Swissport, dnata, WFS and Menzies – have “taken the unprecedented step” of jointly writing to the UK government warning of the imminent collapse of their sector and highlighting the implications of this to the UK’s airline sector and supply chains and during the COVID-19 pandemic. 

They stressed that the airline cargo and ground handling industry is a critical part of the UK aviation system, “providing 90% of cargo and passenger handling at all UK airports and essential services like the handling and security processing of cargo and aircraft fuelling. Without these services, aviation as a whole cannot function, and supply chains will collapse”.

Four senior executives from the companies jointly emphasised that currently, “as more than 95% of flights are not operating, ground handling companies are not being paid”, noting: “While the industry has welcomed the Chancellor’s work retention package, low margins and staff comprising 70% of costs mean that the viability of the industry remains immediately unsustainable.”

Craig Smyth, CEO of Worldwide Flight Services (WFS) told Lloyd’s Loading List that the problems were obviously not just confined to the UK, noting: “This is an urgent, industry-wide, global situation. It is not only a case of air cargo and ground handlers getting support and assistance from governments to keep critical supply chains moving in the current market conditions. It is about protecting aviation security and safety, ensuring our industry is able to continue to play a vital role in supporting regional and national economies and retaining highly skilled employees and making sure it’s all still in place to aid the future recovery of aviation as well as the businesses which rely on it.

“The message the air cargo and ground handling industry is urgently communicating to the UK government is the same industry message which is being shared with governments in other key markets, such as France, Germany, Spain, the Netherlands, Belgium and Ireland. We need immediate support to get through the current challenges, which have temporarily paralysed the aviation industry, to be able to retain our key, highly-trained workforce.

“All over the world, we can see so many examples of how important our role is in expediting deliveries of urgent medical equipment and supplies. Governments must also see beyond the current crisis, recognise air cargo and ground handling and its essential support as a driver of the economic recovery every nation is going to need. This is why the four global handlers are taking a collective responsibility to ensure our voice is heard.” 

Commenting on the UK situation, Jason Holt, CEO of Swissport for Western Europe, said: “As an industry we strongly welcome the Chancellor’s large-scale work retention package. Helping protect our employees and their jobs is a paramount concern of ours. However, even with this assistance, the aviation industry remains in crisis. And in light of the Chancellor’s recent letter to the sector, I have profound doubts that the fundamental challenges for the industry, both now and in the future, are being addressed.

“Without immediate support with taxation and charges, operational flexibility, and the flow through of the Chancellor’s announcement from last week into actual cash funding to support our workforce, we are perilously close to collapse.”

The four companies said the air cargo and ground handling industry will be working with HMRC to access funds committed by Government but are calling for further support, specifically through:

The relaxation of the eligibility requirements for either the Business Interruption Loans Facility or corporate finance loans offered by the Government.

A holiday from PAYE and National Insurance for both employees and employers, together with business rates relating to the significant number of premises they utilise.

To respect social distancing and the furloughing of their teams, they are calling for a practical six-month extension to the Civil Aviation Authority’s regulations requiring all staff to receive retraining every two years.

Holt added: “The aviation system is a triangle of airlines, airports, and ground handling businesses. Without cargo and ground handling companies, international supply chains will stop functioning during the COVID-19 pandemic and recovery.

“Our thousands of employees are keeping goods and parts moving safely and securely during the COVID-19 pandemic and will be integral to the recovery of airlines and airports once the initial crisis concludes.

 “The ground handling industry is robust and competitive in normal times. We have chosen to come together as one voice in these extraordinary circumstances to ask that we be given the essential and urgent support we need to ensure planes can continue to fly.”

Smyth added: “Our message to the UK government could not be clearer or more urgent. Support and immediate action is needed now to maintain the UK’s cargo (and passenger) airport handling capability to ensure cargo supply lines can continue to operate at this time of national and international crisis, and for cargo and passenger airport handling services to be resilient and sustainable after the Covid-19 crisis has passed.”

He stressed that the ground and cargo airport handling industry had “shown its resilience through many crises over the past 20 years, but the global impact of Covid-19 is unprecedented in its global reach, scale and longevity, and means that there is now a real risk of its imminent collapse”.

Smyth added: “Airlines have either grounded their fleets or countries have closed their borders. In our low-margin industry sector, this has resulted in a catastrophic drop in business volume and revenue. As most of our costs relate to people, without immediate Government support, our only options will be to make significant redundancies and to close down operations.

“This is a situation we are anxious to avoid but, amidst all this uncertainty, we cannot continue to play the vital role we do in the nation’s economy and wellbeing without government help. Without this immediate support, even when Covid-19 is defeated, UK trade will continue to suffer long-term disruption because a major part of the supply chain infrastructure at UK airports needed to fuel the country’s recovery will have been shut down – and this will take many months to re-establish. 

“The practical financial measures we are asking the government to agree will help us bridge the gap of drastically reduced revenues until normality is restored to the market, and to retain staff to support the full resumption of operations in the best interests of the country and British industry.” 

He explained that retaining as many highly trained and accredited employees as possible is essential to maintain the very highest levels of aviation safety and security, and to keep in place the essential trade infrastructure which will be needed to re-energise the British economy. “Otherwise, once the crisis has passed and there is an expectation of returning to normality, we can’t make the assumption that the ground and cargo handling companies will be able to immediately restart,” he added. 

“We will face many additional months of recovery while we re-hire, train and certify staff to meet our strict industry requirements, and this will significantly slow the UK resurgence. For the good of the UK economy, British businesses and consumers, we need the government to act now to ensure the vital services our industry provides survive this unprecedented moment in history.”