AIR TRANSPORT

CHAPTER OBJECTIVES
• To explain the history and state of existing infrastructure of air
transport in India.
• To brief the role of cargo airlines including the challenges for air
cargo sector in India.
• To discuss the factors affecting the choice of air freight
transportation in international trade logistics.
• To explain the practices adopted by airlines for air freight rates
determination.
• To discuss the importance of air cargo chartering.
• To explain the procedure of air cargo clearance.
• To discuss the salient features of airway bill in international trade
logistics.
 CHAPTER OUTLINE
• Introduction
• History & Infrastructure of Civil Aviation in India
• Cargo Airline
• Challenges to Indian Air Cargo Industry
• Factors Affecting Choice Of Airfreight Transport
• Airfreight Rates
• Chartering Information
• Procedures Involved In Air Freighting Goods
• Legal Aspects Of Air Waybill
 INTRODUCTION
• Air transportation is increasingly gaining importance in international trade logistics with
increased contribution, both in terms of volume and value of cargo transported.

• The contribution of air transport to global trade is multifaceted as it facilitates the timely
availability of goods in key markets at short notice, thus creating time and place utilities.

• The growing trends in high technology, high value, and time-sensitive products, spanning
across almost all continents, has increased the role of air transport and provided more
opportunities for trade and economic development for developing, least developed,
landlocked, and island nations as high-tech manufacturers and other time critical
shippers are locating sites around or accessible to major airports in these regions due to
cost and factor advantages.

• Factors affecting the choice of air transport for international trade logistics are security
and safety of cargo, criteria for imposition of import duties in country of destination, need
for packing and packaging, nature of the traded product, inventory control and working
capital needs, convenience of distribution, inadequacy of alternative transport options,
applicable insurance premium, value of cargo, distance to the market, and extraordinary
circumstances that prompt the shipper to choose air transport over other modes of
transport.
Development that Led to Increased Air Cargo
Freighting
Globalization of sourcing, production and distribution prompt need for airfreight in
logistics.
Long-haul air-freight is the backbone of globalized production and supply chains.
Air-freight enables faster response to market by ensuring prompt deliveries.
Reduced inventory levels and shorter lead times require faster transport at lower shipment
volumes.
Increase of time sensitive shipments through Air Freight
New inventory management concepts such as “Just-in-Time” and “Zero” stocks.

Un-compromising quality of transport & information flow as goods reach faster through air
transport.
Competition of the future will be between trade supply chains, rather than on carrier’s
cargo-products.
The vast expansion and development of high value and limited time-consumable
commodities market.
 History & Infrastructure of Civil Aviation in
India
• India, quite surprisingly, has the distinction of organizing the first flight by an aero plane in February
1911, piloted by French pilot M. Picquet who flew a aero plane from Allahabad to Naini.
• However, the scheduled commercial airline services in India can be said to have begun on October
15, 1932, when J.R.D. Tata, the Father of Civil Aviation in India and founder of Air India, took-off
from Karachi in a tiny, light, single-engine aircraft on his flight to Bombay via Ahmadabad.
• India civil aviation industry got a significant boost during the Second World War. British government
of India realized that there should be public civil aviation company due to strategic importance of
air cargo transportation.
• Accordingly; largest private carrier of that time, Tata Airlines was nationalized and converted into a
public company.
• British government of India named it as “Air-India” in August 1946. After the independence in 1947,
government of free India gave immense importance to civil aviation sector and extended the
services of air India for international operations.
• Government of India rather set-up “Air India International Limited” to serve to growing needs of
public in both passengers as well as cargo segment. Air India International, which was registered on
March 8, 1948, inaugurated its international services on June 8, 1948, with a weekly flight from
Bombay to London via Cairo and Geneva with a Lockheed Constellation aircraft. Air India suffered
financial losses in initial years of airlines operations.
Notable Cargo Airlines in International
Air Cargo Market

All-Cargo
All-Cargo Non-Separate Entity
Subsidiary
• 808 CARGO • Aero express • Cathay Pacific
• ABX Air • Thai Airways • China Airlines
• Air net Express Cargo • Jal Cargo
• Air Hong Kong • Air India
• American • Air France Cargo
International • American Airlines
Airways/Kalitta Cargo
 World Largest Airlines by Fleet Size,
Destinations Covered and Freight Cargo
Handled
Largest Airliens (By Largest Air Lines (By
Largest Cargo Airlines (By
Number of Destinations Scheduled Freight Tonne-
Fleet Size)
Covered) kilometres Flown (Millions)
• FedEx Express - 643 • United Airlines -373 • FedEx Express -16,1082
• DHL - 250 • • UPS Airlines -
American Airlines -339
• 10,4163
UPS Airlines - 234 • Delta Air Lines -322 • Emirates SkyCargo -9,3194
• TNT Airways - 182 • Turkish Airlines -244 • Cathay Pacific Cargo -8,4335
• Korean Air Cargo - 26
 Key Challenges for Indian Air Cargo Sector
Cumbersome • Complex procedures of custom clearance both for exportable & imported cargo.
Clearance • Approx 30 signatures are required for export clearance & 35 for import clearance.
Procedures
• Problem of uninterrupted power supply
Lack of Support • Poor network of Roads, Ports & Transportation facilities
Systems • Inadequate Cargo Hubs & Cold Storage facilities, etc

• Lack of modern technology / systems in the workplace.

