definitions
Backhauls or Backloads
Backhauls and Backloads are the same thing. The expression refers to a load picked up by an aircraft on the way back from a charter.
Normally a charter price covers the cost of collecting cargo from the airport of origin, delivering it to its destination, and returning the aircraft to its base. However there are times when an airline might find an opportunity to utilize the empty return sector for another cargo. To find cargo that pays well on these return flights is very rare - often there is no load available on the day and, even if there is, it is usually of a perishable nature (fruit, vegetables, flowers, fish etc.) which pays very little indeed.
However there are certain parts of the world where such perishable loads can regularly be found for flights into Europe (such as some parts of the Mediterranean, and certain areas of Africa) although some products can be seasonal. As a rough rule of thumb, these loads do not pay more than about one third of the cost of the whole round trip. So these loads do not stand up on their own commercially, but need major support from another, higher paying load before they become viable.
It is common for potential exporters of regular 'backhaul-type' loads to feel that their regularly available cargo is enough to start a regular operation. This never works. For example, there are often large quantities of leather goods and textiles available in India, Pakistan and Bangladesh for shipment to Europe or the USA. The exporter may feel that he only has to find a bit of cargo going the other way and he can 'start an airline' ! The problem is that the cargo going the other way has to generate TWICE as much as the original loads will pay. Since there is far less cargo going east from Europe, the rates are much lower. So the necessary quantity is not there, and the rate is far too low to make a success of the operation.
Having said that, the Backhaul can provide a benefit, even if it just pays for the fuel cost to come home. Of course, whose benefit it is depends on how well it is managed. Some airlines might charge you for the whole round trip, then pick up a return load (unknown to you) and keep the revenue it generates. But there are three ways that you can use a potential backhaul to your advantage;
1. Obtain a charter price based on the assumption that a backhaul will be available (assuming that one can be found). This can reduce the cost of your charter by perhaps 20%.
2. Obtain your own Backhaul and charter the aircraft for the whole round trip, loaded both ways. If properly organised this can be more profitable than a one-way load.
3. Ask for a rebate subsequently if the airline finds its own Backhaul. Build it into your contract with them and you may get a pleasant surprise afterwards !
Skyline Aviation can manage any or all of these options on your behalf and ensure that, if there is a Backhaul available for your flight, you get the best possible deal.
Thus, 'Backhauls' are sometimes useful, but their value should not be over-estimated.
Cancellation Charges
In the charter business, cancellation is a serious matter. If a charter has been arranged and a contract signed, the airline will block off that slot in its program and start the process of setting up the flight. This process may be complicated and lengthy, and the airline will not want to engage in the work unless they are confident that the charterer is serious.
That is a significant reason why a contract has to be signed. The airline will know that its client is genuine, and everyone is then locked into the terms of the agreement.
If the charter is then cancelled, the airline has done a lot of work for nothing, and may be left with a gap in its schedule with insufficient time to find alternative work. Indeed, it may have actually turned work away as a result of the original charter, and now be unable to retrieve it. Either way, a genuine loss of revenue has resulted.
If the charter is cancelled well in advance of its scheduled departure date, the airline stands a reasonable chance of finding something else to do but, the later the cancellation, the more acute the 'program gap' problem becomes for them.
Accordingly most airlines set out a sliding scale of cancellation charges, increasing in severity as the proposed date of departure approaches. The rate of cancellation charge is normally a percentage of the full charter price, and may typically range from 25% or 50% on fixture (if sufficiently ahead of the flight date), to 90% or even 100% if the flight is cancelled after the aircraft has actually turned up to do the job.
It may seem plausible to avoid signing the contract until the last minute, thus avoiding any penalty should the operation cancel for any reason. This is fine in theory, but may well result in the airline selling the availability elsewhere, leaving the charterer with no aircraft, and no time to find an alternative. It should also be remembered that the process of applying for traffic rights and landing permits will not commence until the contract is signed, so some countries with lengthy application procedures may not have adequate time to grant the permits for the required departure date.
Unlike Demurrage, which is a bit vague in its application and often flexible in its execution, cancellation charges are for real. Rest assured that, if a charter is cancelled, the airline will surely apply the charges as stated in the contract, which is a binding document that obliges the charterer to pay up.
