Typical customer satisfaction levels for best in class service providers in business to business environments are around 90 to 94%. In the air freight market even the best companies rarely achieve 75%. Next to the inherent complexity of the market and of individual shipment processes, the lack of transparency regarding service levels and cost positions are the main reasons for continuing dissatisfaction.

Ongoing volatility through demand and supply dynamics

The global average demand for air freight is fluctuating with a multiplier of the growth rate of world trade. However, the magnitude of supply side changes is much more severe. The trend for more belly capacity and less full freighter operations will add another dimension to these dynamics as certain cargo just is not fit for lower deck operations.

Predicting capacity developments from flight schedules, technical time outs of capacity or fuel price driven obsolescence of older aircraft is the basis for supply side forecasts while demand dynamics result from the economic cycle as much as individual product launches and large projects.

Based on what facts will your organization plan cost and service level expectations for you next procurement cycle? What facts are leading to your expected procurement intervals?
Demand and Capacity Development y-o-y 2012 vs 2013

by clicking on the legend items you can show/hide the graphs

Significant trade lane specific deviation from the average view

On many trade lanes adding or canceling just one flight can increase or reduce the available capacity by high double digit percentages. This results in very substantial changes in service quality and costing on a trade lane level even if the big global average of the air freight market trade lane looks relatively stable.

Available standard information typically is only available at a macro level and does not support trade lane related decision making. If your cost projections are based on global averages you may lose out on significant trade lane related opportunities with regard to rates or routing options.

A better understanding and foresight of demand and supply trends on a trade lane basis - as delivered by Transport Transparency - will help you to take the right decisions in procurement particularly with regard to space allocation and length of procurement cycles. And, last but not least, depending on your company’s relative importance on a specific lane your own allocation decisions may set trends on this lane.

Do you have a view on imbalances on your lanes and what implications these have on service and cost? Are you untapping the obvious opportunities by monitoring the tradelane specific developments frequently?
Rate Development y-o-y 2012 vs 2013

by clicking on the legend items you can show/hide the graphs

Commodity and density driven pricing dynamics

Do you actually know on which lanes what type of cargo is the perfect fit in the commodity mix of an aircraft? Most lanes are either dense or volumetric and complementary cargo can add massive commercial value to an air cargo operator. Depending on the volume-density mix on a specific trade lane, you may achieve an improved cost and service position if you leverage your complementing cargo.

How do you transform the density dynamics on your most important trade lanes into value for your company be it as a shipper, as an airline or a service provider?
Share of commodity exported Germany to China

Surcharge management – the big unknown

With fuel prices above 100$ per barrel the fuel surcharge is almost as high or even higher as transactional freight rates on many lanes. Depending on the hedging policy of the airline, the aircraft it uses and currency trends the real cost of fuel will vary substantially. How does this translate into your “pass-through” fuel bill? Which of the many surcharge methodologies should you use given your shipment profiles and service provider selection? Also in this arena only better facts can drive you towards better decision making.

Similar thinking and rationale could be applied to other surcharges such as risk or security surcharges.

How can you effectively manage the “pass-through” -surcharges also considering unforeseeable trends? What impact do different surcharge methodologies have under specific fuel scenarios?
Fuel Surcharge Development y-o-y 2012 vs 2013

by clicking on the legend items you can show/hide the graphs

Find out what we can do to help you!