What does prevent operators and brokers from being as effective as possible and how has the landscape evolved over the years?
The subject comes under the spotlight at the upcoming online event Mastering Effective Urgent Air Cargo Charters which takes place on October 10.
As we delve deeper into the world of urgent air charters, it's essential to explore the evolving dynamics of the cargo charter market. This niche sector is a sub-sector of the broader air freight market, which itself is a vital component of the logistics industry.
While the air freight market has witnessed significant changes over the past few years due to the emergence of innovative businesses like Cargo One and Freightos Web Cargo, the cargo charter market has seen relatively little transformation.
How is digitalisation is reshaping the industry?
The industry has experienced a significant shift in dynamics brought about by digitalisation. While this trend has imposed high demands for quick and flexible operations, it has also driven people physically apart. However, experts believe in a hybrid approach, underlining the importance of maintaining daily in-person communication.
Simon Watson, Director & Co-Founder of CharterSync, points out that the cargo charter market continues to rely heavily on manual processes. Despite the availability of digital communication tools like WhatsApp and email, many operations across the industry remain manual.
This lack of technical integration results in inefficiencies. Operators, brokers, and carriers often operate in isolation, each with its own set of processes. As technology excels at automating repetitive tasks, the industry is poised to benefit significantly from improved efficiency.
"One of the most significant challenges in our market is that each business works in a silo. They each have their own processes and ways of working that don’t match their suppliers and clients. This creates process inefficiencies across the market, and then they default back to standard forms of communication between parties", Watson says.
When considering how the interaction between operators and brokers can become more profitable, a digital perspective comes into play. While the charter market is relationship-driven and people-centric, technology can play a vital role in maximizing workforce efficiency and resource utilization. By automating repetitive actions, technology allows teams to process more requests or quotes, thereby enhancing profitability.
Discussing the current market conditions, experts argue that the existing system benefits all parties involved but acknowledge that a low market means lower margins for everyone. To thrive, the communication between operators and brokers must transition to a higher level.
"My philosophy is that the current system where the operator does business with the broker and the broker deals with the client is of benefit to all. But a low market means low margins for everyone. To make it happen we need to know exactly how to be effective on both sides", says Nikolay Kurbanov, managing director at AVEM AERO.
The market often operates with incomplete information, resulting in multiple conversations and a lack of transparency. To establish a more profitable working approach, it's crucial to recognize and tackle these challenges by integrating human interaction with technological advancements.
Simon Watson emphasizes the significance of brokers' in-depth understanding of cargo-related intricacies. Cargo charter requests involve intricate details, from permissions and dimensions to loadability and documentation. Technology can facilitate these complex discussions, ensuring the efficient acquisition of precise information.
“In essence, we are one big chain, and each part of it has to understand what is happening before them and after them. We have to ensure each other in some way because at some point, the operator can make a mistake or the client wants something that is not effective and can lead to disaster. If we understand everyone's process better, we'll end up doing a better overall process together," Kurbanov said.
"The problem with young brokers is that they don't understand the process and expect the operator to control the entire process from start to finish. Even experienced people can make wrong decisions, so we need a balanced system. This requires establishing communication with people who are on the other side. After all, even though we are on different sides, we are doing the same job,”
One of the biggest issues currently plaguing the industry is intense competition, stemming from a decline in automotive production. This competition has led to price undercutting, with operators offering services at rates that do not seem economically sustainable.
"We are currently facing high competition because of a low market, which is because of a decline in automotive production. The second challenge we face is price dumping. We have ATR72’s flying under the price of Metroliner, for example, which doesn't make sense.", said Kurbanov.
As for cancellation fees, it's worth considering the unique nature of the business, which often operates on very short notice. While a 100% charge can be justifiable in certain situations, trust and reputation hold paramount importance in their line of work. A precise cancellation policy helps maintain the delicate balance.
"In some situations, a 100% charge is justifiable, but in our business, everything is based on trust and reputation. Usually, we even sign the contract after the flight has finished, for us, verbal confirmation is equal to a signature, but even in such a specific niche, we need a very precise cancellation policy," said Kurbanov.
“But it’s also about a mindset of the market, a shift in mentality, and acknowledging the way that this marketplace does work. If we were in a commodity environment where we had all the information at the beginning to be able to price it accurately, that would be a wonderful, simple world. But it's not that way, " Watson added.
" I think the dynamic of the way that the shippers, the freight forwarders, the air charter brokers, and operators work is also something that is more complex. It can be simplified into where the common ground is and the focus on the essential information required to do the job effectively,” he said.
Kurbanov said: “With better synchronisation, the chance of a successful flight is higher. And the higher the chance, the higher the probability that everyone will be satisfied. Conversely, if a client does not receive his cargo on time, he loses money and pays for a charter that he does not need, or something goes wrong in the flight and we get extra costs. Therefore, to increase efficiency, operators and brokers must work together to develop synergies, where everyone contributes, thus increasing the chances that everything will work out.”
As the cargo charter market continues to evolve, the integration of technology is poised to drive efficiency and profitability. While the industry remains relationship-driven, the efficient use of technology can help operators, brokers, and carriers streamline their processes, reduce inefficiencies, and adapt to changing market dynamics. The challenge lies in finding the right balance between human interaction and technological advancements to create a more profitable way of working in this complex and dynamic sector.
And the topic of the efficiency of cooperation between operators and brokers in the urgent air cargo charter market will be discussed at the online event “Mastering Effective Urgent Air Cargo Charters” on October 10, see https://www.avem.aero for details
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