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Costing Airfreight

Freight forwarders offer consolidated airfreight shipping at lower rates than airlines to attract customers. When shipping consolidated cargo, forwarders pay the published IATA rate and earn a 5% commission. Forwarders make additional profit through ancillary fees and value-added services. Individual shippers benefit from forwarders' consolidated rates and priority over loose shipments. However, consolidations carry risks for forwarders if minimum volumes are not met. Successful forwarders realize profit on 95% of consolidated shipments.

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62 views19 pages

Costing Airfreight

Freight forwarders offer consolidated airfreight shipping at lower rates than airlines to attract customers. When shipping consolidated cargo, forwarders pay the published IATA rate and earn a 5% commission. Forwarders make additional profit through ancillary fees and value-added services. Individual shippers benefit from forwarders' consolidated rates and priority over loose shipments. However, consolidations carry risks for forwarders if minimum volumes are not met. Successful forwarders realize profit on 95% of consolidated shipments.

Uploaded by

haubui
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPT, PDF, TXT or read online on Scribd
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Costing Airfreight

ITA501
L Thomson
Costing Airfreight
• In order to convince clients to utilize the
services of a freight forwarder for air
consolidations, the forwarder typically
offers “lower-than-airline” rates.
Costing Airfreight
• The freight forwarder will offer the same
level of service as the carrier.
Costing Airfreight
• When the forwarder ships consolidated
cargo for customers he becomes an agent
of the IATA registered airline.
Costing Airfreight
• This means that the forwarder will pay the
published IATA rate which will be issued
against the MAWB for the consolidation.
Costing Airfreight
• An IATA commission of 5% is earned by
the forwarder.
• How much profit the forwarder realizes will
depend upon the package of services sold
to the individual customers.
Costing Airfreight
• Aside from the core freight charge, what
other charges will allow a forwarder to
realize more profit?
Costing Airfreight
• If a shipper can tender a shipment to the
air carrier directly unconsolidated, why
would he bother to use the forwarder
then?
Costing Airfreight
• Aside from the services offered by the
forwarder that would ultimately provide
benefit, the individual shipper will not
obtain the same rate, as each shipment
would be tendered individually and thus
fall under a lower weight bracket and in
the category of “loose shipment”.
Costing Airfreight
• In an industry where carriers tend to “over
book” it may be a safer bet that a
forwarder representing higher volumes to
the carrier will have priority of shipment.
Costing Airfreight
• Remember that consolidations are both
challenging and risky at times for the
forwarder.
• Why?
Costing Airfreight
• However successful, established freight
forwarders will realize a profit on 95% of
their consolidated shipments.
Costing Airfreight
• Some airlines participate in the TACT and
others publish their own tariffs and/or
negotiate outside of a tariff.
• Within North America we are seeing much
more negotiation with individual shippers
and forwarders.
Costing Airfreight
• Rates can be quoted in different formats
Per unit load
According to actual volume
Project shipments
According to specific commodity
Net rates
Domestic tariffs
Costing Airfreight
• Per unit load
– Per pallet or skid at a fixed rate or minimum
rate.
Costing Airfreight
• According to actual volume
– A rate based upon a guaranteed minimum
volume over a specified period of time.
Costing Airfreight
• Project shipments for
– a specified period of time
– a specific commodity
– a named forwarder or shipper
– an individual commodity or group of
commodities
Costing Airfreight
• Net rates
– Special rates negotiated with the airline and
not subject to the agent’s 5% commission.
Costing Airfreight
• Domestic tariffs
– Tariffs and rates that differ from international
shipping tariff and rates.
– Provides the option of trucking to the U.S. and
shipping by air domestically versus an
international air shipment.

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