MKTG Discussion Questions Part 2

12-6 Chapter 12: International Air Transportation

Chapter 12: International Air Transportation 12- 5

Chapter 12

International Air Transportation

lEARNING oBJECTIVES

At the end of this chapter, YOU SHOULD:

Identify the types of air transportation services.

Identify the types of aircraft used in international service.

Identify basic international regulations regarding air transport.

Preview

This chapter discusses how freight is transported by air, either in dedicated cargo planes, in combination passenger-cargo planes, and in the belly of regularly-scheduled passenger planes.

Chapter Outline

12-1 Cargo Airlines, Airports, and Markets

I. Growth in air cargo volume (Figure 12-1)

II. Top ten cargo airlines (see Table 12-1)

III. Top fifteen cargo airports (see Table 12-2)

IV. Cargo volume forecast by region (see Figure 12-2)

V. Main markets

a. Dominance by flows between PRC-North America and PRC-Europe

12-2 Types of Service

12-2-1 Air mail services

Initial impetus behind air cargo, today only 4 percent of RTKs

12-2-2 Express airfreight services

FedEx, UPS, DHL, TNT represent about 13 percent of international air cargo traffic

12-2-3 Scheduled airfreight services

Regularly scheduled airfreight; JAL, Lufthansa, Korean, Qantas, …

12-2-4 Charter airfreight services

Freight services offered on demand. Some of the charter business is conducted by specialized aircraft.

12-2-5 Leased cargo aircraft services

Leased aircraft supplement the capacity of airlines at peak times; they are used as charter or scheduled flights.

12-2-6 Airfreight forwarder services

Forwarders lease space on aircrafts and consolidate shipments from smaller shippers.

12-3 Types of Aircraft

Differentiation:

I. Passenger planes that happen to carry cargo

II. Pure cargo planes

12-3-1 Passenger Aircraft

I. Besides passenger luggage, most passenger planes can carry airfreight

II. Most airfreight is “loose,” not palletized

III. International cargo services on passenger planes are often unreliable because airlines “bump” freight for more passengers and their luggage

IV. International cargo is usually extremely urgent:

a. Machine or computer parts needed for critical repairs

b. Fresh produce or fish

V. Constraints:

a. Size

i. Of airplane’s hold

ii. Of airplane’s door

b. Items prohibited from air transport

VI. Onboard courier (OBC) service means the freight (package) always makes the plane since it is with a passenger who has priority over freight

12-3-2 Combination Aircraft

I. Combination Aircraft or “combis”—planes with cargo on the main deck as well as in the hold, traveling along with passengers

II. Good for runs on which there is not much passenger demand

III. Offsets cargo size restriction of passenger planes

12-3-3 Quick-Change Aircraft

I. Can be changed from passenger to cargo by utilizing seats mounted on “palletized units” (see slide 18)

12-3-4 Airfreighters

I. Most airfreighters are “liners” in that they operate on a regular schedule

II. Same type of plane used in passenger service except that it has a roller deck to allow pallets and containers to be pushed in the aircraft

III. Freight is then secured with locks, hooks, and slings

IV. Mostly older airplanes, including a large number of DC-3s from the 1930s and 1940s

V. In the past, old freighters were older passenger planes retrofitted for cargo service, and are still popular

VI. Boeing and Airbus offer freighter versions of almost every aircraft they build

VII. In single-deck freighter, loading has to be done carefully, so as to not upset the balance of the aircraft on the ground

a. Tail stand prevents “nose up” situations

VIII. Air cargo industry classifies its freighters by: standard body, medium wide-body, and large wide-body

IX. Airfreighters can be aircraft specifically constructed for transporting freight

12-4 Airfreight Tariffs

Airfreight is priced according to the higher of:

I. Actual weight

II. Dimensional weight (or “volume-weight), is traditionally based on 166 cubic inches per pound (or 6,000 cubic centimeters per kilogram). However, FedEx and UPS have 5,000 cm3 per kg or 139 cubic inches per lb.

12-5 International Regulations

I. Regulation is by International Air Transport Association (IATA), and by the International Civil Aviation Organization (ICAO)

II. Large number of bilateral agreements has led to so-called “open–skies” agreements

III. Paris Convention of 1919 established sovereignty of a country over its airspace

IV. Warsaw Convention of 1929 limited accident liability of international airlines regarding passengers and freight

a. Liability limits increased by later agreements

V. Under IATA and ICAO rules, a country can restrict the number of airline flights in and out of its airspace

a. Generally, limit favors national airline companies

b. In 1992, United States and Netherlands agreed to an “open-skies” agreement, allowing no limit to flights that each other’s airlines could fly into the other’s territory

c. By 2008, the U.S. had 94 open-skies partners

VI. Flights in and out of a specific airport are limited by the number of landing slots available.

VII. IATA and ICAO have more active role in establishing industry standards for environmental protection

12-6 Environmental Issues and Sustainability

I. Increased importance of the idea of carbon footprint and conservation

II. Virgin Airlines initiated the idea of renewable fuels, using a bio-fuel for an experimental flight

III. Noise reductions with “hush kits” and with airports located away from large cities for cargo traffic, which often takes place at night

12-7 International Air Cargo Security

12-7-1 Transportation Security Administration (TSA)

I. Advanced shipping notification

II. Automated Targeting System (ATS)

III. Mandatory security inspections for all high-risk shipments

IV. Partnership with trade community to strengthen air cargo security

12-7-2 Advance Manifest Rules for Air Carriers

I. Trade Act of 2002 requires cargo manifests be submitted electronically before arrival to Customs and Border Protection

a. Through its Automated Manifest System (AMS)

