Worldwide air freight traffic from 2004 to 2020

(In million metric tons)

 Factors governing modal choice

Value Physical Characteristics

Extremely bulky or low-density
High-value products have a greater
products are not suitable for air
propensity to be shipped by air.
transport

Perishability Demand
Products can "perish" in terms of When the demand is
economic utility (value), physical unpredictable, infrequent, in excess
utility, or both. of local supply and seasonal.

Distribution issues Geographic market

Risk of pilferage and theft , transportation factors
Insurance costs, Packaging, Special Transport infrastructure, Security,
handling Customs, Transport connectivity
 Characteristics of air cargo

Small shipment size

Perishable

Subject to quick obsolescence

Required on short notice

Valuable relative to weight

Expensive to handle or store

In summary, air cargo provides the benefits of -

Speed Reliability

Reduction
Security of inventory
cost
 Types of air cargo

Electronics
General
cargo Wrist Watches

Personal Effects

Textile

Human remains
Special
Valuables
Cargo
Live Animals
Perishables
Dangerous Goods
 Air cargo process

Information
gathered on
Agreement made transport options Air transport
between shipper depending on chosen as the
and consignee nature of the mode of transport
consignment and
time constraints
Shipper contacts The agent picks up
Process the
an IATA approved the consignment
documents
air cargo agent or from the shipper
required for
an airline to and then pack,
shipment. Ex:
transport the mark and label it
Airway Bill
goods. appropriately.
 Shipper
Consignment Consignment
completes
moves to the moves to the
payment of
customs airline and stays
charges (If
personal for with it until
charges
clearance. flight loading.
prepaid).
 Once packed in
ULDs, the ULDs offloaded
The
consignment from the aircraft
consignment is
moves to the and taken to the
placed in ULDs
ramp for loading warehouse.
into the aircraft.
 Airline informs
Cargo is Cargo is tailed
the consignee
unloaded at against the
about the
the arrival cargo
arrival of the
warehouse. manifest.
consignment.
 Comparison of Passenger and Cargo Air
Services
PASSENGER AIR SERVICES CARGO AIR SERVICES
Round Trip Service One Way Service

Unspecified Public Travelers Limited Shippers

No further Ramp Services Need Ramp Services: loading/unloading,

breakdown, storage, customs, etc.

Cabin Services No Cabin Services

Daytime departure/arrival Night departure/arrival
Sensitive to time, routes and stops Less sensitive to time, routes and stops
Airport-to-airport service Door-to-door and Intermodal service

Each of these contribute to differences in land-side and air-side

operations between the two.
 Unit Loading Device
▪ ULDs are containers or units used to load baggage and cargo
in the aircraft.

▪ ULDs are of two types:

1. Containers -
Usually made of aluminum and they fully enclose the
cargo unit. They may have built in refrigeration units for
goods that need to be preserved.

2. Pallets –
Rugged sheets of aluminum. Their rims can be locked
onto cargo net lugs.
ULD - Containers

AMA
AKE series

ALF series
ULD -Pallets

PMC
▪ Advantages of ULDs –

✓Protection from weather

✓Reduction in damage of cargo
✓Quicker processing
✓Optimizing space and volume

▪ Handling of ULDs –

✓Tare weight : Weight of an empty ULD

✓Net weight : Weight of contents to be loaded into the ULD
✓Gross weight: Total weight of an empty ULD and its content

▪ Aircraft weight and balance manual should be referred to

determine the maximum gross weight allowed for a particular
ULD in relation to its position within an aircraft hold.
▪ Each ULD has a unique IATA ULD identification code.

IATA has developed 3 letter identification codes followed by 4 digit

serial number, followed by 2 letter airline code

Ex: ALF 8330 QR

▪ 3 letter identification code:

✓First letter - It is either A or P (A = Container, P = Pallet)

✓Second letter - Base dimensions of the ULD
K,L,A,M (Length * Width)
✓Third letter - Indicates the contours (shape) of the ULD

▪ The ULD Regulations (IATA manual) contains both technical and

operational standard specifications, regulatory requirements and
airlines requirements applicable to overall ULD operations.
 Different services provided by cargo
handlers at airport cargo terminals
1. Warehousing
✓Acceptance, build up and storage of shipments
✓ULD build-up and breakdown
✓Inventory control
✓Truck loading and unloading
✓Handling of transit and transfer/transshipment freight
✓Security services
✓Express services
2. Documentation
✓Acceptance and processing of import, export, transit and
transfer documentation
✓Sending of all IMP messages
✓Tracing

3. Handling of dangerous goods, live animals, perishables and

other special freight

4. Transport to and from aircraft

5. Air freight trucking services

Items used in loading and unloading of
cargo alongside the ramp
Trolley
Tractors
Loader
Belt Loader
Transporter
Pushback Tugs
 Air Cargo Business Models

All-cargo carriers Integrators

(Freighters) (Express carriers)

Belly cargo carriers

Mixed carriers
(Passenger
(Combi carriers)
carriers)
 All-cargo carriers (Freighters)

▪ Operate a dedicated fleet of freighter aircraft.

