PICTURED - I was privileged to host a webinar with Darren Masters - Menzies Aviation's VP Finance Oceania (right) addressing policies relating to their revised terminal fees. .jpg#&39; border=)
Below is a summary of questions from FTA subscribers and Darren's responses.
Q1 Why is the CTO fees for imports 3 – 4 times higher than the rest of the world?
A1. In part this is because export fees are much lower than the rest of the world. This is driven by the capacity challenges inbound vs. the large available capacity outbound in Australia; as a result Airlines have always been very opposed to export charges by the CTOs. The charges have developed over time in response to market conditions in Australia.
We have not tried to match the overseas scenarios; our reference to them was simply that the principle of a much closer Lose vs. unitised rate was not something which was made up by Menzies in Australia
Q2. What is your KPI from time to lodge for pick up and subsequent time to lodge for pick up and subsequent time to load?
A2. This does vary significantly by Airline. In most cases the time is 90 minutes for express cargo and 3 hours for general cargo, however these standards are agreed with the airlineand are their standards not ours.
Q3 Would Menzies be open to implementing KPI structure and after reduced fees when the KPIs are not met. We as freight forwarders are not able to charge certain customers the full CTO fee when we don't meet agreed transit time KPIs?
A3. We already have KPI systems in place with Airlines where the KPIs they require to be met are listed. There are numerous reasons why cargo may be delayed which are outside of our control such as customs, AQIS, etc. etc. While we are open to discussing most things, we would be unable to have penalties payable in any situation which is outside Menzies accountability. We would prefer to look at specific situations where KPIs are not met and address the issues which have caused these.
Q4 The cost increase to unit rate structure seems to be offset for the cost to transport lose to the second terminal is this the real reason behind the increase?
A4. Simply no. The second terminal was developed to improve service levels and reduce congestion at Sixth Street. The full impact of any changes in these fees across Australia does not even get anywhere near the additional costs involved with the second terminal. The reason for the changes are as stated in our communications, namely the changes in cargo mix being experienced in the market place and the need to realign fees so we do not end up with unworkable future fee regimes. The second terminal decision was our decision and we do not expect the market place to pay for any additional costs in this regard.
Q5 Forwarders would prefer an increase to the ULD Price?
A5. While this may be one point of view and we can understand it, we do not believe it is a long term viable option. It still creates inequity between shipments and does not reflect the level of cost incurred relative to the fee received for the work.
Q6 With the reduction in loose cargo mix over recent years this should in turn reduce the wage cost for Menzies with less staff required to break down cargo it should have also reduced the need for a large warehouse floor space needed to break down ULDS they remain intact on racks yet wee increase in loose costs each year and now a change in the ULD rate structure. Costs should be less in handling cargo in ULDs.
A6. While the change in the type of cargo does change staffing costs it does not create a like for like change in cargo staffing. A lot of cargo labour is incurred just to operate a terminal and is not necessarily driven by the mix of cargo. Costs are less to handle ULDS no one is arguing with this point. Our fee regime retains a massive difference in fees between loose and unitised cargo. The problem is that the fees related to unitised cargo are in our view much lower than the cost of handling them. This is partly due to the fact that the main increases in charges by CTOs over the years have been to loose handling fees. If we do not do something to change the way charges are levied, the movement in shipment mix towards unitised cargo will create a situation where we will end up with loose fees per kg which have to grow exponentially to cover the cost increases we face but over a reducing % of total cargo handled.
Q7 If the increased costs from the airport is a significant factor in increasing CTO handling charges, shouldn't the industry and in turn all CTOs be looking to put pressure on the airports to reduce costs for freight handling . Without this the loose rate is still going to increase and the ULD rate is likely to increase in the future.
A7. Airports by nature are monopolies. Putting pressure on them certainly does occur; the question is always what alternative exists for us. Airlines have fought with Airports for years about landing fees, passenger fees etc. and these have still increased. The Airline industry in relation to its influence on Airports is massive compared to the influence CTOs can create.
The infrastructure work by airports is focussed on passenger services and initiatives to reduce CTO costs on airport are not high on the priority list. There was nothing available for us on Sydney airport when we looked at our options in 2013. Consequently we had to go off airport to get what was needed with the subsequent trucking costs an unfortunate consequence of improving services to our customers
Q8 Menzies has significantly reduced their operating hours on week-ends in Sydney. Was this further reduce costs? But there is no reduction in ITF fees or savings passed on to freight forwarders?
A8. This change was driven by demand. We were finding very little requirement at these times and were incurring significant cost to operate a terminal without demand. We have done what we can to reduce costs in our business to mitigate the need for fee changes. If there is demand for a change to hours again we will adjust accordingly. I am also aware that we have arranged specific times to suit particular forwarders and will be prepared to do so if specific issues are raised with the terminal management directly.
Q9 We are experiencing long waiting times and the cost is then borne by the freight forwarder. What is Menzies doing to reduce waiting times?
A9. While all facilities experience challenges at times, we do not see generally long waiting times in our delivery statistics at all. We would be interested in looking at specific issues so we can investigate any challenges and resolve them. We do believe that in any comparison of CTO service criteria and waiting times we rank well.
Q10 Airlines won't allow a fee on exports which is understood as this could cause a large impact. This would mean that the only way to cover costs that the CTO has control of is import terminal handling fee as all other revenue is tied in with airline contracts. How do you look to curb the ever increasing cost of handling imports as this is the only charge that you can scale yearly?
A10. It is indeed a significant challenge. There is no doubt in Australia that imports subsidisethe cost of cargo handling for exports. This is however simply driven by the market dynamicsin that there are higher inbound capacity constraints than outbound. The freight fees levied by the airlines themselves are proof of that. Our belief is we need to try and spread the costs more evenly and in more of a relationship to the CTO work undertaken, however that will be limited by the marketplace. We will continue to attempt to improve efficiency and pass this back to Freight forwarders. Our e-AWB fee is reflective of what we want to continue to do.
As processes become automated and reduce costs we will attempt to reflect that in the feeswe charge. The fees need to have some balance and reflection of the cost involves however before this works properly.
Q10 Can you remove the minimum ULD rate and replace it with the kg rate?
A10. This is an option we will review as part of the overall review of the changes we have made and is a possible change
Q 11 With the new revenue from ULDs would you reduce the minimum for loose?
A11. As with Q10 we will consider this as part of the review we will undertake.
Q12 We have several customers that have raised this concern. I have a simple example of what the cost difference is for just one regular importer using Menzies. 3 x ALF's @ 9000kgs. Currently paying $180, the new fee would be $ 900. This is a massive increase of $0.08 / kg. The customer is now looking at changing airlines to avoid Menzies. Could you please advise if there will be a difference rate structure for perishable cargo?
A12. We have reviewed submissions in relation to perishable cargo and the impact the revised fees will have. We have as a result introduced a 5.25c per kg fee for perishable cargo as part of the changes. We hope this will assist to remedy some of the more extreme increases in charges as we are certainly not seeing this type of increase in our overall revenue due to the changes we have made.