Monday D-Day For Air Cargo
June 7, 2010 Des Vertannes lands in Switzerland to assume the position
as Global Head of Cargo at IATA.
Des will be the first in this post to bring
along the experience and credentials of an airline head of cargo, roles
in which he served at Gulf Air and Etihad respectively.
ACNFT certainly wishes him the best of success
in this new endeavor!
On this occasion, it is appropriate and
timely to examine some of the issues the industry struggles with and which
Des will have an opportunity to impact. How much free hand he will really
have is anybody’s guess, particularly in light of the IATA Director
General stepping down next year and the typically passenger business bias
in the organization.
We thought we had exhausted commentary on
the airline/forwarder relationship, the good, the bad and the ugly, only
to be proven wrong, again! Despite such a long common history, known issues
and burgeoning forums and with more bodies jumping in the breach to facilitate
than you can shake your stick at, generally speaking, it remains as tenuous
as ever, if not more so.
The whole agency concept has been unraveling
as commissions have disappeared over time and the tangible benefits of
IATA accreditation, when measured in financial terms, are perceived as
entirely one-sided by the freight forwarders, in favor of the airlines.
A frequently voiced complaint has been that
being an agent doesn’t afford more favorable rates or payment terms.
IATA has been pushing CASS relentlessly, and more recently CASS-import,
while gradually dismantling the traditional national airline/forwarder
committees and replacing them with IATA personnel.
In fact the exact text from the IATA Cargo
Procedures Conferences, A Quick Reference Guide, March 2010 Edition, reads:
“…IATA Secretariat ensures the following: 1.4.3 Guidelines
Do Not: ……allow local Board of Airline Representatives to
dictate practices “
It’s worth considering the possible
and likely reasons behind this activity – while CASS is indeed free
to participating freight forwarders/agents, the airlines pay an annual
fee plus an amount per processed air waybill.
On the other hand, CASS participation has
very strict rules with forwarders committing pre-authorized debits.
For example, in Canada, as of the end of
2009 this was the situation by IATA dictate “any Agent who does
not return the new Agreement duly signed by December 30th 2009 will be
deemed to have executed the Pre-Authorized Debit Agreement and will be
bound by it. Agents may, however, opt out at any time of the Agreement,
on 21-day prior notice to CASS Canada (certain conditions will apply to
their remittances)”. Not many options left open by the IATA attorneys
For reference, the complete text of the
conditions can be found at: http://www.iata.org/worldwide/
These kind of measures offer significant
protection to airlines in case of forwarder/agent default; it would be
interesting for the sake of transparency to obtain a country by country
statistic of defaults over a three year period which justify this approach
– any time IATA cares to provide it, ACNFT will print it.
Arguably, the agency situation ultimately
distorts the traditional vendor/customer relationship between contracting
parties, imposing a rigid IATA-driven framework that boils down to all
or nothing, forcing agents to accept agreements without any room for negotiation,
flexibility or any give and take.
Yet this isn’t an entirely one-sided
matter because it is IATA, not its airline constituency, which is the
driving factor for its own financially motivated benefit. While settlement
mechanisms undoubtedly make good sense—streamlining and simplifying
the processes, there is no room for the creativity and freedom to structure
a “deal” between entities depending on supply and demand.
Clearly IATA has been striving to command
a broader supply chain industry role beyond its air transport mandate.
The question is to what degree has this push been reflected in accommodating
non-airline participants and giving them a voice and a vote.
The Cargo Agency Conference, for example,
is described by IATA as “the acknowledged leader in establishing
standards and providing customer-driven distribution services to the cargo
industry. The CAC deals with relationships between airlines and sales
intermediaries involved with the selling and processing of international
air cargo. It works at strengthening industry capabilities, promoting
industry reputation and enhancing commercial success for both airline
and agent participants.”
Analyzing this mission statement beyond
its superficial hyperbole quickly reveals that “sales intermediaries”
such as GSA and forwarders/agents obviously are not members of the conference
and are thus not directly represented. And the “customer-driven
distribution” implying freight forwarders and shippers are equally
and conspicuously absent. We would really like to hear from “agent
participants” how precisely has the conference been “enhancing
[their] commercial success”.
Moreover, the conference chairman is a paid
IATA hire – the only conclusion that can be drawn is that while
very capable and experienced, no airline representative was available,
willing and qualified to run the conference. Interesting indeed. As minutes
are not public, few know when one fifth of the voting members of the conference
are present in compliance with its meeting quorum rule. There is more
than enough paperwork floating around that such trivialities and minutiae
are lost in the shuffle; the airlines are complicit in this state of affairs.
June 7, 2010 is day number one, time will
tell whether fundamental or incremental change is in the cards and how
issues such as those mentioned will be seen, recognized and addressed
in the constructive manner in which we report them.