▪ Generally work with intermediaries called freight forwarders.

▪ Freight forwarders buy cargo space wholesale from the

freighters and sell retail to their customers.

▪ Freighters often will enter into long-term contracts with the

forwarders, which provides stability in demand for carriers.

▪ All-cargo airlines are usually unidirectional, accounting for

international trade flows
 Belly cargo carriers

▪ Belly cargo carriers are passenger-only airlines that carry cargo

in the holds of their aircraft as an additional revenue stream.

▪ Over 50% of global airfreight is moved as belly cargo.

▪ Demand for belly cargo is largely driven by the unrelated

market demand of passenger air transport.

▪ For belly cargo only carriers, since their capacity is fixed and
demand is unrelated, fluctuations in supply tend to be less of
an issue, and have a low marginal cost.
 Integrators (Express carriers)

▪ The integrators, are firms that provide door-to-door service such

as UPS, FedEx, and DHL.

▪ Many of these firms operate dedicated all cargo aircraft, delivery

vehicles, and cargo hubs.

▪ The cost for express services are much higher than for other
modes of transportation.

▪ Express carrier must own and operate the entire transportation

network from delivery vehicles to hubs, the dedicated aircraft to
move the cargo, receiving air hub and the downstream
transportation network to deliver the cargo to its final
destination.
 Mixed carriers (Combi Carriers)

▪ Combination carriers move both passengers and cargo.

▪ Like the all-cargo carriers, combination carriers work almost

exclusively with freight forwarders to provide the pickup and
delivery service to the ultimate customer.

▪ Airlines such as Lufthansa, Air France, Cathay Pacific Airways,

and Korean air operate fleets of both passenger and
dedicated cargo aircraft and therefore considered
combination carriers.

▪ Combination carriers can earn up to one-half of their gross

revenues from cargo on some routes.
Comparison of All cargo carriers and Belly
Cargo carriers
Cost of service

Fleet

Dimensions and type of cargo

Flight schedules

Network and payload

 Air freight services
Assembly service Distribution service Charter service

▪ Consolidate ▪ Service provided • Charter services

packages from a by airlines that fly provide the
shipper or group air cargo is flexibility to
of shippers. accepting one transport cargo to
shipment from a destinations that
shipper and, at are not on the
destination, airlines regular
separating it into flight schedules.
its parts and
distributing them
to different
customers.
 Air freight services
Pickup and delivery Automobile round trip
Courier service
service service
• Provide the ▪ Cater to the need of • Offers door-to-door
convenience of airport to airport transportation of the
sending straight from transportation of vehicle from certain
shippers door step to documents and origins to certain
consignee’s door step. packaged boxes. destinations.

• Offer a hassle-free ▪ These consignments

service with customs move with the
clearance, import and shortest acceptance
export cut off time at origin
documentation and and highest unloading
air waybill and delivery priority
preparation. at the destination.
 Air cargo documents
▪ Air Waybill
▪ Cargo manifest
▪ Invoice
▪ Certificate of origin
▪ Packing list
▪ Other documents: - Dangerous Goods Declaration
- Certification for live animals
- Health certificate
- Death certificate
- Export license
- Phyto-sanitary certificate
 Air Waybill
▪ A document made out by or on behalf of the shipper, which
evidences the contract between the shipper and airline.

▪ It acts as proof of receipt of goods of shipment.

▪ It is also used a s a freight bill and certificate of insurance.

▪ It includes conditions, limitations of liability, shipping

instructions, description of commodity, and applicable
transportation charges.

▪ Shipper is responsible for the regularity, correctness or

completeness of insertions on the air waybill, even if the air
waybill has been completed by an agent or the carrier on his
behalf.
▪ Air waybill is a non-negotiable transport document.

▪ The AWB number has 11 digits and 3 parts.

- The first 3 digits are the Airline Prefix

- The next 7 digits is the Serial Number of the AWB

- The last digit is the Check digit

The check digit is derived by dividing the 7
digit Serial Number by 7. The remainder
determines the Check Digit.
Example: Serial Number 8114074 divided
by 7 is 1159153 with remainder 3.
Therefore the Serial Number + Check Digit
is 81140743.
 Cargo Manifest

▪ Lists the goods carried in a means of transport or in a

transport-unit, for the use of customs and other officials.

