15 / 09 / 2009
LESS than a week after Air Cargo News exclusively revealed that LH Cargo was to instigate an almost immediate 25 per cent hike in rates, AF-KLM released a near identical letter to customers revealing its own 20 to 30 per cent rate increase. It was shortly followed by Delta and a number of other airlines – some announcing their moves more publicly than others.
In its letter to customers, AF-KLM Cargo management stated: “The results of Air France Cargo-KLM Cargo are under severe pressure given the extraordinary market conditions faced by our industry.
“In response to these difficult circumstances, we have taken severe measures such as significant reduction of capacity and major cost-cutting initiatives.
“In this economic environment, and in order to maintain our contribution to the airfreight supply chain, in terms of capacity and services, Air France Cargo-KLM Cargo is now forced to increase its freight rates by 20 to 30 per cent as of early October.”
Are forwarders supposed to believe that coincidentally all of these airlines decided to formulate and put into practice near-identical policies within days of each other?
Every company has to react to market moves by their opposition, but cargo executives, for many years, seem incapable of putting into place any logical long-term strategy for rates.
Instead, the industry moves from boom-to-bust with depressing regularity. The airlines will now find it extremely difficult to raise rates from the ludicrously low level they allowed them to fall to.
There is also growing evidence that some forwarders are more equal than others in the application of the rises. Air Cargo News has learned that a number of the major multinationals have been assured that the increases ‘will not apply to them’ and that they will receive their own ‘special’ deals.
These double standards by airlines in applying rates has incensed the small- and medium-sized forwarders, already aggrieved that airlines are happy to accept their higher-yielding cargo, but do little to encourage more of this business. Instead they pursue loss-making volume from the multinationals for ‘market share’ reasons.
Air Cargo News has received correspondence from forwarders expressing outrage at the way the rises are being implemented.
Some of the rates quoted recently by airlines reveal the extent of the mess they have got themselves into. Rates as low as nine cents plus charges from Europe to Hong Kong have been quoted and cases of zero rates on other eastbound routes are commonplace.
Air Cargo News even saw evidence of a shipment being flown at minus seven cents, plus, plus. Quite how an airline can apply a 25 per cent increase to a minus rate is unsure.
The need for airlines to charge more realistic commercial rates is clear. Yet the approach by the airlines to their customers has so far been at best, clumsy, and at worst, arrogant.
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