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Airlines can no longer ignore freight forwarders

Price structuring must acknowledge freight forwarders contribution.
GAC airfreight manager, Mario Coelho
GAC airfreight manager, Mario Coelho

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Written by Mario Coelho, airfreight manager, GAC Dubai

Today, more than ever before, aviation is playing a key role in the logistics supply chain that delivers goods to markets. Together with cheaper, but slower, transportation by sea and land, airfreight brings commodities to consumers and helps keep the wheels of commerce rolling.

Ocean and surface freight still form the backbone of the transportation link in the delivery chain, but airfreight plays a critical role when moving time-sensitive, perishable, urgently required goods or those with a short shelf life. At a time when retailers are keeping tight control of goods held in stock, ‘just in time’ deliveries to help buyers/distributors keep inventories low and save on storage costs simply would not be possible without aviation.

However, it can be a double-edged sword − airfreight is not always cheap, so it is important to achieve the right balance between time and cost. High consumer demand for the latest gadgetry means that air transportation is a viable option for high technology products. The shelf life of such commodities before they are replaced as the latest ‘must-have’ item by the next model is relatively short, so it is not an option to have such a shipment sitting on a ship for 30 days. That’s why it makes sense to use airfreight to deliver your latest smart phone or digital tablet.

Aviation plays a key role when a sudden unforeseen need arises. The daily cost of shutting down a factory production line due to a breakdown can be astronomical, so getting the necessary parts delivered as quickly as possible is vital. And usually, the fastest way to deliver parts is by air. The oil and gas industry is a case in point, where flying parts in can save millions. Even shipping – aviation’s traditional competitor for freight – can benefit from the ‘fly boys’. Vessel owners face big losses if their ship breaks down and needs urgent repairs mid-voyage. Aviation often provides the answer by flying in parts from around the world to the nearest ship repair yard. Though the price tag for the operation may be as high as a couple of hundred thousand dollars, it is nothing compared to the cost of the vessel being out of action for a matter of weeks.

But while the aviation industry has benefited from freight movements, the payback has been limited for logistics providers, as the processes and systems generally don’t favour forwarders. Whilst airlines have taken full advantage of the electronic interface, the direct benefits have not been shared with forwarders. In fact, rather than the benefits, many have found that they have related costs passed on to them. Not so long ago, a manual airway bill would be delivered to an airline which had a host of staff to key-in data into their systems or take bookings by phone, fax or e-mail. This is now all done on their behalf by forwarders through EDI interfaces, enabling airlines to maintain minimal staff to correct data or accept/reject bookings that are queued for manual intervention.

Forwarders can pay a heavy price for simple data correction requests if sent from outside of the system, as well as the cost, albeit smaller, involved in sending the original data to the carriers electronically. While it could be argued that the airlines’ cost of maintaining systems is high, employing a large workforce to man a call centre represents a much greater operational expense. This begs the question: “Why must the forwarder pay more now than ever before?”

If nothing else, those of us who work in the airfreight side of the business would like to see the airlines acknowledge the contribution of forwarders. While we appreciate the challenging economic environment the aviation sector faces in keeping things going with substantially reduced volumes, this applies equally to forwarders.

It has been well documented that the Middle East is not a huge export market. The viability of airlines continuing to operate their routes to and within the region has been boosted recently by the increase in passenger numbers, both for business and pleasure. That has resulted in an increase in aircraft fleet sizes which has brought business to forwarders − specifically for the movements of aviation spare parts and stores to serve the industry based here, as airlines do not always have the resources to serve their own logistics needs. By working with expert and experienced forwarders they can focus on their core business and let the forwarders take care of the supply chain role for important spares and parts.

There is plenty of room for improvement in the symbiotic relationship between the aviation and logistics industries and if we work together intelligently, both sides will reap the benefits. This has been recognised by bodies like IATA and FIATA, which are now among those working to make that interdependent relationship work better for both sides.

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