Airfreight Industry, Quo Vadis? Part 4 - Overbooking and Offloads

In this series of articles disruption is the keyword, and we look at various areas in which the traditional airfreight industry needs to be streamlined and simplified, so as not to be swept away by something completely new and innovative, as is happening in other areas, where new mobile internet technology is making traditional business models obsolete.

Last Monday, our author Mark Grinsted took a critical look at the unfathomable structure of surcharges levied by carriers. In today’s issue of CargoForwarder Global, he focuses on the vexing issue of overbookings and offloads.

Readers are cordially invited to send their inputs and post comments or make suggestions for additional cargo themes worth to be elaborated in depth by Mark and published on our CFG portal. Enjoy reading!

Day-to-day practice at many airports: offloaded and stranded shipment
Day-to-day practice at many airports: offloaded and stranded shipment

The purpose and the main strength of airfreight is to move goods as quickly as possible from A to B. The airfreight industry has however manoeuvred itself into a position in which this basic requirement is regularly not fulfilled. In the traditional airfreight industry, there are numerous factors which cause delays in the movement of airfreight. Let’s look at some of them:

Trucking to other airports
Often the rate structure is such that, from an economic point of view, it makes sense to truck cargo from one airport to another, for example from Frankfurt to Amsterdam, even if there is sufficient capacity on direct flights from Frankfurt. This phenomenon will be treated in a separate article.

Trucking to a consolidation gateway
Here too the traditional rate structure, in this case lower rates for bigger shipments, makes it economically attractive to collect smaller shipments at one central point, and to deliver these as one large shipment to the airline. This trucking to gateways costs time, of course. This too will be treated in a separate article.

Paperwork
Customs and security of course also cause unnecessary delays. This has been a strong focus of IATA and airlines trying to speed up processes ever since the integrators came on the scene several decades ago. But without much progress. This too is a subject for a separate article.

Unreliability
Today’s subject is delay caused by offloads. The nature of airfreight is to be fast, but at the same time unreliable. Some of the unreliability is inherent to the special nature of air transportation: Payload is often dependent on weather conditions along the route, technical problems can lead to the substitution of another type of aircraft than was originally planned, cargo comes in all shapes and sizes so that it is difficult to judge in advance exactly how much will fit in a container or cargo hold. And, a permanent problem on passenger flights, passengers and their baggage normally have priority over cargo, so that cargo needs to be content with whatever space is left over.

Overbooking
However, the most frequent cause of offloads is man-made and the responsibility of all actors in the airfreight industry: Overbooking. Overbooking may be in everyone’s local interest, but the quality of the whole airfreight industry suffers as a result. Airlines are under huge pressure to achieve full flights, and the reservations staff are held accountable for every unused ton or cubic metre. They are forced to overbook to be “on the safe side” in case of no-shows, delays for incoming connecting cargo, or late trucks. Offloads can even be seen as something positive, as a proof that the flight was really completely full, and that everyone had done their job well!

Deliberate unreliability
This policy of deliberate unreliability is made all the easier by the fact that forwarders normally do not face any negative consequences if booked cargo is not delivered at all, or not delivered in time. And this is often not the freight forwarder’s fault; he is helpless if the shippers cancel cargo at last minute, as so often happens. Some larger shippers (insiders will have some examples!) are totally unpredictable and can deliver huge tonnages one day without any prewarning and on other days will suddenly have no cargo available despite pre-bookings. And they can do this with impunity, knowing that their market power will ensure that their own cargo will move nevertheless, even at the cost of delays for other, less powerful, shippers.

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Fatalism
And the consequence of all this? A sort of fatalism on the part of all the actors in the airfreight transportation chain. Shippers do not feel obliged to deliver as booked as they know from experience that their cargo will often be left behind anyway. Freight forwarders can afford to shop around for better prices, and shift the booking from one airline to another at last minute to save a few cents. They can always put the blame on the shipper if they are challenged. And airlines (and handling agents) get lazy and do not plan flights accurately enough. What is the point in meticulous planning if you do not know whether the booked cargo will turn up?

Money-back
On a side-note, the express rates, even with “money-back guarantee” offered by various airlines, are not a real solution, not for someone who just simply wants his urgent cargo to move reliably on the next flight, whatever the cost. Getting his money back if the cargo misses the booked flight does not help him at all – the shipment has still not arrived and is urgently needed at destination.

Solution
What is the solution? Bookings must be binding on all parties. In the last decades, various attempts by individual airlines to impose cancellation fees, at least for large shipments, have remained isolated; there was always another airline who would not insist on cancellation fees. That must change: Penalties must be applicable for no-show shipments. Airlines must pay compensation for all cargo that does not move as booked or is delayed, just as passengers now have a legal right to compensation for delayed or cancelled flights. This will force reservations and handling staff to take better care when planning flights and avoid overbooking and offloads. All to the benefit of the whole airfreight industry. All actors in the airfreight industry just need to get their act together!

Mark Grinsted

Write a comment

Comments: 2
  • #1

    Gerton Hulsman (Wednesday, 12 July 2017 15:04)

    MARK
    Interesting to read your article.
    In principle it boils down to the word we are not supposed to say in our industry otherwise we will face trouble.
    Airlines need a security indeed to take off with full loads as otherwise they run into losses. That this system of overbooking is a pain in the neck for many is an axiom. The airfreight industry and especially the handling of airfreight at airports are not only complex, it became SCIENCE over the years where it should make life a lot easier due to all sorts of communication. The mentioned paperwork is immense and it becomes more complex when many parties are involved in the handling of air cargo. The times that IATA Standard handling is long gone! Ground Handlers, Ramp Handlers, Warehouse Handlers, Operations departments, Airlines, GSSA´s etc. all have something to do in this enormous chain of information. We are living in an era of Communication but it goes hopelessly wrong on regular basis with this communication. As long as we transport cargo all over the world for prices for which you cannot even buy a stamp to send a letter, the problem of over overbookings and hopefully a full aircraft will continue.
    The initiative of TIACA to give young professionals in our industry the chance to have a look in other parts of the industry is welcomed now by many. To understand what the problems of other stakeholders in the chain are, will clarify the dilemmas for which many are often standing for. And last but not least: Train your young staff properly. It will pay off in the end.
    Keep up the good work.

    Gerton Hulsman
    MD DUS Cargo

  • #2

    Mark Grinsted (Monday, 17 July 2017 22:24)

    Dear Gerton, Thank you for your valuable comments. You are right: the handling agent is often the one at the end of the line who has to try to make the best of a poor job by others further up the line. Training is important, but newcomers are not going to change the industry as quickly as we need. And as long as the quality of service, as offered by the airfreight industry in general, is low, so too will the prices remain low. Dropping the price is always far easier than increasing the quality of service.