IAG Cargo to offer all-in freight rates

IAG Cargo is joining the all-in freight rates club, following the lead set by Emirates SkyCargo and Qatar Airways.
A spokesman for the cargo arm of British Airways and Iberia said that it will remove the fuel surcharge and exceptional handling charges “to offer a simpler pricing structure”.
He added that the new pricing structure will be implemented across all IAG Cargo markets by the start of this summer season.
The IAG Cargo move – Scandinavia’s SAS is also rolling up fuel surcharges into overall freight rates – comes as the European Shippers Council (ESC) predicted that many other carriers will follow suit.
Joost van Doesburg, airfreight policy manager at the ESC has spoken to a number of major European airlines who were “very carefully looking at the idea”, indicating that a move would come about “in the near future.”
He told ACN that recent meetings with major shippers had convinced him that there was growing pressure for such a move, to improve transparency and make airfreight charges easier to understand and account for. Moreover, there was now a groundswell of support from the major freight forwarders, he added.
He said that it was “not a coincidence” that the three carriers had made the decision to stop accounting for fuel charges separately at a time when jet fuel prices are at last on their way down.
He added that while there was some danger that the surcharges would now be locked in to general freight rates, on the whole, airline customers would welcome the transparency that it would bring.
“On the positive side, it means that shippers can now take a longer term view; they can deal with a fixed rate,” he said. “Shippers are fed up with surcharges – they just want to know the rate per kilo.”
Forwarders, who in the past had taken an agnostic view of fuel surcharges, were also coming round to the idea that abolishing them would be a good idea.
For one thing, they are not allowed to charge a commission on surcharges, only on the freight charge as such, so rolling the two together would in theory allow them to increase commissions. Forwarders were also becoming increasingly unhappy at having to maintain two separate accounting streams for surcharges and airfreight, Doesburg argued.
He would much rather that airlines competed not on price but on quality and reliability. One way to achieve this would be to “refresh” the Cargo 2000 scheme to create “a new competition in the supply chain.” But under the surcharge system, “it was difficult even to compare rates” let alone anything else.
Meanwhile, there was little sign of airlines reducing existing surcharges to take account of tumbling jet fuel prices.
Many used the excuse that their fuel buying was hedged many months in advance, though it was interesting, said Doesburg, that “if you believe them they hedge just before fuel prices start going down, but somehow they never seem to when they are going up.”
Lufthansa, which does not hedge its fuel, according to a spokesman, had in fact reduced its fuel surcharges by ten per cent, making it one of the better carriers in this respect. “But some of the big European carriers have not changed their prices at all.”
Doesburg added that there was also a strong argument for rolling up security surcharges into freight rates too. These have been relatively stable, rising only two or three times in ten years.
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