LTL price hikes by US carriers expected to stick, despite softer market
Although demand has declined slightly, general rate increases announced by major LTL carriers in the ...
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The sun is bright; the day is clear, besmirched only by a fuel smog that floats by on the breeze. The temperature is extreme. There is currently no electricity, just a tiny travel laptop, with a weakening battery, and the distant hum of a generator.
It must be Air Cargo India, you say.
Actually, no. This is central London. Owing to the vagaries of the Indian visa system, The Loadstar never made it to Mumbai, and instead is labouring in the freezing cold, owing to the vagaries instead of UK infrastructure. It wouldn’t be prudent to go into too much detail on the kafka-esque nightmare of getting a visa when one’s passport has been detained. Suffice to say, The Loadstar won’t be blogging from Mumbai. Not this week.
But last week’s blog revealing Panalpina’s less-than-speedy payment plan seems to have caused a stir. Smaller forwarders, in particular, have been agitating over the news. And it’s triggered the popular debate over whether airlines under-sell themselves.
It’s a difficult argument. Yesterday IATA reported that 2011’s freight load factors were hovering at around 45% – which certainly makes it difficult to argue for a rate increase, as David Ambridge from Bangkok Flight Services points out on the LinkedIn discussion on the topic. “Airlines cannot charge the rates they need to be profitable as there is overcapacity on trade lanes… We need sensible rates that allow airlines to make some profit instead of losing more money every single day. Business will adjust to this very quickly.”
And yet shippers are always on the look out to cut the costs and go for a poorer service, points out Aris Zwart, ex KLM Cargo and Air Cargo Netherlands man. “Top airlines should skip the extras and go for the low and middle end of the market,” he argues. And, he adds, the shippers should negotiate directly with the airlines, while keeping the forwarders involved on a documentation and ground level. “It is really silly that the margins that are needed to keep the airlines flying, investing and keeping networks in place disappear into the pockets of the middle men.”
While the last statement is certainly true, this has never been an argument that has held much weight with either the shippers or the airlines. Shippers don’t want to negotiate with all the different carriers they need – they don’t have the time or resources or experience. Airlines too have little appetite for negotiating with the shipper – the forwarder is an essential part of the chain. But they do appear to take too great a share of the money. (You only have to look at the size of the stands at a multi-modal exhibition to work out who is benefiting most from the relationship.)
Zwart also makes the point that generally speaking, if someone doesn’t pay, “there is only one way. Eliminate them from the customer list, and blacklist in agreement with your fellow companies.”
Apologies to Panalpina here – (they only delayed payment for a pretty short time) – but my guess is that even if it had been more significant, the airlines still wouldn’t blacklist a major forwarder. And together, in agreement with fellow companies? Never. Unless it is through IATA, and as the result of a consistent policy of non-payment.
While the argument about forwarders controlling airline rates is age-old, it’s hard not to think that the carriers continue to be scared of their own shadows following the DoJ’s pillage of the industry. There can be no ‘industry’ discussion on the blacklisting of forwarders, and no one is brave – or possibly foolhardy – enough to take the decision alone. Capacity is the ultimate influence on rates, and yet there is no legal way to come to an industry agreement on it which could benefit both shipper and carrier.
IATA, currently, is looking at the sustainability of air cargo. You can introduce all the environmental, PR and e-freight initiatives that you like, and efficiencies will certainly improve things, but until the airlines have worked out how to take their fair share, sustainability is surely but a distant dream.
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