▪ The manifest gives the commercial details of the goods, such

as:
✓ Transport document numbers
✓ Consignors and consignees
✓ Marks and numbers
✓ Number and kind of packages
✓ Descriptions and quantities of goods

▪ Ensure that cargo listed as having been placed on board the

transport at the beginning of its passage continue to be on
board when it arrives at its destination.
 Certificate of Origin

▪ Certificate of origin is used to declare which country the

shipment originated in.

▪ Very important for customs clearance purposes because every

international location carries distinct rules and regulations based
on where the goods originated.

▪ Usually certified by an authorized semiofficial organization. In SL

Department of Commerce issues it.

▪ This Certificate may also include a declaration by the

manufacturer, producer, supplier, exporter or other competent
person.
 Packing list

▪ Document specifying the distribution of goods in individual

packages.
 Invoice

▪ Document required by the Customs in an importing country in

which an exporter states the Invoice or other price (Ex. Selling
price, Price of identical goods)

▪ It also specifies costs for freight, insurance and packing, etc.,

terms of delivery and payment, for the purpose of
determining the customs value in the importing country of
goods consigned to that country.
 Manuals used in air cargo industry
✓ Live Animals Regulation (LAR)
✓ Perishable Cargo Regulations (PAR)
✓ Temperature Control Regulations (TCR)
✓ Dangerous Goods Regulations (DGR)
✓ The Air Cargo Tariff and Rules (TACT)
 Chargeable weight

▪ As per IATA rule, in an air shipment, airfreight charge is

calculated on the basis of actual weight or volume weight, which
ever is higher.

▪ For an air shipment, the actual weight (gross weight) or the

volume weight of the shipment, whichever is the greater is
known as the Chargeable Weight .

▪ Chargeable Weight was created as a conversion factor for air

freight in order to bridge the difference between volume and
weight.

▪ 1,000 kilos of feathers requires a larger volume than 1,000 kilos

of lead. In order to be able to charge this difference equally, a
conversion factor was called into life.
▪ Chargeable weight is an equilibrium point where the actual
weight and volume weight of cargo balance out.

▪ Gross weight/Actual weight is always measured in kilo grams (Kg)

▪ To obtain the volume weight in kilograms using centimeters,

divide the cubic centimeter result by 6000.

Volume weight (kg) = (Length * Breadth * Height) cm3

6000
▪ To obtain the volume weight in kilograms using inches, divide
the cubic inches result by 366.

Volume weight (kg) = (Length * Breadth * Height) inches3

366
Example:

ABC Company is going to ship some cargo from Los Angeles to

Shanghai. The shipment consists of 5 boxes, each weighing 30kgs,
and each measuring 50 x 40 x 40 cms. Find the chargeable weight.
(1 inch = 2.54 centimeters , 1 kg = 2.20462 lbs)

Actual Gross Weight = 5 boxes x 30kgs each = 150 kgs

Volumetric Weight in kgs using centimeters = (50 x 40 x 40cm) x 5

boxes 6000
= 67kgs

Result: 150 kgs is greater than 67 kgs, so the Chargeable Weight

will be 150 kgs which, in this case, is the Actual Weight.
 Rate Slabs
Freight rates are based on the following Slabs or break points:

Minimum charge (M) –

The lowest charge applicable on each commodity to each destination

no matter how small the shipment. This is a charge not a rate. A
commodity can not be shipped for a lower price than the minimum
charge.

Normal rate (N) –

For below 45 Kgs. It is a rate given for each kg. When the weight
exceeds minimum charge weight normal rate is applied.
Quantity rate (Q) -

+45 - Above 45 Kilogram.

+100 - Above 100 Kilogram.
+250 - Above 250 Kilogram.
+300 - Above 300 Kilogram.
+500 - Above 500 Kilogram.
+1000 - Above 1000 Kilogram.
+2000 - Above 2000 Kilogram.
+5000 - Above 5000 kilogram.

All rates are per kilogram. Quantity rate is lower charge in

higher weight.
Example

Charges for transportation of a shipment containing wrist watches

from Colombo to Chennai, India.
Minimum charge = $ 60
Normal rate = $ 5 per kg

If the chargeable weight of shipment is 10 kg –

Normal rate = $ 5 per kg * 10 kg = $ 50

$ 50 is less than $ 60 (Minimum charge), therefore the

minimum charge is taken as the rate slab, since the charge can
not be lower than $ 60 .
If the chargeable weight of shipment is 15 kg –

Normal rate = $ 5 per kg * 15 kg = $ 75

$ 75 is greater than $ 60 (Minimum charge), therefore the

normal rate is take as the rate slab.
If the chargeable weight of shipment is 15 kg –

Normal rate = $ 5 per kg * 15 kg = $ 75

$ 75 is greater than $ 60 (Minimum charge), therefore the

normal rate is take as the rate slab.

