Basic Knowledge of Aircargo
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1 Air transportation Week 7 Cargo airline operations Dr. PO‐LIN LAI Lecture Outline The Air Cargo System Cargoes using Air Transport The Economics of Air Cargo Air Cargo Traffic Flows Conclusions FTKs measures actual freight traffic. Some airlines disclose Cargo Tonne Kilometres (CTK) which explicitly includes unaccompanied baggage and mail, avoiding ambiguity. It is the equivalent of RPK for freight. One FTK is one metric tonne of revenue load carried one kilometer. The sum of FTKs for every flight stage flown by every aircraft over a period is the FTK of an airline over the period. Freight tonne kilometers (FTKs) FTKs is a measure of how much freight business an airline gets. Weight carried is not adequate measure because distance matters: carrying a tonne 10,000km is clearly a greater supply of transport services than carrying the same tonne 100km. FTKs are obtained by multiplying the tonnes of freight uplifted by the sector distance over which they have been flown. Freight tonne kilometers (FTKs) RTKs measure the output actually sold. They are obtained by multiplying the total number of tonnes of passengers and cargo carried on each flight stage distance. Revenue tonne kilometers (RTKs) Roughly 150 to 180 billion RTK Shipping, in comparison,53.4 trillion RTK(16.2 trillion without bulk) Non‐express items include perishables, high value electric goods needing rapid consumer markets access Anecdotally, above $3.00 per kilogram in value may justify shipping by air if time requirement so demand. Air Cargo‐ General knowledge
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References for people working in Airfreight logistics
Transcript of Basic Knowledge of Aircargo
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1AirtransportationWeek7CargoairlineoperationsDr. POLINLAI
LectureOutline
TheAirCargoSystem CargoesusingAirTransport TheEconomicsofAirCargoAirCargoTrafficFlows Conclusions
FTKsmeasuresactualfreighttraffic. SomeairlinesdiscloseCargoTonne Kilometres (CTK)whichexplicitlyincludesunaccompaniedbaggageandmail,avoidingambiguity.
Itistheequivalentof RPK forfreight. OneFTKisonemetrictonne ofrevenueloadcarriedonekilometer.ThesumofFTKsforeveryflightstageflownbyeveryaircraftoveraperiodistheFTKofanairlineovertheperiod.
Freighttonne kilometers(FTKs) FTKsisameasureofhowmuchfreightbusinessanairlinegets.Weightcarriedisnotadequatemeasurebecausedistancematters:carryingatonne 10,000kmisclearlyagreatersupplyoftransportservicesthancarryingthesametonne 100km.
FTKsareobtainedbymultiplyingthetonnes offreightupliftedbythesectordistanceoverwhichtheyhavebeenflown.
Freighttonne kilometers(FTKs)
RTKsmeasuretheoutputactuallysold.Theyareobtainedbymultiplyingthetotalnumberoftonnesofpassengersandcargocarriedoneachflightstagedistance.
Revenuetonne kilometers(RTKs)
Roughly150to180billionRTK Shipping,incomparison,53.4trillionRTK(16.2trillionwithoutbulk)
Nonexpressitemsincludeperishables,highvalueelectricgoodsneedingrapidconsumermarketsaccess
Anecdotally,above$3.00perkilograminvaluemayjustifyshippingbyairiftimerequirementsodemand.
AirCargo Generalknowledge
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2AirCargo Generalknowledge AirCargo Generalknowledge StrongoverallstatisticalrelationshipbetweenairfreightandGDP
NotonlyGDPbutalsoFuelpricealsoaffectairfreightinrecentlyyears
TypeofCargoCarrier Combinationcarrier Conventionalscheduledairlineswhichcarrybothpassengersandcargo
Cargocarriedintheholdsofscheduledpassengerflights(Over50%ofallairfreight)
Allcargocarrier Theseoperatecargoonlyflights Bothscheduledandadhoc(pointtopoint)charters Oftenspecialisttypesofaircraft
TypeofCargoCarrier Integrators Provideadoortodoorservice Alsooperateroadvehiclesforthedeliveryandcollectionoffreight
Contractfreighter Aircraft,crew,maintenance,insurance(ACMI)leases Carryfreightonbehalfofotherairlines Offerflexibility
MajorAirlines(2012)IntegratorIntegrator
FreightForwarders Provideaninterfacebetweenshipperandcarrier Expertsinthecomplexityofaircargomovements Packaging,documents,insurance,customs,etc.
