Press Release

Excessive Airfreight Surcharges are damaging exporters’ competitiveness

As the US Dollar value reached new lows and crude oil prices per barrel surged towards the US$ 100 mark the Irish Exporters Association (IEA) today stated that airfreight surcharges were at excessive levels.

The IEA’S Chief Executive, John Whelan, explained the full concern of the exporters as follows;

‘’Fuel surcharges, as applied by airlines as an add–on to the normal freight rates, are at an all-time high due to the high price of crude oil. However, the surcharge being charged to Irish exporters is approx 50% higher than it should be’’.

He went on to say ‘’the net impact is that Irish exporters will pay 55 million euro more in fuel surcharges than they should over the coming year at current surcharge rates. This, he said is affecting the competitiveness of exporters, particularly those shipping to the US who primarily have to rely on airfreight to get their goods to market.’’

The IEA statement went on to explain the situation as follows;

· Major airfreight carriers, both Airlines and Express Carriers have, for many years, imposed fuel surcharges to protect themselves against unexpected changes in the cost of aviation fuel.

· The fuel surcharge is imposed in the exporter’s local currency at a rate of so many cents per kilo. Post 9/11, the average level of surcharge has been calculated on the assumption that one US Dollar was of equal value to the Euro.

· With the exchange rate hitting US$ 1.46 = €1, the IEA points out that Euro Zone exporters shipping to the USA are being unfairly discriminated against by the carriers whose policies favour US exporters to Europe.

· Average November 2007 surcharge levels are at 80 cents per kilo. For Europeans this is 80 Euro cents, for Americans it is 80 US cents per kilo. At current exchange rates the Irish airfreight exporter is paying the equivalent almost 120 US cents per kilo – 50% more than the US based exporter.

Airlines operating out of Ireland such as Aer Lingus, Delta Airlines, American Airlines, US Airlines, Continental Airlines and other carriers are increasing their transatlantic capacity in anticipation of the implementation of the ‘Open Skies’ agreement, and this is welcomed by the Irish exporters who have seen the benefits of competition on the routes. However, they are all working in consortium fashion and using a fuel surcharge rate which does not reflect individual company costs burdens due to the rising fuel prices, nor an equitable exchange rate for calculating the surcharge. Exporters are already under pressure with currency exchange rate difficulties and need the airlines to take a more realistic approach to fuel surcharges .The current levels of fuel surcharge effectively double the actual airfreight rate. The IEA has called on the airlines to adopt a realistic exchange rate for the fuel surcharge, and issue a new and lower fuel surcharge rate over the next week.

The USA is the single most significant export market for Irish based Companies, North and South, accounting for 67% of total airfreight exports from the island of Ireland. A recent study carried out by the IEA showed the growth of direct air services as a significant competitive advantage for Irish companies whether in the ‘high-tech’, pharma or speciality food products businesses. Airfreight is as important to the SMEs as it is to the multi-nationals, and they are all suffering the effects of the excessively high fuel charges.

The IEA commends the work of the EU Commission in stepping up its activity in seeking to stamp out anti-competitive practices in both the passenger airline business and in airfreight. The Association calls on the Commission to enforce fair dealing on the part of the carriers and the use of realistic exchange rates in determining any surcharges.

Ends.

For further information contact:

John Whelan, Chief Executive, Irish Exporters Association
Telephone: 01 661 2182 / Fax: 01 661 2315
Mobile: 087 9271243
Email: jfwhelan@irishexporters.ie