CARGO HANDLING MANAGEMENT, IMPORTANCE OF CARGO IN AIRLINE BUSINESS, TYPES OF CARGO, PACKAGING, FREIGHT CALCULATION

Introduction:

Cargo means goods or luggage which are carried by ship (or airplane). Thus, those airlines that are transporting only cargo are referred to as cargo carriers or cargo airlines. The fare to transport goods is known as freight, and the airline or ship is seen as a freighter. Thus, the cargo airlines are freighters carry products from one place to another. Cargo shipment is an outcome of world trade. World trade results from disparity. It means some places have goods and some locations don’t have. This phenomenon creates demand and supply mechanism. Those who supply are known as exporters and who purchase it are known as importers. Thus cargo transport is a result of export and import. To understand this information, one should see the form and volume of world trade.

The global economy grew (Report of IMF 2006) at 3.6 percent in 2005 propelled by both the USA, maintaining a 3.5 percent growth, and fast-growing emerging market economies such as China (9.9%) and India (8.4%). There is a tremendous structural imbalance in the world economy. According to IMF classification, about thirty advanced nations (USA, European Union & Japan) had a share of 52.3% of global output of goods and services (2005). On the other hand, the percentage of developing countries (about 200 countries) is 47.7%. The largest economy, the USA, had a share of 20%. Others are the European Union (15%), Japan (6.4%), China (6.7%) India (6%). In world exports, the share of developed nations was 69%, while developing countries have a share of 31% (India=1.3%).

While exports and import growth varied among the developed nation, trade performance of developing countries (including India) continued to be reliable. India’s growth rate in trading was 25% (2005-06) in the case of India, there is a notable upward change since last decade. If we see the structure of the Indian economy, then we find that there is a sharp decline in the importance of the primary sector (agriculture, mining and allied activities) its contribution to nation’s GDP is about 20% in 2006. While about 53% of national income is produced in the territory sector (services, transportation including tourism, banking, etc.) and the rest is contributed by the secondary sector (manufacturing sector, 24%). Thus, now there is more importance of services, transportation, trade, etc. than the primary sector. (source, economic survey 2005-2006)

The trends of physical output in civil aviation sectors are shown by this table, which shows the pattern of Cargo handling by airlines.

Trends in Growth of physical output in the infrastructure sector:

TRENDS IN GROWTH OF PHYSICAL OUTPUT IN INFRASTRUCTURE SECTOR

 

 

 

 

 

This table shows a significant fluctuation in air transportation in the export sector, though there was a sharp decline in 2003-04. In the field of import sector, there was minus growth 2001-02 due to the 11th Sept. air crash in New York, after that, there was a good recovery, and it has a very high growth rate. 

All the above figures show that India is a very fastly growing economy; there has to be very high growth in export and import. Hence the importance of cargo transport will remain high.

There are three types of cargo planes:- (i) Pure cargo planes, which are meant for cargo purposes. (ii) Mixed configuration planes, in such flight, half of the space is for passenger, and rear side has cargo section (iii) passenger plane; in such aircraft, the lower part is made for cargo purpose. Sometimes cargo airlines face the challenge to carry particular types of cargo, e.g., if one has to give elephant, then what will happen? Whenever it moves, it will disturb the balance of the plane. For carrying goods of unusual shape, size, and weight one as to arrange in advance with specific requirements. 

The essential infrastructural facilities needed at any airport to handle Air Cargo Services:-

  • A modern office complex with professional facilities.
  • Computerization and automation to increase performance and efficiency. 
  • Cargo storage space separate for import, export, and cold storage facility.
  • Parking facilities for vehicles carrying goods.

 

Cargo Handling Management

When we are talking about the export or import of goods, there are three modes of transportation. (i) surface (ii) water (iii) air.

         Surface transport may have several types of vehicles and ways, e.g., Railway and roads on which there are large no. of vehicles are used such as trucks, bullock-carts, etc. There are traditional modes, and they carry a large part of the cargo. They provide door to door service without many times loading and unloading (except Railway), but they have their limitations. They are not very useful in international trade if the countries are located very far from each other, e.g., roads carry the trade between India and Nepal. Recently some trade has been carried by rail and road to Pakistan. 

