There is a reason why major travel sites like Kayak and Expedia display plane ticket prices after all taxes, fees and surcharges have been added: it’s because customers don’t want to see what they thought was a $200 ticket turn into a $300 ticket at checkout, thanks to the addition of fees and surcharges—which are sometimes vague and questionable.
That same idea applies to the air cargo industry.
In 2015, in a response to demands from forwarders and shippers, Emirates SkyCargo made the intelligent decision to simplify its pricing structure. The carrier began providing customers with an all-inclusive freight rate, doing away with add-on fuel and security surcharges. This strategy has been praised by industry experts as a needed step away from the outdated surcharge mechanism.
The move has also had a domino effect, as other big names in the industry have been motivated to follow their lead, including American Airlines, Virgin Atlantic Cargo, and Qatar Airways. Clearly, big changes within the air cargo industry are happening already.
Transparency and Consistency Are What Customers Want
And growth is what air cargo businesses need.
According to the most recent quarterly report from the International Air Transport Association (IATA), the air cargo industry is continuing to “outperform global merchandise trade, but growth remains weak.” Recent poor performance is in part due to factors like struggling commodities/heavy industry and political events like Brexit.
So how will air cargo carriers remain competitive in the industry and catalyze growth at a time when headwinds to the global economy seem to be constantly arriving? By consistently and promptly responding to customer needs.
Right now, what customers want is to know the final price immediately. As Joost van Doesburg, an air freight policy advisor at European Shippers’ Council, notes, “Surcharges were always the number one source of frustration for shippers.” A transparent, all-in pricing model can take away that frustration, and thus help hopefully attract more clients at a time when consumer confidence is improving (as IATA noted in its report).
However, in an industry where fuel price fluctuation and regulatory factors can change costs, some remain skeptical about whether this trend can continue. In short, the success of implementing air cargo all-in rates depends largely on how carriers use technology to deliver these all-in quotes to clients.
Data Can Help Determine Rates for a Longer Period
In an effort to aid financial decision-makers and improve operational efficiency, many shippers hope to take air cargo all-in rates even further by having the ability to lock prices in for a long period, such as for six months or even a year.
That, however, may seem impossible, especially with fuel prices constantly in flux, rising labor costs, and fees and regulations varying from place to place. For those shipments going through Seattle-Tacoma International Airport, landing fees, parking fees, and remain-over-night fees are just some of the many costs.
But it’s all about keeping customers happy. And air cargo carriers are finding a way to make all-in rates fixed for a certain season or year.
The best way for carriers to provide shippers with a stable rate for a specific route and allotted time-frame is to employ the technology they already possess. This is where big data comes into play.
Analyzing historical fuel price trends can help air freight companies make more accurate predictions on fuel costs over the next year. Combining that data with other relevant pricing data, such as environmental regulations fees, research expenses, and security measures, will enable businesses to calculate a stable and profitable forecast.
Not only will this keep air cargo carriers in positive earnings, it will keep clients happy because they have a clear and reasonable price that they know won’t change.
Simplification Is Key to the Future
In the consumer world, simplicity for the customer is king. All-in rates are a great start for the air cargo industry, but there is room for improvement in how such prices are calculated and obtained. A simpler digital strategy will guide carriers to a brighter future.
With all the apps, real-time feeds, and digital solutions at our fingertips, getting a binding quote should not take long at all. Unfortunately, too many airlines make obtaining quotes, submitting bookings, and monitoring shipments much more time consuming than necessary.
If the air cargo industry is to survive a major disruptive force, it must think about modelling its transactions after typical consumer transactions. Getting an all-in rate should be like getting an all-in rate for a plane ticket or rental car; it should take just a few clicks.
All-in rates are a great trend in the push for transparency and simpler pricing in the air cargo industry. But innovation shouldn’t stop there. Airlines and shippers need to take advantage of available data and provide long-term and accurate pricing; embracing technology will allow clients to get all-in rates in seconds.
So, while there is still more work to do, positive changes are occurring. Let’s hope the innovative trend continues.