Momentum toward electronic air cargo bookings that directly connect forwarders and airlines is slowly building, a sign that airlines are warming to the notion of providing online access to spot capacity.
That’s significant given the vast proportion of air cargo capacity isn’t yet available online, but it also underscores the extent to which the airfreight industry remains dependent on a current structure that sees shippers rely almost wholly on forwarders to book space.
In short, shippers are disincentivized to book direct with carriers, whether online or not, because forwarders handle bothersome ancillary handling and compliance services at origin and destination and also get access to lower buy rates from airlines than shippers can. Online booking doesn’t change that equation.
But the digital nexus of airlines and forwarders is showing signs of progress. Just this week, the technology startup cargo.one, which enables forwarders to make electronic bookings with cargo airlines, received a 16 million euro (US $18.8 million) funding round to grow its platform. Meanwhile, Barcelona-based WebCargo, a subsidiary of logistics software provider Freightos, released a new version of its web booking interface for forwarders, designed to make it easier to compare rates across different airlines.
WebCargo, which is integrated directly with British Airways, Air France, KLM, Lufthansa, Etihad, and AirBridgeCargo, said in a statement the volume of electronic bookings made thus far in July via its system is three times what it was in July 2019, “a reflection of how much more important real-time air cargo has become in the era of COVID-level airline capacity.”
Berlin-based cargo.one, which counts Lufthansa Cargo as an investor, is directly integrated with Lufthansa, All Nippon Airways, Finnair, Etihad, AirBridgeCargo, and TAP Air Portugal. The company focuses on real-time online bookings — i.e., those for which the price fluctuates dynamically — while WebCargo offers both real-time electronic bookings and static rate bookings. WebCargo CEO Manuel Galindo said in February “the vast majority of bookings in the industry are still being made offline” and “a majority of airlines don’t have automated prices today.”
A more efficient connection
Tools connecting forwarders with airlines electronically help reduce the amount of time both parties spend on a single booking from hours to minutes. But they also highlight the degree to which forwarders remain an integral part of the airfreight procurement process. Shippers still remain dependent on forwarders to secure space even as the market goes digital.
That’s because forwarders provide pick-up and delivery services beyond booking. Additionally, forwarders provide multi-modal offerings to shippers beyond just airfreight, so shippers view air cargo bookings as just one aspect of a bundle of services.
One forwarder told JOC.com that it would make little sense for a shipper to execute the booking and then hand off pickup and delivery of freight to a forwarder, nor would the forwarder want to sacrifice the revenue that would come attached to booking off its own contracts with airlines. Additionally, shippers are not set up to handle pickups of air cargo consignments in the same way they are set up to handle drayage for ocean shipments and very few have the volume to negotiate better rates on these services than forwarders provide.
As one technology provider put it to JOC.com, the reticence to move to shipper direct electronic bookings with cargo airlines is not “a tech hurdle as much as a business model one.”
While investment and traction for electronic bookings are growing, one needs to look no further than the e-airway bill (e-AWB), an initiative driven by the International Air Transport Association (IATA), to understand how long digital process changes in the freight industry can take. By IATA’s own admission, it took nine years for the e-AWB to become “the default contract of carriage for all air cargo shipments on enabled trade lanes.”
E-booking adoption in the airfreight industry is likely to come faster than that, but it won’t happen overnight, particularly since the vast majority of air cargo capacity isn’t even available via e-bookings.
WebCargo in May inked a deal with IBS, a cargo management software provider to airlines, to stoke more interest in online bookings. WebCargo’s AcceleRate product is used by more than 1,900 forwarders, including Hellmann, Nippon Express, and DSV Panalpina, and provides rates from more than 330 airlines.
Forwarders have been gravitating toward building direct application programming interfaces (APIs) with airlines, a necessary step to moving to more electronic bookings. Lufthansa Cargo itself released its smartBooking API in February to convey its rates to forwarders and digital marketplaces that forwarders use to make airfreight bookings for shippers.
Contact Eric Johnson at [email protected] and follow him on Twitter: @LogTechEric.
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