         Water transport, especially sea transport, has the largest share in international trade. They need investment in the construction of ports/harbors/jetties and the ship, but after that, the maintenance cost and operational cost are meager. They are very suitable for bulky items. Most of the raw materials, machines, and manufactured items are carried by ships. 

         Air transport is the latest mode of transportation, but they are costly; construction of airports, airstrips, purchase of plane, air turbine fuel, operational cost, staff, etc. are expensive. The most significant positive aspect is its fast speed.

So, when we compare all three modes of transportation, we find that air transportation is the most expensive but fastest. It means it will be preferred for perishable items, such as dairy products, animal products, flowers, and vegetation or valuable items such as jewelry, machines, etc. 

         In India, the Airport Authority of India is the official cargo handler at all leading international airports viz. Delhi, Mumbai, Kolkata, Chennai, etc. and handles all cargo meant for Import or Export from India. A particular computerized system is designed and developed for managing the Import, Export, Disposal, and Trans-shipment (TP) Operations for these different locations. The system covers all the aspects of cargo handling from the time AAI receives it, and to the time it is handed over to agents/airlines, including Billing for all cargo related activities. This project went online in October 1999.

 

Imported Cargo

Import-Module involves On-Line Transaction Processing of data (viz. details of Import cargo) that are entered during Flight Check, Binning (Placement), Examination, Billing, Delivery of cargo, Acceptance of baggage and Queries/generation of a report for further clearance.

Import activities:

Under the Normal flow of imported consignments-

         A flight’s Manifest is entered at the flight check counter. The consignments are Segregated and Binned at the various locations in the ‘Bonded Area.’ When the Delivery Order is received, the consignment is sent for Customs Examination to the examination Area, and on getting ‘out of charge,’ the Payment is made for the consignment through a Bank Challan. It is Delivered under a Gate pass.

         In the case of a Trans-shipment consignment (International-to-international/International–to-Domestic), the Cargo Transfer Manifest (CTM) is entered, and after its payment, the consignment is delivered to the consignee/agent.

Consignments detained by customs are detached from the normal cycle and processed on their release. Consignments can also be taken by customs as ‘samples,’ under a Sample Gate pass. Different activities like conversion of consignments from import to Trans-shipment and vice-versa, recording damaged consignments, reprinting of documents like bank challan/gate pass/Location Slips are provided in the system.

 

EXPORT Cargo Cycle:

Export activities:

In the case of Export, the Exporter is allowed to bring consignments into the Airports Authority of India Cargo complex after payment of Terminal Storage Processing Charges to AAI, which is based on Type of Commodity and Chargeable weight of the consignment. An AIRWAY BILL NUMBER (AWB No.) identifies a consignment. The consignments are physically weighed by AAI to crosscheck with what has been declared in the AWB. In the case of WEIGHT VARIATION, the exporter has to pay “WEIGHT DIFFERENCE” Charges. Later on, they are moved into EXAMINATION AREA, where Customs examine cargo. The cargo undergoes X-RAY scanning if required. Once considered, Customs either grants “LET EXPORT” permission or asks the exporter to “WITHDRAW” the cargo, or “DETAINS” the cargo. In case, Consignment is detained, it is sent for further examination outside the Cargo Complex. Once examined and permission is obtained, the consignment is moved into BONDED AREA, where consignments are Binned (placed). In case, Cargo is being withdrawn, and the exporter is given a Gate Pass for Withdrawal of Cargo. Based on Loading Permission obtained from Customs, Airline’s load consignments into UNIT LOAD DEVICE (ULD), which is assigned to a particular Flight. Once ULD BUILDING is complete concerning an appropriate Flight, Airlines approach the Airports Authority of India for “EXPORT PERMIT FOR RELEASE OF ULD.” Once Release Permit (Gate Pass) is obtained, the ULD is taken for physical loading into aircraft via “AIRSIDE GATE,” followed by “UPLIFTMENT.” In case Flight gets canceled or any consignment needs to be withdrawn from the flight, “OFFLOADING” happens. If offloaded, the ULD may either be “REBUILT” or may be assigned to another plane. Re-Building is the process of Breaking of ULD, which means that the consignments in the ULD are shifted back to Bonded Area Locations.