What is Demurrage ?
Demurrage is an old maritime term that dates back to the days of sailing ships. Essentially it is a fee for keeping the vessel waiting. In the aviation world, this is normally found as a clause in a charter contract which specifies a rate per hour (or part of an hour) for keeping the aircraft on the ground awaiting the late arrival of cargo, or perhaps the late preparation of documents by the shipper.
Sometimes, particularly when the aircraft is operating the charter in the middle of an intense and time-sensitive program, the operator may specify in the contract that 'Demurrage is not permitted without the prior agreement of the carrier'. This means that he cannot really accept any delay, and may have to abandon your charter if you are not ready on time.
This all sounds a bit tough, but in fact it is common for charter airlines to offer clients a degree of flexibility, perhaps stating in the contract that the first 3 hours of a delay are free, for example; and it is very rare, even in cases where 'Demurrage is not permitted' for the airline not to accept a certain amount of last minute delay without penalty, provided that everyone is kept informed and they know that 'the truck is just coming up the airport road'.
In practice, the actual charging of demurrage fees is fairly rare, occurring normally only in extreme cases, and it is more often used as a threat by an airline trying to get things moving ! Of course, none of this applies if you are leasing the aircraft full-time, because you are free to do what you like with it, and delays are of no consequence to the owner of the aircraft.
Royalties and No-Objection fees
Royalties (or 'no-objection fees') were originally to compensate the national airline for profits they would have made, but did not, because a foreign airline took the flight away from them. In theory, the local government agrees to grant a landing permit to a foreign airline, in return for a compensation payment to the national airline who, they claim, would otherwise have operated the flight themselves. On receipt of their money, the local airline will announce that they have 'No objection' to the flight taking place, and the landing permit will be granted to the foreign airline.
In fact there were (and still are) many occasions when the national carrier had neither the required type of aircraft or the availability to operate the flight, but they still claimed the compensation anyway. This right to claim a payment for granting a permit then became common throughout Africa, the Middle East and Asia as a way for local officials to make large amounts of money for doing nothing at all, and the national airline was often not involved in any way - indeed sometimes there was no national airline ! In some countries it is quite normal for ten of thousand of dollars to be charged, even when the flight is for emergency or humanitarian relief purposes, or on local government business.
This can lead to sad inequalities. For example, a British airline operating a flight with cargo from England to the Central African Republic will be charged a heavy royalty there, whereas an African aircraft operating a flight to Britain will be charged nothing. The British government has made little progress in trying to convince foreign countries to stop this practice, but it refuses to levy the same terms in return, saying that it wishes to 'set a good example'. In fact, in recent years, the number of states charging royalties has reduced somewhat, and it is now confined mainly to a handful of countries in central Africa, some in the Middle East (notably including Saudi Arabia), and one or two Far Eastern nations. Industry has become accustomed to the fact that some African countries will routinely use corruption to bolster poverty-stricken local economies, but that does not explain why it is still prevalent in Saudi Arabia.
The method of levying the charge varies. Sometimes it is related to the maximum weight of the aircraft, sometimes to the weight of the cargo carried, and sometimes related to nothing at all. On some occasions a country will say that they do not charge royalties but, for example, will then add US$ 10000 to the aircraft handling charge in order to disguise it. Saudi Arabia will demand that the money is paid in advance to the General Authority of Civil Aviation (usually by the importer in Saudi), before they will grant the landing permit. In other countries the aircraft is allowed to land, but is then prevented from leaving until the locals have extracted enough money, usually in cash from the crew or anyone else who will pay.
Whatever the system for the particular flight, the attitude of the operating airline will always be the same, i.e. that they do not want to get involved. The charge for royalties or no-objection fees will always be excluded from the charter price, and it is up to the charterer to organise payment themselves. Normally if they don't pay, there will be no permit, and therefore no flight. But on occasions the problem does not arise until the aircraft has already landed, so the airline will want to be 100% sure that the charterer or shipper has made the appropriate payment arrangements. This is unfamiliar territory for many in Europe, and the airline will hand the problem over to you, so it is best to pass the issue on to the importer or receiver in the country of destination. They will have come across this before and will know how to sort it out, so give them the headache and keep well away from it.
Back to FAQs
