Dean Smith and Active Air Freight "Calling All Air Carriers" - High Surcharges Stagnate Industry
Fuel surcharges for air freight are high while oil costs are low? Why is this happening in the shipping industry? Dean Smith and Active Air Freight discuss steps to fight the problem.
Zephyr Cove, NV, July 6, 2015 (Newswire.com) - A question often asked of Active Air Freight is: “If global oil prices are low, when will fuel surcharges go down to generate air freight sector growth?”
Many experts believe global oil prices will remain low or subdued, perhaps for twenty years. The staff of Active Air Freight do not believe that world events will allow for a twenty-year drop in oil costs. Nevertheless, many air carriers are not reducing fuel surcharges, despite the fact that many years separate us from oil at $100 per barrel. Although most air carriers are not increasing fuel surcharges, only a few have reduced them and one carrier has even increased their fuel surcharge. Most Asian and European cargo carriers still charge over $1.00 per kilo for fuel with a usual security fee of $0.15 per kilo added. So while these companies have a shipping charge that may be comparable to other cargo carriers, once you add fuel and security fees, the costs are much higher.
How Did Air Cargo Get To This Point?
How did we get to the point where the shipping charge itself no longer reflects the client cost to move an item from point A to point B? An example is found in the air passenger industry and charges assessed by most U.S. airlines. They discovered a profitable revenue stream by adding various passenger fees and “pay for perks.” These perks include baggage fees, seats with more leg room, fast-track TSA security — the list is long. The result is seen on airfare websites, where one carrier looks the same as another for a certain flight. Once you see the additional fees and the upgrades necessary for a similar level of service, of course you realize that the real cost is completely different.
Air passenger fuel surcharges and security fees were introduced supposedly as a result of “world price increases and security measures.” Many airlines hid the charge by blaming it on “taxes,” until the U.S. Department of Transportation insisted they label it as an airline imposed charge. Now, in the face of declining oil prices, they call these added fees “carrier-imposed charges” or “international/domestic surcharges.” Obviously, this is a revenue stream the airlines do not plan to give up anytime soon. It literally takes an act of Congress for such airlines to change predatory practices that hide the true consumer cost of a ticket.
Following this example, airline cargo operations discovered their own “revenue stream” of profits through non-regulated fuel surcharges. Even worse, many carriers colluded to keep fuel surcharges high. Over the last twenty years, many airlines were caught hurting industry, retailers and consumers with this non-competitive and illegal practice. In the shipping business we called these carriers the “Air Cargo Fuel Cartel.” 2011 eventually saw 21 major air carriers fined for fuel surcharge price fixing, yet many cargo airlines still seem unfazed and may be involved in similar activities.
Freight forwarders and integrators can change this situation only by demanding comprehensive fuel surcharge reductions. Otherwise, clients can expect to pay nearly as much for fuel and security charges as they do for the air cargo costs. Such exorbitant fees during the 2015 holiday season could contribute to historically low expectations, with major retailers downsizing inventory and operations. With less to ship, air carriers will likely suffer losses. Logic points to offering incentives by reducing fuel and security charges to increase, not lessen, air cargo growth.
Unfortunately, after decades of cargo experience, Dean Smith and Active Air Freight have seldom seen major air carriers implement common sense business practices. It's the forwarders and integrators who must take action to stimulate growth and business. Aggressively seek the best total costs for your clients and reward air cargo carriers using reasonable pricing with your clients' shipping.
Truthfully, dialogue with cargo sales representatives only goes so far. Paying competing carriers, those with fair and reasonable surcharges, leaves a lasting impression! Although creating change in airline policies is difficult, being proactive collectively is a step in the right direction.
For more information, visit Active Air Freight at activefreight.com or call us at 1-866-937-4471.
Tags: air cargo, air shipping, airfares, carrier imposed charges, domestic surcharges, freight forwarding, freight integration, fuel fees, fuel surcharges, international surcharges, security fees, security surcharges