 

Disposal Module

Consignments that lie unclaimed or undelivered for more than 30 Days (or a duration which is decided time to time by AAI) with AAI usually are disposed of in a manner deemed fit by customs. This disposal mode could be an open auction, sealed tender sale, destruction, or simply handing over to customs or any other approved agency.

We will see in detail about the main types of commodities which are carried by airlines. Before knowing more about cargo handling management, it will be worthwhile to know some terms/codes/ definitions which are used in Air cargo:

Abbreviations and Definitions

 

AWB = Air Way Bill (Air consignment note). It is the note which includes all information regarding consignee (sender) consigner (receiver), both addresses, amounts paid, and to collects types of commodity, etc.
CC = Charges collect- the total charge which the airline will collect.
CCA (Domestic) = Consignee’s copy attached
CCA (International) = Charges correction advice
CVD = Cash Value Document
DACC (Domestic) = Delivery against consignee’s copy
GCR = General Cargo Rates
NCV = No Commercial Value
NVD = No Value Declared
SCR = Specific Commodity Rates
SLI = Shipper’s Letter of Instruction
ULD = Unit Load Device
VC = Valuation Charge

 

 Class Rates –

Certain rates are applied to specific commodities. They have the following types of standards:-

(i) Minimum Rate:- It is that charge which is taken from a sender to send a consignment of cargo from the departure city to the destination city.

(ii) Regular Rate:- It is the rate that is taken up to 45 kgs. of general cargo from departure city to the destination city. If there is no discount for a consignment of 45 kgs. And over, then the average rates are applied to consignments up to 100 kgs. If there is ‘Q,’ then there is a discount for higher quantities of cargo.

(iii) Quantity Rate (Q):- It is the rate for sending higher quantities of general cargo.

(iv) C– where specific commodity rate applies

(v) R– where class rate with a surcharge to an average price applies

(vi) Specific Airline Rates– expenses which are utilized on a particular airline only. 

Types of Cargo

As mentioned earlier, the goods which are sent by airlines, they are either perishable or valuable. The transportation (freight) is very high, so we can’t expect that raw minerals and cheep articles may be carried. The main types of goods may be Fruits and Vegetables, live animals, dairy products, manufacturers’ machines, valuable minerals, etc. Among such goods, there can be some heavy items; some are bulky, some need a large space, e.g., car, which takes a lot of space inside and outside the care. So, such factors will affect the packaging, handling (e.g., cold storage facility) or space management. In the case of live animals, special packaging (cage), maintenance of air pressure, and temperature will be needed. For general cargo, normal weight is the parameter of cargo rates. But for special items, there is a provision of specific commodity rates (SCR). The IATA has classified all commodities into 0 to 10000 classes (see the list specific commodity groupings). In the Airway Bill, the codes of goods are mentioned along with the constant rate. The broad classification codes are:-

  • 0001-0999 = Edible animal & vegetable products. 
  • 1000-1999 = Live animals & inedible animal & vegetable products.
  • 2000-2999 = Textiles, Fibres, and Manufacturers.
  • 3000-3999 = Metals and Manufacturers, excluding machinery, vehicles & electrical equipment.
  • 4000-4999 = Machinery, Vehicles and Electric equipment
  • 5000-5999 = Non-Metallic minerals and manufacturers
  • 6000-6999 = Chemicals and related products
  • 7000-7999 = Paper, reed, rubber and wood manufacturers
  • 8000-8999 = Scientific, professional and precision instruments, apparatus.
  • 9000-9999 = Miscellaneous 

 Packing

Packing is a crucial aspect of shipment. Packing needs several points to be considered:-

