WHEN flight disruptions occur, particularly due to engine malfunctions or extended routes, the contractual framework for air cargo relies heavily on the terms set out in the Airway Bill. These Airway Bills, which govern the relationship between the airline and its cargo clients, often limit the liability of the carrier in cases of loss, damage, or delay.

The Airway Bill incorporates the Montreal and Warsaw Conventions, which set limits on the carrier’s liability for delay, damage, or failure to deliver goods on time. It also gives the airline the right to alter schedules, substitute aircraft, or reroute flights as necessary. While airlines do strive to maintain good relationships with their partners and customers, the reality is that many disruptions, such as technical maintenance or geopolitical conflicts, may fall within the scope of liability limitations.

Airlines also work in partnership with other carriers, particularly when one airline is facing technical or operational issues. This partnership model helps ensure cargo continues moving, even if one carrier’s flight is delayed or cancelled. If you’re shipping goods or relying on airlines to import or deliver goods, it’s crucial to explore insurance options that cover delays. This might not always be available for certain goods, like perishable items.

Aviation insurance and coverage for disruptions

Aviation insurance policies are designed to address the complex and international nature of air cargo operations.

These policies generally cover both damage to cargo and the operational liabilities of airlines, including technical failures and maintenance issues. However, they may not specify coverage for global disruptions such as geopolitical events or localised issues like airport closures caused by wildfires or airspace restrictions. Most aviation insurance policies will cover claims resulting from breaches of contract related to maintenance issues or the supply of parts.

However, events like airspace closures or unforeseen delays may fall under force majeure clauses. These clauses are key in protecting parties from disruptions that prevent them from fulfilling their obligations. Many larger contracts in the aviation industry set predefined liability limits, which could be around US$10 million. This amount is typically established to cover claims for breach of contract, and insurers often dictate the required coverage for third-party liabilities. Importantly, many contracts also contain clauses that prohibit claims for economic losses, which could be critical when assessing whether airlines, freight forwarders, or cargo owners can recoup financial losses due to extended disruptions.

Impact on time-sensitive and perishable goods

Extended flight routes or delays can have severe implications for time-sensitive and perishable goods. In particular, industries dealing with high-value perishable items, like fresh produce or flowers, face a heightened risk of financial loss when supply chains are disrupted. One immediate issue is that perishable goods may not arrive in optimal condition, leading to spoilage and significant financial losses. For example, avocados and flowers, which are sensitive to temperature and time, may spoil if delayed during rerouting or extended supply chains. This is particularly concerning for businesses like supermarkets, which rely on fast turnover of fresh produce.

In addition to product losses, businesses face financial ramifications as stock levels fluctuate due to disrupted supply chains. Supermarkets have had to adapt by offering a wider variety of goods from different suppliers to mitigate the impact of delays. In the case of avocados, you might now find multiple varieties displayed to spread the risk across different suppliers and countries.

Challenges for airlines and freight forwarders

For airlines and freight forwarders, flight disruptions often mean more complaints from customers and increased administrative burdens. The logistical challenges, such as the need for additional warehousing and handling due to rerouted flights, can lead to further delays and a potential rise in claims.

Airlines must ensure that cargo is safely stored and managed if it becomes stuck at feeder airports due to reroutes. However, many airports lack the infrastructure to manage extended cargo stays, leading to further complications. As customers seek reliability and efficient service, disruptions can erode trust, prompting businesses to consider alternative freight solutions. This competitive pressure is especially significant for smaller carriers who may benefit from the larger market disruptions caused by major players like British Airways and Virgin Atlantic.