Low Growth • Lack of adoption of operational and marketing methods that cater to the specific and
and Profitability
extensive needs of the customers.
Poor
Information & • Urgency for introduction of e-commerce in world trade as the exclusive means of
Communication documentation and processing.
Management
Diminishing • Airlines are squeezed of profits due to higher operating cost
Returns to all • Ever increasing cost of operations worry the Agents.
players in • Shippers & Exporters are aggrieved on account of increase in freight and other
Industry costs for exports.
• Lack of clear cut policy on ground handling
Poor Ground • Diffrentiatial rates at various ports for haulage and storage of cargo including
Handling Policy
diffrential demurrage policy
 Factors Affecting Choice of Airfreight
Transport
• Security & Safety
• Imposition of Import Duties
• Packing & Packaging
• Nature of the Product
• Cash flow
• Convenience of Distribution
• Inventory Levels and Storage
• Inadequacy of Alternative Transport Options
• Insurance Premium
• High Value Cargo
• Distance of the Market
• Extra Ordinary Circumstances
 Air Freight Rates

• Market-Related Rates
• Unit Load Device Rates
• Specific Commodity Rates
• Commodity Classification Rates/Class Rates
• General Cargo Rates
• Minimum Charges
• Government Order Rates
 Exclusion from Air Freight Rates

• The collection of cargo from the consignor’s premises or

warehouse or factory.
• Delivery of cargo from the airport of destination to the
consignee’s premises.
• Storage of cargo including any type of demurrage charges if
applicable.
• Custom clearance of cargo and duties so payable.
• Applicable taxes and port congestion charges if any.
• Cargo Insurance.
 Examples of Class Rates
Live Animals,
Animal Containers
& Stalls

Braille-type Valuable Cargo E.G.

Equipment Gold Bullion,
Traveler’s Cheque,
Examples Precious Stones Etc.
Of Class
Rates
Magazines,
Books & Human Remains
Newspapers

Unaccompanied
Baggage,
Summary and Description of Various Charge Applicable in
Air Transport in India
1. Terminal Processing Charges: The rates for general & perishable cargo shall be Rs. 0.55
per kg. subject to minimum of Rs. 100/- per consignment and it be Rs. 1.10 per kg. subject
to minimum of Rs. 200/- per consignment for special cargo including valuables.
2. Demurrage Charges: All types of cargo, (general/perishable special/valuable) shall be
Rs. 0.55 per kg. per day subject to minimum of Rs. 100/- per day (or) Rs. 550/- per MT.
Per day
3. Penal Charges For Mis-Declaration Of Weight: No penal charges will be levied for weight
variation up to +_2%. Between 2% and 5% of weight variation, double the TSP charges
i.e., Rs. 1.10 per kg shall be levied. Beyond 5% of weight variation, Five times of TSP
charges, i.e., Rs. 2.75 per kg shall be levied.
4. MOT Charges: All the consignments arriving cargo terminal with customs permission
between 21.30 hrs. and 07.30 hrs. and on Closed holidays shall be accepted with Rs.
100/- per AWB as merchant overtime apart from the normal TSP charges.

5. Packing Charges: For repacking the packages after examination with bands/stitching, etc.,
Rs. 3/- per package is levied.
6. X-Ray Charges: Rs. 3/- per package up to 10 kg weight and Rs. 5/- per package beyond 10
kg weight shall be levied as X-ray charges.
 Chartering of Airlines
• Cargo aircraft are chartered for transporting cargo to remote
locations which are not serviced by scheduled airlines.

• Cargo aircraft are chartered by airlines for transporting cargo to

locations where the requirements of the landing strips are not met
by other aircraft. Thus; they charter a small aircrafts which meet
the requirement of destination country’s landing strips.