  • It should be packed in such a manner that it may not injure any person while handling, and it cannot harm or damage any other cargo. It should be strong enough that it can be carried safely to the destination with ordinary care in handling. There should not be a sharp edge in packing.
  • While carrying dangerous goods, it should be packed according to the guidelines of IATA hazardous goods regulations. Such articles must be listed with proper and precise consignee and consigner’s name and address. The shipper (sender) should also sign a shipper’s certificate as required under IATA dangerous goods regulations.
  • The articles containing liquids (wet cargo) should be packed in secure containers that can be safe at varying air pressure (due to change in the height of the airplane). There should not be leakage. Sometimes these liquids may be acid-like corrosive material that can harm the base of aircraft as well as other cargo. So, the packaging is crucial. 
  •  It is challenging to carry live animals. If they are chicks, then there should be holed at specified gaps, so that they can breathe. The pack should not be huge so that it cannot be capsized. They should not be overcrowded.
  • Usually, fishes, e.g., shrimps, are packed in ice-filled containers so that they may not stink; otherwise, whole space and other products may spoil. If there is a large animal, such as dogs and cats, they usually are carried with their owners in cages in passenger planes. If there are more than two dogs, then one can imagine the situation. 
  • Some products need a deep freezer or whole plane as a freezer, e.g., if one has to carry fruits (in 2007, USA demanded mango from India), flowers (e.g., Rose are supplied to the world flower market at Amsterdam) milk (once it was proposed that milk from Denmark will be supply to India) or milk products, vegetables (Delhi is a big market where vegetables from all over the world are supplied), etc. In all such cases, the whole airplane is made as a freezer to keep them fresh.
  • There are some articles, which may not be valuable, but they may have unusual shapes and sizes, e.g., once the Taj Hotel at Bentota (Sri Lanka) demanded a ‘Tandoor’ to bake Punjabi Tandoor bread. Its way was such unusual that regular serving planes were unable to carry it. Several items have emotional value, e.g., Dead human body, human remains (remember Anupam Kher’s Saraansh film), paintings, sculptures, etc. which need extra care. Once there was an India festival in the foreign country in which several statues from the National Museum were carried. On return, it was found that there was a scar on the chick of ‘Didar Yakshi’ (it is the central statue at the entry of National museum, New Delhi). So, a large amount was taken from the insurance company.

Thus, packing good is science and art. It should be reliable, but not very heavy. Otherwise, the cost of transport will be more on packaging material than the transported item. That will enhance the price of the product.

After packing, the shippers are required to write legibly and durably the name, address, contact no. of both, i.e., the consignee and consigner. For the carrier of dangerous goods, the shipper should fix appropriate labels, as shown in IATA hazardous goods regulations, in such a way that it may appear prominently.

Nowadays there is a pressure of extremists all over the world and India in particular. It is not possible that the security staff at the airport will break the packing to verify the articles. Usually, x-ray, metal detecting devices, sniffer dogs, etc. are used to check the unwanted dangerous explosives. These goods are kept in warehouses of airports for more than 24 hours so that if there is a time bomb, then that may explode. However, there are several other new technologies to detect such articles. We come across such news now and then.

 

Freight Calculation

Part-A

         The freight rate varies on several factors: The first logical thing is the weight of goods, but it cannot be the only parameter. There are several faulty goods, raw materials, or less valuable items; they can’t be compared with useful things, e.g., the same weight of fruits, dairy products, or animal products cannot be transported at the rate of gold or diamonds. So, besides weight, the type of goods is also necessary. Sometimes the item may not be massive but spacious, e.g., flowers, cotton textiles. They take more space than metallic products. So in freight calculation, the volume also is an important parameter. Sometimes, neither weight nor size alone can be criteria, e.g., transportation of a car, which will waste an ample space; in such condition, the rate will be on per unit. Such a price is known as the unit load factor (ULD). In any type of fare calculation, whether passenger or cargo, the method of fare calculation is telescopic. It means as the distance will increase, or as the weight will increase its rate will decrease. So while calculation, the prices are in the specific slab, i.e., in the lower piece (when the load is low), there is a high rate; in the next sections (when weight is more), the freight is quiet and small.

Besides the above technical factors, several other elements affect freight fixation. These factors are:-

Government Policy:- The Exim (export and import) policy of the government is essential. Each government wants to save and encourage indigenous industries (products). So it helps in their export and discourages the import of foreign products, mainly which are produced within the country. This policy reflects in custom tax at the airport or seas port. This tax is also reflected in freight. In India, the government has created dry docks, freight corridors, and several other facilities to encourage export. 

Airline’s Policy: Each airline has its policy. It depends on its available space in aircraft, several stations it covers, its infrastructural capacity, available human resources, and plans for future growth. If an airline wants to grow, then alike pricing policy and marketing strategy, it adapts several policies. It may keep its freights low in those areas where it may be in an advantageous position. So, it keeps frights of particular products low in one place, another in other sites. 