Minimum Normal Quantity

charge rate rate

Chargeable weight
12 kg 45 kg
 Air cargo rates
➢General Commodity Rate (GCR)

➢Specific Commodity Rate (SCR)

➢Commodity Classification Rate (CCR)

➢Special rates: Exception rate

Joint rate

Container rate

Spot rate/Ad-hoc rate

 General cargo rate (GCR)

▪ General cargo rates apply to the carriage of commodities that

have not been allocated a specific commodity rate or
commodity classification rate.

▪ It is charged per kilo of cargo as per cargo tariff guide of each

Airline.

▪ General cargo rates consist of minimum rate (M), normal rate

(N), and lower charge in higher weight (Q).

▪ Published for each pair of cities an airline serves.

 Specific Commodity Rate (SCR)

▪ Specific commodity rates are usually lower than general cargo

rates and are published for particular commodities from a
specified point of origin to a specified destination point.

▪ They are subject to a minimum weight restriction.

▪ Specific commodity rates take precedence over class rates

and general cargo rates.

▪ Usually these rates are applied to commodities that move in

large volume shipments in a given market.

▪ Sri Lanka has given SCR for certain goods that move
frequently such as Fruits and Vegetables, Cutfolage, Live fish
etc.
 Commodity Classification Rate (CCR or Class Rate)
▪ Published for particular class of commodities from a specified
point of origin to a specified destination point.

▪ Class Rates take precedence over General Cargo Rates.

▪ Class rate are taken as a surcharge or rebate of the general

commodity rate.
Class rate

Surcharge Rebate

Valuables – 200% of Normal GCR Newspapers – 50% of Normal GCR

Live animals – 150% Normal of GCR
When giving rates,

✓ Specific commodity rates are given priority.

✓ Next Class commodity rates are considered. A surcharge or

rebate of the normal General commodity rates is considered.

✓ If there is no Specific commodity rate or Class rate, General

commodity rate is taken.
Special rates
Exception rate

▪ Rates set higher than usual rates because they apply to

commodities that require special handling, such as, automotive
vehicles, uncrated furniture etc.

Joint Rate

▪ A single through-rate on cargo moving via two or more air

carriers or air and surface carriers.

▪ It is generally a published rate.

▪ The shipper has the advantage of availability of a number of

different routings at the same rate.
Container rate/ Unit Load Device (ULD) rate

▪ A rate for the transportation of an entire container or ULD at a

uniform charge, regardless of the weight of its content, unless a
pivot weight is specified .

▪ Shippers can use their own ULDs or carrier owned ULDs.

▪ Generally charged a lower flat rate that includes both the use of
the ULD and the transportation of its content.

▪ Airlines can also provide one or more ULDs for the shipper that
has many items going to the same city and charge the shipper
less for the total shipment.
Spot rate/Ad-hoc rate

▪ Rates offered on a specific shipment and a specific flight.

▪ Spot rates are given for late booking shipments on lightly

loaded departures.

▪ To get this rate, a shipper must have cargo ready to ship.

 Factors affecting air freight rates
Cost of the service

▪ Basic consideration in rate making; the rates should cover the

costs of service and yield a reasonable profit.

▪ Air freight is carried in the cargo compartments of passenger

aircraft and also in all cargo aircraft; the costs that must be
covered generally are the same for both all-cargo carriers and
belly cargo carriers.
Volume of traffic

▪ Volume of traffic a carrier can achieve affect rates.

▪ Volume is significant. As volume increases, unit rates

decreases. Reduces rates for larger shipments give
benefits of economies of scale.
Characteristics of the traffic

▪ Transportation characteristics of the commodity is an

important element in the rate making process.

▪ Major transportation characteristics, density of the

commodity, dangerous cargo, hazardous cargo, perishable
cargo, subject to damage, and require special packaging.

▪ In cargo aircraft, utilization of available space and available

lifting capacity must be optimized.
Directionality

▪ Most passengers travel is round trip, freight is all one way.

▪ Consequently, rates have been set lower levels in the off

direction as a means of filling up space to equalize the flow
of traffic and put aircraft to more efficient use.

Value of Service

Principle factors that reflect value of service include the speed

and reliability of air freight service, the value of the commodity,
and the profit margin of the consignor or consignee.
Competition

▪ Competition from air carriers and other modes of

transportation. Capacity exceeds demand there is
considerable pressure to lower rates.

▪ Rate reduction can be introduced by the least successful

competitor to improve its market share or possibly by
the principle carrier to generate new traffic