Transportation Best Practices/Trends: Building air cargo relationships

June 01, 2012

With the recent Southwest/AirTran merger, and the possible merger of U.S. Air and American Airlines, capacity and service issues are causing many shippers severe discomfort. Freight forwarders, however, say that this disruption can be mitigated with collaboration and ongoing strategic planning.

"We are confronted with a dual-edged sword," says Washington, D.C.-based Airforwarders Association (AfA) Executive Director Brandon Fried. "In one sense, we don't want to lose American because it may mean fewer choices. But on the other hand, a merger with U.S. Air could provide more efficiency on the routes they serve."

According to Fried, Southwest is now promising to deliver "vastly superior" domestic service than it had in the past, and with economies of scale that will save shippers money. "But in the end," he says with a little chuckle, "we can't really compete with the other modes on rates. When you are buying space on an aircraft, you are paying for value and time-savings that other carriers can't provide."

And because more than 80 percent of air cargo is managed through freight intermediaries, relationships matter more than ever before. Christopher Connell, president of Commodity Forwarders, Inc. in Los Angeles says that going directly to the carrier is not an option many shippers will make.

"Mergers are nothing new in our business," says Connell. "We've been through United/Continental; Delta/Northwest; and KLM/Alitalia deals in the recent past, so we expect a few minor hiccups during the transition. But the long-term benefits are worth it."

For Connell, the upside has been better attention from air cargo providers who now have cash flow and a stable workforce. He observes that unhappy employees can severely damage an airline's brand, and impair operations.

"No forwarder can afford a service failure," says Connell. "This is especially true with perishable cargo. Given the time-definite nature of our business, we only partner with the most reliable carriers."

Despite the ongoing merger and acquisition activity in the air cargo sector, he's not particularly worried about competing directly with a specialized carrier. Connell notes that asset-based transportation providers are not as nimble or as responsive as intermediaries capable of brokering services on both ends of the movement.

"Tripartite agreements now provide us with ways to bring value-added services, like security screening and consolidation," Connell says. "And on the trucking side, we can bring considerable economies of scale."

At the same time, however, Connell concedes that some airlines are selling their tracking and tracing capabilities "quite aggressively," and seem to be gaining share in Latin American markets. "Some shippers prefer working with air carriers if they can 'float their inventory' using sea-air strategies," Connell says. "But we don't see this as a major threat."

Richard Fisher, president of the airfreight forwarding company Falcon Global Edge, admits that he's lost some customers who preferred to work directly with the airlines. "But most come back," he says. "While airlines can be competitive on domestic moves, international shipments pose more security challenges. That's where a forwarder can really help."

Full article: http://www.logisticsmgmt.com/article/transportation_best_practices_trends_building_air_cargo_relationships