Navigating global skies

Singapore freight forwarders – Star Concord
11-Dec-2023

With a global presence, Kales Airline Services has looked to go beyond the traditional role of a GSSA through its partnership model.

“We actually think of the airline as a true partner,” Sebastiaan Scholte, CEO of Kales Group, said. “We have the in-house capabilities to set up and run a fully independent cargo department on behalf of our airline customers. We provide actionable market data, can set up a road feeder service network, negotiate interline and handling agreements and provide state-of-the-art solutions, always taking into mind our agile entrepreneurial spirit.”

Prioritising customer growth

Recognising the drivers of profitability for an airline, either in passenger or with freighters, Kales acknowledges it is important to use the right cost drivers to allocate certain costs. 

The revenue mode of Kales is aligned with that of its customers, driven by optimising the revenue per flight. Therefore, they are always trying to optimise the yield and payloads of their customers. 

Moreover, they are continuously trying to reduce their airline customer’s cost with the economies of scale they have to negotiate better road feeder service (RFS) and ground handling agent (GHA) agreements

“Changing from a cost driver X to cost driver Y can have an impact on the economic viability of projects, divisions, flights etc,” Scholte explained. “It is a given that every flight that leaves with a low load factor is economically unrecoverable. Therefore we continuously are looking at best ways to optimise the revenue per flight.

“Applying marginal costing means that the extra revenue generated in certain actions (like for example taking an extra shipment on board an aircraft) will trigger additional (marginal/variable) costs,” he continued. 

READ: Thriving in a developing GSSA industry

Optimised services

Kales is committed to ensure that its customers, be it from passenger, freighter or a combination fleet, receive the same high quality service where yields and load factors are optimised.

“With our in-depth knowledge and experience with the different types of passenger and freighter aircraft we know all unit load device and pallet positions with its restrictions, so we can optimise the load factor combining volume and dense shipments,” Scholte highlighted.

Kales has sought to work with its partners to learn from their best practices, applying them where possible in their own operations to ensure a smoother supply chain.

“For example, our total cargo management division we have operational management control that ensures seamless quality across the air cargo supply chain. We apply service legal agreements and standard operating procedures with the service providers we contract on behalf of our customers and we regularly conduct audits,” Scholte outlined.

READ: Kales Group signs global partnership with Cainiao

Stabilising situation

While the markets started relatively strong in the first quarter of 2023, even though volumes and yields were already declining, the two quarters thereafter were less favourable. However, volumes are growing again and the yields are stabilising.

“Somehow most of the people extrapolate the current situation in perpetuum,” Scholte stated. “A year ago most of the industry was expecting great times ahead of us, with higher rates than pre-Covid using the Covid years as a reference base. And now they are expecting more declines using this year as a reference.”

“Churchill once said: ‘The further you look in the past the better you can predict the future’. Our industry is cyclical strongly driven by demand and supply. There will be more growth again,” he continued. “2024 will most likely start slow but hopefully it will pick up as of the second half mainly driven by the incredible e-commerce growth and subsequent restocking.”

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Author: Edward Hardy