• Cargo aircraft are chartered for transporting cargo over areas of

restricted access, civil strife etc. where chartered cargo aircraft can
fly in to both international airports and rough landing strips.
 Information Requirements of Air
Chartering Company
Size and Volume of Cargo in tonnage & cubic capacity

Outsize drawings of cargo to plan loading arrangements

Tentative Flight Route (s) to plan take-off, landing and parking

arrangements

Schedule of transporation and frequency therein

Name & location of the consignee to overcome airflying restrictions

Nature of Cargo ie. hazmat, reefer, break-bulk, inflammable etc

Any special requirements

 Procedures Involved in Air Freighting
Goods
• At the time of booking the shipping space in airlines, a freight forwarder
or an airlines need some information for booking of cargo. This
information may include following:
 Name and address of the shipper
 Name and address of consignee (s)
 Nature of cargo
 Special handling instructions i.e. Hazmat, inflammable, reefer,
perishable, live animals
 Schedule date of shipment
 Named port of loading
 Named port of destination
 Actual weight and measurements such as size and dimensions of cargo
Cargo which Cannot be Consolidated in
Air Freighting
Valuable Cargo Such As Gold Bullion, Banknotes, Jewelry Etc.

Live Animals

Human Remains

Diplomatic Bags

Baggage Shipped As Cargo

Dangerous Goods.

Any other items as specified by DGCA in public interest and safety.

Documentation for Air Cargo Shipments

• Shipping Bill as applicable in quadruplicate:

• Commercial Invoice
• Packing List or Cargo Manifest
• Insurance Certificate
• Certificate of Inspection
• Certificate of Origin
• SDF/EDF/Softex
• Export Promotion Form (EP Form)
• Any other relevant certificates/documents.
 Processing of Shipping Bill in Export Transaction Under EDI System
Step: 1 Service Center

Exporter/CHA EDI Service Check List Error

Center Generation No

Submission /
Step: 2 Appraising Allotment of S/B No.

Yes
Yes DEEC Supdt. For
Appraising by FOB> Rs. 10 Lakh No DEEC
Endorsement
AC DBK> Rs. 1 Lakh
Sample > 75000

Examination by
Cargo Registration
A.O. Assigns the Inspector
Inspector

Step: 3 Examinations

Handing over Cargo Submission of Documents

Printing S/Bs 3 L.E.O by A.O
to Port Authorities to A.O Copies

Yes
DBK Processing
EGM Filing DBK S/Bs

Cycle Complete
Source: Central Board of Excise and Customs, Department of Revenue, Government of India
 Airway Bill - Introduction

• Airway Bill is a transport document associated with Airfreight.

• It serves as a receipt for goods and an evidence of the contract of carriage, but it
is not a document of title to the goods. Hence, the AWB is non-negotiable.

• It contains the following details:

 number of packages
 dimensions or volume
 gross weight
 shipping marks

• The goods in the air consignment are consigned directly to the consignee.
 Airway Bill – Types

• On the reverse side of the airway bill are the airline’s terms and conditions of
carriage whereby an airline is obligated to transport a consignment to its final
destination once it has confirmed receipt of the shipper’s consignment.

• Airway bill can be comprised in two parts:

 MAWB (Master Airway bill) – shipments sent on a direct basis, not
consolidated.

 HAWB (House Airway bill) – shipments sent on a consolidation basis whereby

grouping together various clients consignments under one MAWB being
issued by the freight forwarder.
 Airway Bill - Functions

• Contract of Carriage
• Evidence of Receipt of Goods
• Freight Bill
• Certificate of Insurance
• Customs Declaration
 Airway Bill – Colour Scheme for Different
Recipient
Numb Copy Recipient Color
er Scheme
3 Original for Shipper Shipper Blue
1 Issuing Carrier Air Lines Cargo Billing Blue
Accounting
4 Airport of Origin Origin Gateway Domestic - maintain for 1
year. International - maintain for 5 years.
2 Original for Consignee Orange
Consignee
5 Delivery Delivery Receipt/Airport of Destination Yellow
Receipt/Airport of Domestic - maintain for one year
Destination International - maintain for five years
6 Extra copy Can suffice as Origin or Delivery White
Receipt/Airport of Destination copy for
gateway or CFS
NOTE: Origin or Destination CFS must make a copy of MAWB and attach it to the AC12
Register of Air Freight or work order to retain for their records.
 Salient Features of Airway Bill
Proof of receipt of the goods for shipment

Evidence of the contract of carriage

An invoice for the freight, reflecting the shipper, the consignee and the
goods being shipped, as well as the full freight amount

A certificate of insurance (if carriers insurance is requested by the shipper)

A guide to airline staff for the handling, dispatch and delivery of the
consignment

A means of clearing the goods through customs

Major Differences in Airway Bill and Bill of
Lading

Air Waybill (AWB) Bill of Lading (B/L)

• Non negotiable instrument • Quasi-Negotiable instrument

• AWB shall be issued after the complete • Bill of Lading shall be issued after the
consignment has been received complete consignment has been boarded
• The airlines or his agent is responsible onto vessel
for issuing AWB • The vessel company is responsible for
• Goods can be received by specified issuing B/L
person • Goods can be delivered to bearer
• it is not a document of title or ownership • It is document of title or ownerhship