An outlook for marine crew travel

One of the challenges shipping and ship management companies now face is that crew changes are becoming more complicated, time consuming and expensive.

Winter 2020/21

The current climate

Learning from experience

The current climate - learning from experience

Commercial shipping and related marine crew travel has always been one of the most resilient travel sectors to geopolitical, economic and, most recently, pandemic health crises.

Thanks to its alignment with seaborne supply chains and global trade, it has maintained a constant growth rate despite international conflicts, natural disasters, fluctuating oil prices and global economic downturns and on average 100,000 seafarers need to be changed on a monthly basis in order to keep global supply lines undisrupted.

This need has not been reduced by the COVID-19 pandemic and the subsequent travel restrictions imposed by countries, ports and airlines since March.

At the end of September it was estimated that 400,000 seafarers are still stranded on board ships- many with expired contracts needing to be relieved by a fellow seafarers to replace them.

Despite the situation having improved since March, April and May, when around only 10-15% of 2019 scheduled flights flew, we do not expect the regulations to be relaxed or to stabilise at a global level anytime before mid-2021. With 80% of all countries still considered to be high risk areas by the Center for Disease Control and Prevention in September 2020, governments continue to impose restrictions on an ongoing basis and limit or prevent ships from conducting crew changes.

One of the challenges shipping and ship management companies have been facing since March and April 2020 is that crew changes are becoming more complicated and time consuming with so many different restrictions and protocols in place.

This, in addition to airline route limitations and therefore scarce availability on some of the most needed routes for seafarers, has made crew changes lengthier and more expensive. This is further exacerbated if we also add quarantine measures, increased airfares and other additional costs, such as tests, into the mix.

Airline outlook - capacity

Increasing airline capacity, which rebounded to 40% of 2019 flights in July and close to 50% in August, should not be considered a recovery just yet.

In response to coronavirus outbreaks across Europe since mid-August, capacity is down to almost 40% again in September and we should not expect airline schedules to come back to pre-covid volumes as long as country lockdowns and quarantine requirements are re-introduced and announced at very short notice. As such one can expect to see some fluctuation for a period of time.

Overall, the air seat capacity shortage is expected to continue across the next 6-9 months as frequencies remain a fraction of 2019 schedules and current government

restrictions discourage full re-deployment of routes and larger aircrafts by major airline suppliers.

Additionally, the airline industry is expected to further shrink due to bankruptcy or mergers necessary for survival, which, as a result, will bring more seat capacity shortages, particularly in areas with already limited seat capacity such as South America and Africa.

Such events would make seafarer itineraries and crew changes in these regions more difficult and more expensive.

Airline outlook - pricing

Airline Pricing

Given the observations regarding capacity, airfares are likely to fluctuate until a final ease of government lockdowns and restrictions is in effect. Pricing is currently more 'simplistic' (fewer service classes and/or more restrictions) and more expensive as a result of airline-specific priorities such as profitability and/or liquidity considerations.

*Excluding domestic flights.
Where cells are empty, COVID-19 period has insufficient sample.
Please note that these figures do not include chartered flight costs booked with ATPI in 2020, which are typically higher than commercial flights.

There may be new or hidden costs related to extra airport taxes and airline surcharges levied in relation to enhanced coronavirus airport and aircraft checks, sanitation and cleaning.

In the short-to-medium term (Q4 2020 and H1 2021) and after only partial easing of government restrictions, airfares are expected to remain between 35%-50% more expensive than 2019. This prediction is based on an exercise conducted on a number of ATPI's global marine clients. They represent 30% of the 2019 total of ATPI's marine business volumes. The exercise compares 2019 against April-August 2020 data, to identify Covid-19 related average cost impact.

Although it does not compare the same time periods or global situations, nor the exact same Origin & Destination (O&D) and passenger mix, it is a large enough sample to allow us to draw some conclusions by looking at the average fare increase and traveller mix by crew nationality and continent.

The table overleaf shows the overall average fare increase for the top crew nationalities, as well as a breakdown of the respective increases by continent, which could be used as a guideline for 2021 budgeting purposes.

In summary, travel within and to/from Asia, where lockdown started early and seat capacity is still limited/restrained shows an average increase of 55%. Whereas to/from and within Europe the average increase seems to be below 35%, which is highly affected by the average fare increase in travel between Europe & Asia at 60%, since travel within Europe increased by only around 5-10%. It goes without saying that key crewing countries such as India and Philippines, which experienced extended lockdowns and banning of commercial air travel, have seen the greatest increases due to extremely limited availability.