12-7-3 Certified Cargo Screening Program

I. CCSP requires 100-percent inspection of all cargo on passenger aircrafts by 08/2010

II. Certified Cargo Screening Facilities are responsible for that inspection

12-7-4 Air Carriers and C-TPAT

I. C-TPAT to enhance existing security practices and reduce the threat of terrorism to international air shipments

12-7-5 Air Cargo Security Requirements for Other Countries

I. Numerous countries in process of developing and applying air cargo security standards similar to those of the U.S. after 9/11

Key terms

ACMI lease

Aircraft, Crew, Maintenance, and Insurance. The term is used to refer to a type of aircraft lease where the owner is responsible for providing the aircraft, the crew, maintenance, and insurance, but not the fuel.

airfreighter

An aircraft entirely dedicated to the transport of cargo. An airfreighter is either an aircraft that was originally designed as such or a former passenger aircraft that was retrofitted as an airfreighter.

charter airfreight

A type of freight that is shipped on a dedicated aircraft, either because it cannot be shipped on an airliner because of its weight or size, or because of its destination.

combi aircraft

A type of airplane that is designed to carry both passengers and cargo on the main deck of the plane; generally, the front of the plane is equipped to accommodate passengers, and the rear is equipped to accommodate cargo. A combi aircraft cannot carry certain hazardous cargo.

damp lease

A damp lease is an agreement between the owner (lessor) of an aircraft and a lessee, in which the owner provides the aircraft, maintenance and insurance, but no crew. See ACMI lease, wet lease, and damp lease for alternative contracts.

dimensional weight (volume-weight)

A weight, calculated based upon the dimensions of a shipment, used by airlines to determine the tariff to be charged to a shipper when a shipment is not very dense. The volume-weight equivalency is that 6,000 cubic centimeters is 1 kilogram (or that 1 cubic meter is 166.67 kilograms). In all instances, an airline charges the higher of the actual weight and the volume-weight. Volume-weight is also called dimensional weight.

dry lease

A dry lease is an agreement between the owner (lessor) of an aircraft and a lessee, in which the owner provides only the aircraft, without any other services. See wet lease and damp lease for alternative contracts.

express cargo

Cargo shipped with a guaranteed pre-determined delivery date and time.

freight tonne kilometer (FTK)

Unit used to express the volume of cargo transported by an airline; it is the number of metric tonnes of freight, mail, passenger, and baggage carried multiplied by the distance they have been carried, in kilometers. This measure is often used interchangeably with the revenue tonne kilometer (RTK).

integrator

An air cargo carrier that offers its customers complete door-to-door services. Such services usually include pickup, transportation, delivery, and processing, as well as numerous related tasks.

International Air Transport Association (IATA)

A trade association comprising almost 230 airlines, representing 93 percent of all scheduled air traffic.

International Civil Aviation Organization (ICAO)

An agency of the United Nations whose mission is to establish safety and security standards for international civil aviation.

lower deck

The largest deck on an aircraft, the one on which passengers travel in a passenger aircraft.

main deck

The deck designed to carry cargo and luggage on an aircraft, located underneath the main deck.

Montréal Protocol 4

A 1900 protocol that limits the liability of air carriers to SDR 17 per kilogram of cargo. There is no limit for death or injury.

onboard courier (OBC)

A passenger on a regularly scheduled flight who is relinquishing his or her baggage allocation, allowing companies to ship extremely urgent cargo. Such a passenger is compensated by the cargo carrier with a discount on his or her airplane ticket.

open-skies agreements

An agreement between two or more countries whereby air carriers from one of the countries are allowed to serve any of the other countries’ airports.

quick-change aircraft

An aircraft that can very quickly be converted between passenger and freight operations through the use of palletized sections of seats.

revenue tonne kilometer (RTK)

Unit used to express the volume of cargo transported by an airline; it is the number of metric tonnes of freight, mail, passengers, and baggage carried multiplied by the distance they have been carried, in kilometers. This measure is often used interchangeably with the freight tonne kilometer (FTK).

roller deck

The configuration of the deck of an aircraft when it is designed to accept cargo shipments; the deck is equipped with rollers and bearings that allow cargo to be moved in any direction without much friction.

sustainability

A deliberate attempt at using resources, including aircraft, in such a way as to preserve and protect the environment and meet the needs of future generations.

time-definite shipment 

Cargo or package shipments that must be delivered by a guaranteed, pre-determined time and day.

volume-weight (dimensional weight)

A weight, calculated based upon the dimensions of a shipment, used by airlines to determine the tariff to be charged to a shipper when a shipment is not very dense. The volume-weight equivalency is that 6,000 cubic centimeters is 1 kilogram (or that 1 cubic meter is 166.67 kilograms). In all instances, an airline charges the higher of the actual weight and the volume-weight. Volume-weight is also called dimensional weight.

Warsaw Convention

A 1929 Convention that established the first limits of liability for air carriers.

wet lease

An agreement under which the owner (lessor) of an aircraft provides the airplane, insurance, maintenance services, and a flight crew to the lessee, who has to cover all of the other variable costs, such as fuel and airport fees.

PowerPoint SLIDES – STUDY THEM – PRINT THEM OUT !

· Introduction (2 slides)

· Types of Service (6 slides – 2 Tables)

· Types of Aircrafts (15 slides, 13 photographs)

· International Regulations (2 slides)

· Freight Tariffs (1 slide)

· Environmental Issues (1 slide)

· Security (1 slide)

Additional Resources

Coyle, John J., Edward J. Bardi, Brian Gibson, and Robert A. Novack, Transportation: A Supply Chain Perspective, 7th Edition, 2010, South-Western, Cengage Learning, Cincinnati, Ohio.

“Cargo,” International Air Transport Association, http://www.iata.org/whatwedo/cargo.

Airliners.net, http://www.airliners.net.