Most US air forwarders have cut staff numbers

5/13/2020

More than half of US-based air freight forwarding companies and associated air freight firms appear to have made some level of personnel cutbacks in the last few weeks despite federal relief programmes encouraging them to retain staff, as the effects of the Covid-19 pandemic takes its toll, according to a new survey.

The findings come from a survey in early May by the Airforwarders Association (AfA) among its members, which range from small businesses with fewer than 20 employees to large companies employing more than 1,000 people and business models varying from domestic to worldwide freight forwarding operations – and related businesses involved in moving air cargo through the supply chain.

The survey aimed to look at how the business impact of the pandemic was evolving for its members, their thoughts on developments such as passenger aircraft all-cargo flights, whether members have applied for and received any of the financial assistance programmes of the CARES Act and to advise the AfA how it should proceed in its advocacy efforts.

In a brief summary of the results, AfA advisor Roy Hecteman highlighted that in terms of staffing levels, “fully 60% report some level of personnel cutbacks ranging from modest to ‘bloodbath’”.

Federal relief

He reports that a similar number have applied for federal relief under the Paycheck Protection Programme (PPP) or other programmes. Established by the CARES Act, PPP is implemented by the Small Business Administration with support from the Department of the Treasury and provides small businesses with funds to pay up to eight weeks of payroll costs, including benefits. Funds can also be used to pay interest on mortgages, rent, and utilities.

PPP is a loan designed to provide a direct incentive for small businesses to keep their workers on the payroll, with SBA offering to “forgive loans if all employees are kept on the payroll for eight weeks and the money is used for payroll, rent, mortgage interest, or utilities”.

Among the AfA members that responded to the survey, over 62% have applied for federal relief and another 9% are “in the process”. And regarding the status of those applications, over 65% have been approved, with 31% still working through the process.

On the question of whether this support will it be enough, Hecteman said the responses indicated that “the jury is still out, but close to 80% think it will bring significant relief, but will fall short of keeping the whole”. 

AfA executive director Brandon Fried confirmed to Lloyd’s Loading List that this means “80% of the respondents feel the PPP brings significant financial relief for the time being but will probably be insufficient if the crisis lasts longer than the eight weeks of coverage for which the funding is intended to cover”.

Asked whether the trend for airlines to use their passenger aircraft to perform all-cargo flights had helped, Hecteman said the responses indicated “truly mixed results” that he said were “most likely dependent on the market segment(s) in which they specialise”.

Nevertheless, he said just under 70% have reported some degree of usage of the programme.

On the question of where and for what have these ‘passenger freighter’ operations helped, he said “geographically, we are seeing a mix between the US and Asia and the US and the EU”. And as for commodities, he said “not surprisingly, most is centred around medical supplies and pharmaceuticals”.

And lastly, on the question of how companies see the situation in 2020 playing out, he said members expressed “a lot of concern about when and how strongly things will turn around – especially in the B2B arena”.

Wider US logistics sector

The responses echo trends reported in other parts of the US logistics sector, where freight companies indicate that the urgent demand to transport medical equipment and to get essential goods to consumers isn’t compensating for falling logistics demands on other sectors of the sharply contracting US economy.

According to a report today in the Wall Street Journal (WSJ), US trucking companies cut more than 88,000 jobs in April and warehouse operators cut more than 74,000 roles, leaving package-delivery companies – which added 1,800 jobs in April as they boosted business carrying e-commerce orders to homebound consumers – as the only transport sector boosting employment last month.

WSJ said the gap between the package carriers and the rest of the logistics sector highlights the varying impact of the coronavirus-driven lockdowns on different parts of the US economy, noting that the loss of 2.36 million jobs in goods-producing sectors, including 1.33 million manufacturing jobs, shows why “many truckers say the added business moving high-demand products pales next to the lost trade from industrial-scale operations”.

The extent of job losses among freight forwarding and logistics companies in other parts of the world is currently unclear. While many have taken advantage of government supported furlough schemes to provide a temporary response to falls in business levels, many have also internally announced permanent redundancies, with anecdotal evidence of some freight forwarders reducing their staff levels by 10-15%, and others reviewing their staff levels.

Late last month, global freight forwarding and logistics group DSV Panalpina announced that it was reluctantly having to let go of around 3,000 staff as part of a US$200 million COVID-19 cost-cutting programme to align its costs with a significant drop in demand that is expected to continue throughout this year. It said the staff reductions had already begun in some markets, with most of the 3,000 losses to be from among the company’s 30,000 ‘white-collar’ staff rather than its 30,000 ‘blue-collar’ workforce.