Travel within and to/from North and South America, where lockdown started after Asia and Europe but remains closed, shows an average increase of 25%, mainly affected by travel to/from Asia again at an increase close to 50%. Also travel to/from and within Africa shows significant fare increases of around 70%, also mainly affected by travel to/from Asia with an increase around 85% higher than 2019, as both continents are still very restricted, whereas Africa to/from Europe’s increase is around 44% due to Europe mainly being more open.

Crew change outlook

It is true that once restrictions began to ease in Europe and some of Asia, and countries/governments started recognising seafarers as key-workers, which ensures that they are exempt from travel restrictions and are able to travel to and from ships, crew travel rebounded and hundreds of thousands of seafarers were successfully repatriated and replaced by relief crew. However, a considerable number of crew are still stuck at sea.

This is partly because some continents and countries have not eased their respective in-country restrictions at the same pace as others and therefore crew changes have become either impossible or prohibitive.

Nevertheless, the mix/share of crew booked between the same top 4 continent mixes has remained quite stable during the

COVID-19 period when compared against that of against 2019:

Crew change outlook

Crew change complexity during the pandemic

The outbreak of the pandemic brought with it obvious difficulties in the travel booking process and led to lengthier crew change completion times. Six months since many lockdowns began and there are still no standards among country lockdown guidelines, port regulations on seamen and airline/airport hygiene standards and restrictions.

Travel consultants and crew managers are working together to find 'out-of-the-box' solutions in order to overcome the ever-changing obstacles and make crew changes happen.

This requires extensive search and confirmation of information via different channels in order to provide effective, viable and accurate solutions.

These conditions have resulted in increased time taken to complete a crew change, therefore finalising a crew change may now take up to 5 times longer in comparison to pre-coronavirus, due to rapid and unexpected changes in movement regulations, enforcement of travel bans and - already limited - airline options.

Some of the additional tasks involved in the crew travel booking process during the pandemic are:

Constant updates to all travel consultants via ATPI Alerts
Identification of possibly affected travellers by any new restriction or other change of situation via the ATPI Duty of Care team
Continuous monitoring of airline websites to confirm current bookings as cancellations can occur without prior notification
Online research for repatriation and charter flights
Constant phone and written communication with airlines and embassies
Waiting list configuration and updates
Keeping the client informed of the above as far as possible

These are the new conditions to which our experienced travel consultants but also shipping and ship management companies have adapted and we anticipate will continue to experience for most crew change requests for the next 6-9 months.

Crew change outlook

Travel disruption cost and additional time

Shipping and ship management companies should also consider the increase in costs and extended time linked to travel disruption. When travel/health requirements are not met or an airline cancels a flight last minute due to newly imposed restrictions or low demand, a number of unforeseen elements are likely to inflate the crew change cycle:

Overlay land-based costs (hotels, subsistence)
Quarantine time (hotels, subsistence, medical expenses, evacuation expenses)
Cost multiplier effect: i.e. vessel disruption from an on-signer’s delayed boarding
Renewed or multiple Covid-19 tests due to delays and cancelled flights

Crew change outlook

Health requirement cost

Shipping & ship management companies have seen a surge in operating expenses, as major cost components, such as crew change costs, have sky-rocketed.

Even after the eventual ease of lockdowns and return to some form of normality, the effects from the airline trends described previously and the post-Covid-19 normal will continue to negatively affect ship operating expenses.

Other than the air travel costs, various Covid-19 health requirements imposed by border controls, airlines, airports and ports (medical tests, PPEs, additional time spent onshore, etc.), have made crew changes an expensive exercise, especially when a global safety standard has not yet been agreed and adopted.

Given the added complexity and cost of crew changes, the shipping industry will be forced to consider crew travel as a critical expense item that requires the attention and care of specialist professionals in a strategic client-supplier relationship.

In addition, a proactive grip on cost control and constant budget monitoring and improvement is likely to be a key element in their efforts to mitigate OPEX increases.

ATPI is in a position to support shipping and ship management companies during the Post-COVID-19 new normal, offering our enhanced value based on fresh, proactive and innovative solutions, aligned with clients’ elevated requirements on cost control and duty of care.

Sources:

www.imo.org

www.eurocontrol.int

www.cdc.gov/coronavirus

www.bloomberg.com