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Forwarders push for "all-in" air cargo rates

By William DiBenedetto, CBN Feature Editor

Perhaps moving to an "all-in" pricing model will help the struggling air cargo industry, or at least reduce the struggle.

An all-in rate is the total cost of an item, including all direct and indirect costs for that item. Forwarders are calling for airlines to end air freight surcharges and shift to all-in rates. Speaking recently at The Loadstar’s air freight seminar at Multimodal in Birmingham (UK), Doug Overett, UK business development director for CEVA, said: "I just want to see consistency. Some airlines have moved to all-inclusive rates, and others haven’t."

All-in pricing reduces complexity in favor of stability and consistency. As Nigel Wilkins, head of UK air freight operations for DB Schenker says, "With lots of different mechanisms, it’s very hard to organize pricing."

"Customers want to see a reduction in the fuel surcharge since prices went down," said Overett. "I understand that the price of jet fuel is not exactly the same as the oil price, but there is definitely a relationship. But when we ask airlines, we get a fairly waffled response. We want to clear up the nonsense of surcharges. All-in prices at least will reset the fuel surcharges to represent prices better."

Apparently, momentum is building for all-in pricing. Joost van Doesburg, air freight policy advisor for the European Shippers’ Council said, "Shippers will demand more all-in air cargo rates, and we need to make the air cargo mode more attractive for the customers. Surcharges were always the number one source of frustration for shippers. So it’s time to focus on their needs and wishes."

American Airlines, Virgin Atlantic Cargo and AirBridgeCargo, among others, are all in the process of ditching fuel and security surcharges.

Slow growth

The International Air Transport Association (IATA) reported that global air freight figures for March masked "significant regional and commodity variations." According to the latest monthly reports from IATA and WorldACD, the numbers indicate that average global prices, including surcharges, were down 10 percent, year on year. WorldACD said there was hardly any tonnage growth (+0.3 percent worldwide), while IATA figures reported a modest 1.6 percent rise in volumes in March compared to a year ago, measured in freight ton kilometers (FTK).

The industry’s March performance contrasted with a strong 12.2 percent rise reported for February, noted IATA, although the numbers for that month were "skewed by the combined impacts of the timing of the

Lunar New Year and the labor dispute at U.S. West Coast seaports."

IATA said air freight performance over the first quarter of the year indicates year-on-year growth of 5.3 percent, "in line with general global economic trends and slightly higher than the 4.5 percent growth that was anticipated in IATA’s December outlook."

Tony Tyler, IATA’s Director General and CEO said the air cargo industry "is on a solid but unspectacular growth trend. And there is little evidence today that would point towards an acceleration as the year goes on."

Trade facilitation

IATA and the United Nations Economic Commission for Europe (UNECE) signed a Memorandum of Understanding to strengthen their support to developing countries seeking to implement the World Trade Organization Trade Facilitation Agreement. In a statement, IATA said the agreement promises "enormous potential" for countries to reduce transport costs by up to 10 percent through more efficient facilitation, making them more competitive in the global economy.

Digital future

Air cargo businesses need a digital strategy for the future. Without one they face a competitive threat from disruptive technology, said Marcus Fromm, managing director, Accenture Freight. "A digital business model is not just for growth but for survival," he told delegates in early May at the Air Cargo Europe conference in Munich.

In line with that thought, Kuehne + Nagel launched a booking platform designed for small and medium-sized shippers, FreightNet, which allows customers to get a quote, book and ship with the ease of a consumer transaction.

The time is now for air cargo firms to embrace digital technology, according to Fromm.

"Time is running out," he said "We can’t wait another 15 years. There needs to be action now, and far outside the scope of the industry’s circle."