Shipping and forwarding will be transformed in myriad ways by the spread and containment of coronavirus, according to Andy Thorne, CEO of the Kestrel Group. He said the events of 2020 had caught everyone off guard.
“Of course, it’s been a huge change,” he told Lloyd’s Loading List. “The world got caught with its pants down. We in the West looked at coronavirus and thought it be would be another Asian Bird Flu or SARS and didn’t pay enough attention. It came to the Western world very quickly and we were overwhelmed and didn’t act quickly enough.”
The dramatic change in the outlook for freight forwarders also caught them off guard. “If someone had said to me in January that Kestrel, even with a good wind and a fair breeze, will probably only break even this year, I would have laughed,” Thorne laments. “We might make a small profit, but it will be a miracle because some of the business has totally dried up.”
As a Non-Vessel Operating Common Carrier (NVOCC) and liner agent, Kestrel is a market leader in the Caribbean where it offers global liner connections supported by multiple offices across the region in addition to five UK offices and a string of offices in the Americas, Africa and Asia. However, Kestrel has more than one string to its bow. Primarily an agency business, it is also an NVOCC and a freight forwarder providing air freight, breakbulk and heavylift services.
“We handle about 35,000 TEUs globally into the Caribbean and north of half a million containers a year in total if you convert our breakbulk and Ro-Ro cargo too; so we’re up there with the top carriers – and we also represent Hoegh Autoliners through a Kestrel Group Company who offer near global capability for Ro-Ro and breakbulk, as well as many other niche breakbulk lines, so it’s a mixed bag.
“We are the UK’s largest liner agency, representing more carriers than all of our competitors put together. We are fortunate to have been twice named in The Queen’s Birthday honours list, receiving The Queen’s award in 2010 and 2018.”
Thorne expects that coronavirus will have multi-faceted impacts on the freight and shipping world, changing how the industry is managed and business conducted. In the short-term, Kestrel has been doing its best to find ways of keeping vital trade lanes open when many Caribbean ports are only accepting crucial cargo food stuffs and medical equipment, or restricting vessel or quay access for stevedores.
“It has been a challenge,” he said. “Our breakbulk and ro-ro business is still pretty strong but our container business to the Caribbean has been affected. We are still very busy with LCL [Less than Container Load], but some of the full loads have quietened off. But we are still loading groupage every single week for the Caribbean and maintaining that.
“We are determined to keep loading every week to the islands. Some markets have seen massive growth, like Guyana – where we normally load only one container of LCL we are loading three to five 40’ (units) every 10 days.”
Thorne believes the public often do not comprehend the difficulty of sourcing Personal Protective Equipment (PPE) when the whole world is demanding vast amounts urgently when a few months ago there was little demand for it. Considering the challenges faced, he also thinks many governments, including the UK’s, have provided fantastic support for businesses.
“From a business point of view, the support that we have received from the UK government and our bank Nat West, who arranged a CBILS loan almost immediately, has been outstanding,” he added.
With 160 staff worldwide, Thorne said personnel health and safety has been foremost when coming to grips with operating during the current pandemic.
“The vast majority are now working from home,” he said. “We try and keep them out of offices, but some need to go to warehouses to load cargo and print documentation, etc.”
Coronavirus, he believes, will change the logistics business forever, and in many ways that are positive. “For sure, things will never be the same,” he added. “There will be more working from home and as a business owner, I’ve had the time to look at my business critically – how we handle it, what’s profitable, what’s not. I’ve looked at how we take it forward in 2021 and beyond, how we make it better. It has been a great opportunity in that sense.
“Some things we have been doing are unnecessary. But you miss that office interaction. When you’re all together, someone talks about something and you pick up on it and you can assist them.
Office interaction missing
“Working remotely means you need good people because there’s less communication, so you need much better processes to get things done. So, our processes are becoming much more streamlined. Our e-commerce business is flourishing, and there are less ‘tyre kickers’ – those who call just for a quote that won’t happen. Enquires we now get are live and real and turn into business almost immediately.
“Calling shipping lines with own offices and getting answers is really tough, but that’s good for us because we are working every day and available and can take bookings easily, so we have picked up more business. That’s another positive.”
Thorne admits Kestrel had some fortune in the timing of coronavirus lockdowns for the Caribbean markets it serves, which are heavily dependent on tourism.
“Our luck is that the bulk of our container business is Caribbean-centric and if Easter comes in March or comes early, we have a reasonable year,” he explained. “If Easter comes in April, we have a fantastic year because Easter is the big watershed point for people going on holiday to the Caribbean. After that they stop going and look forward to the summer holidays.
“The fact is that this year the vast majority of cargo had already moved pre-Chinese New Year because it had to arrive for Easter so the extended lockdown in China just meant that the last stragglers didn’t move until after.
“So, we have been quite lucky that it happened around Chinese New Year. There was a little slowdown and now it’s hitting hard, with volume off by approximately 40% looking forward to May, while April was down 15%.”
He said with many ports still closed and restrictions in place in the Caribbean, it was difficult to plot what a recovery would look like.
“The ports were locked down to protect people in the middle of March but with the vast majority of income being tourist related, thankfully their money had already been earnt,” he said.
“If a country says its only letting in food and medical supplies, you’ve already taken out a significant amount of business and it will take a little while for it to come back.
“But we have a lot of pent-up business and projects that will go ahead. One major project in the Caribbean said as soon as Italy, Spain and the UK can give us product, we want it asap, because we want to build in the downtime ready for the uptick in the first quarter.
“So, they are expecting to be fully operational by the third quarter. Hotels that have closed down are doing refurbs over the summer months with no interruption. Normally they have some occupancy and have to be careful about noise, so we are expecting a very large uptick.”
Thorne has been improving Kestrel’s transit times, including launching a new service into a range of Caribbean islands from the UK with a 14-day transit time instead of the 24-day transit time when cargo is transhipped over Caucedo.
“The new improved service over Saint Maarten means we can now serve the Leeward and Windward islands in as little as 9-14 days from the UK,” he said. “We’re knocking a lot of time off our transit. A direct result of this forced lockdown has meant I’ve had the time to look at the routes and schedules and make adjustments.
“We’re also talking to a few shipping lines who are looking at their costs and considering whether to close their own offices and go back to an Agency. We’re talking to two shipping lines in particular who are seriously thinking about this. Everyone is looking to reduce costs and overheads and how agents can help reduce costs and still increase business.
“I have always maintained that agents are motivated by booking freight. If we don’t’ book freight, we don’t make money. Carriers who have their own offices pay their staff regardless of the cargo lift.
“So, we’ve got a lot going on and we’re looking at more new services.
“Our air freight division in particular, has gone crazy. We are working very hard in this sector and just secured a contract worth over $2 million in freight revenue, which will see us move urgently required PPE into The Caribbean in May alone.