Buycapacityinbulkfromairlinesandsellinsmallerquantitiestoshippers
Impactonairlines Separatetransportproviderfromthecustomer Reduceyieldsasforwardersusemarketpower
Sectorisnowbeingenteredbythelarge3PLs
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3Passengervs CargoOperationsPassenger Cargo
Traffic flow Round tripsLowconcentration
Often imbalancesKeytradeflows
Airlinechoice ManydecisionmakersSubjectiveassessment
FewdecisionmakersObjectiveassessment
Serviceoffering
DeliverytimeimportantMinimumchangesDayflightsoftenpreferred
DurationimportantRoutingnotimportantNight flightspreferred
Airlinefactors Greater revenueGlobalalliances
LessrevenueMarketspecificalliances
Policy Increasingly deregulatedforinternationalonly
Increasingly deregulatedforinternationalandcabotage
Doganis (2010); Zhang and Zhang (2002)
Ratecomparison
Perishability(e.g.food,fashion) Opportunitycost(e.g.capitaltiedupinhighvalueproduct:Iphone)
Inventoryrelatedcost(justintime) Timedefiniterequirement(express)
Shippersuseaircargoonlywhen Characteristics
Emergency Shipments
Ultra-high value density
Routine (High Value-Density)
MedicinesAid
Documents
GoldDiamonds
Works of art
Perishable Non-perishable
NewspapersFruitFish
Electrical goods
Microchips
Time critical
HorsesF1 Cars
SpeedSurface modes
disruptedSecurity Speed and security
Short product life
Total logistics cost reduced
JITAdapted from Doganis (2002)
Occasional
CostIssues Aparticularproblemishowcombinationcarriersshouldallocatejointcosts Jointcosts:
Occurwhentheoperationofoneservicecannotbeseparatedfromtheoperationofanotherservice
Cannotbeallocatedtoaspecificservice Negligiblereductionincostsifonepartisdiscontinued
How should costs be split between passengers and freight?
CostIssues IATArecommendsthefollowingapproachtocost
allocation1. Directoperatingcosts apportionedonthebasisof
theusablevolumeoftheaircraftallocatedtoeach2. Cargospecificcosts shouldbeidentified examples
includesalesandmarketing,groundhandling,landtransport
3. Administrationandindirectcosts splitinproportiontothesumofalltheothercosts
Not all airlines use this approach, as many see cargo as a profitable by-product of operating passenger services
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4CostIssues
Combiaircraft Allocatejointcostsonthebasisofvolume Cargooccupiesboththebellyholdandpartofthepassengerdeck
Allcargoaircraft Greaterpayloadthanpassengeraircraft Issuewithoversupplyofcapacitywhichcanaffectyields
PricingTariffs Generalcargorate
Expressedperkilogram,mayhaveminimumweight Mayreducewithincreaseddistance Candifferdependingupondirectionoftravel
Quantitygeneralcargorate Ratedecreasesasconsignmentsizeincreases
Specificcommodityrates Encouragethecarriageofcertaincargoes
Unitloaddevice(ULD)rates Chargeperunitload Encourageshippers/forwarderstouseandfillunitloads
PricingTariffs Classrates
Reduction/surchargeongeneralcommodityratewherecargorequiresspecialtreatment
Accountholdertariffs Availabletofreightforwarderswhogeneratesufficientbusiness
Contractrates Negotiateddirectwithcustomers Guaranteeminimumvolumeoveragivenperiod
Spotrates Usedtofillsparecapacity
Timedefiniterates Doortodoorservicewithguaranteeddeliverytime
IssueswithRevenueManagement
Kasilingam (1996)
Passenger FreightCapacity Fixed number of
seatsWeight/volume available affected by many factorsThree dimensional capacity (weight, volume, fixing positions)
Itinerary control Prefer to travel as planned
Can follow any route, providing delivery date is met
Allotments space for major customers
Contractual obligations affecting available space
OverallMarketTrends
Boeing (2010)
Majoraircargotradelanes
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5Majoraircargoformoderneconomies FactorsAffectingDemand
Boeing (2010)
MainAirCargoLocations
Mill
ion
Tonn
es (2
012)
0
500,000
1,000,000
1,500,000
2,000,000
2,500,000
3,000,000
3,500,000
4,000,000
4,500,000
ACI (2012)
TransshipmentPointsN.America Asia
DirectANCKIXICN
Asia N.AmericaDirectANCKIXICN
Europe AsiaDirectPEKKIXICNNRTPVG
Asia EuropeDirectPEKKIXICNNRTPVG
Ohashi et al. (2005)
Conclusions
Aircargoisakeycomponentofworldtrade Playinganincreasingroleinsupplychainsascompanieslooktoreducetheleadtime
Whilesomeairlinesseecargoasaprofitcentre,itisactuallyajointproductfromoperatinganaircraft
Thismakescostallocationandrevenuemanagementmorechallenging
