British Airways World Cargo’s (BAWC) announcement this week that it has increased its fuel surcharge is likely to squeeze profit margins of airfreight users still more, especially as other service providers are expected to follow suit.
BAWC announced an increase to its fuel surcharge which will rise to 72p/$1.10/€1.10, with effect from May 8.
BAWC said the increase follows a second consecutive week that its fuel index has been above the level 22 threshold.
The index was developed by BAWC to provide customers with more information about the calculation of fuel surcharges. It is updated on a weekly basis and posted on www.baworldcargo.com.
Adam Carson, senior manager, revenue management,at British Airways World Cargo, said: “The continued escalation of fuel prices has made it necessary to increase our fuel surcharge by two levels, in line with the index."
But the move will put more pressure on the fresh produce airfreight sector. “This surcharge will be passed onto cargo rates obtained by the produce exporters in the countries of origin,” said John Crofts, md of Manchester-based Pangaean. “The freight forwarders and general sales agents who book cargo space for the exporters will have to drive harder bargains with the airlines to minimize the cost increases to the exporters and ultimately the UK consumer.”
At Heathrow-baesd freight-forwarder HPL Kensington, Raj Bakshi, exports manager says the move will affect business. “This increase was unexpected and it is going to mean more expense for the supply chain,” said Bakshi. “Profit margins are already tight and they are going to be squeezed even mor enow - if you were getting 5p a cage now it is only going to be 3p a cage.”
The danger is now that other airlines will follow suit and with supermarket customers unlikely to want to pay more for their produce or pass those increases onto shoppers, the costs will have to be absorbed further back along the chain.
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