Competition: Nowadays, several airlines have arrived in the field. They have a cut-throat competition, so they adjust their losses from the profits of other places. To get away, others share of cargo they do several ethical, unethical practices with several hidden prices. In this case, the competition also determines the freights.

Season: Travel & Tourism usually is a seasonal business. Similarly, there are several products whose export and imports are seasonal. In peak season and lean season, there is always a difference of freights. In lean season there are several types of discounts to sustain in the market. 

Types of Goods: As mentioned in ‘Types of Cargo,’ there are several types of goods which are incomparable, so there are different freight rates for different kinds of products.

International Agreement:- According to the agreement at the World Trade Organization, gradually, all countries will remove their political barriers for export and import through zero tax regimes. It means each nation should keep their political boundary-free for export and import of any product. Practically, each country imposes several types of restrictions in several open/disguise forms. In the domestic sky, the ministry of civil aviation has fixed the freight rates. For international cargo, the IATA has set freight for each product from a place to other places.

The essential elements of freight calculations are:

  1. Cartage- Charge to carry goods from the shipper’s address (city of origin) to airport and airport to the receiver’s address (city of destination).
  2. Freight- charge to carry goods from one city to last destination directly or via some cities.
  3. Documentation charge– It is taken by the airlines/agent for transportation.
  4. Demurrage charge- If freight is not collected within seven days from the date of arrival of the goods, a demurrage charge (penalty) is taken. 
  5. Costs receive a fee– A shipment may be accepted on charges collect (to pay) provided if the freight and valuation charge is not very high and does not contain:- perishables, newspapers, human remains, unaccompanied baggage, where the resale value of the goods would be less than the total amount to be collected, livestock, etc. 
  6. Service tax: It is a new tax.
  7. Surcharges:- Wherever applicable will be levied in addition to rates depending on demand/capacity and will not be commissionable.

Thus, while fare calculation, all the above charges are calculated from ‘Air Tariff Book,’ which is published by Indian Airlines and few other private cargo airlines and by IATA’s OAG air cargo guide. 

Part-B

         Similar to air passenger ticket, there is an airway bill, which is filled up by the cargo agent/airline officer. It has the following parts:-

  1. Consignee:- Enter the name of the receiver
  2. Address:- Enter the address of the receiver
  3. No. of passengers:- 
  4. Methods of packing:- It depends according to goods, e.g., solid, liquid, dangerous products, live animals, etc.
  5. Marks or numbers:- There can be brand or company marks.
  6. Nature & quality of goods(including dimension or volume of products)
  7. Gross weight:- It is the total weight of all packages.
  8. Chargeable weight:-The fare is calculated on only a certain weight.
  9. Value for carriage:- It is the value of goods 
  10. Individual declaration of value for insurance by the carrier:- This value is evaluated by the airline, which may be different from the consigner’s appraised value.
  11. Documents attached:- Here, the list of documents should be attached.

packing managemnt

12 & 13. Consignor’s name & address:- Enter the name and address of the sender.

14, 15. & 16. Place of acceptance (where the package was accepted) date and name of agent (if any)       

17. Signature of the consignor or his agent: – this is very important. Without this signature, the cargo will not be accepted. 

18 Pre-paid by consignor:- the amount which is paid by the consignor 

19. Due from consignor:- It is the money to be collected

20. Payable by consignee/charges receive:- It is the due amount to be obtained from the consignee.

21. Airport of Destination:- Name of city/Airport, if a city has more than one airport, the name of all.

22. Charges (it is charge calculation, alike fare calculation in passenger ticket) it is to be filled in this manner:-

  • Credit party code no.- it is 7 digit no. alike PNR no. in the passenger ticket.
  • Freight from …………. To …………. Per kg.
  • Freight from …………. To …………. Per kg.
  • Freight from …………. To …………. Per kg.
  • Statistical charge
  • Cartage charge (from city to airport and airport to city)
  • Valuation charge
  • Miscellaneous charge
  • Any other charge
  • Surface transport (fee to an agent)
  • Total
  1. & 24. Freight charge paid on ………..(date) 

at ……………(place)

  1. Rate classification code
  2. Commodity classification code.

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