With increasing delays in production freighter deliveries, aging fleets requiring more frequent downtimes, and cargo demand continuing to outstrip capacity supply, airlines need to ensure maximum optimization of the available space on the market. And that can often mean seeking strength in numbers through alliances or strategic partnerships. CargoTech’s solutions offer support in analyzing and sourcing available capacity, matching and expanding interline networks, and ensuring optimum space and load factors in real time.

Over the past 5 years, capacity constraints have become a growing problem. The high uptake of e-commerce alongside MRO and production restrictions or delays have meant that capacity is not expanding as quickly as originally planned. Instead, airlines are faced with aging freighters, a limited supply of cargo space, and constantly growing demand.

“Last year was particularly tough for cargo divisions, given the huge return of the passenger market. While belly capacity returned, much of this was taken up by baggage, and airline network planners, too, tend to follow passenger rather than cargo demand,” Michael Teoh, Head of Strategy at CargoTech, explains. “Holiday destinations or second tier cities are not generally locations with any significant cargo requirements and therefore pose a problem to mixed-fleet cargo airlines as they are nevertheless expected to contribute to the load factor. At the same time, freighter conversions and production deliveries are delayed, while e-commerce and certain high-value commodities are on the rise, placing a strain on the available cargo capacity in the market.”

Stronger together

When airlines all face the same capacity challenges, yet cater to different customers and cargo flows, one way to combat space limitations is to enter into partnerships and leverage interline opportunities. These can be as simple as agreeing Block Space Agreements (BSA) with partner airlines – preferably on legs that are underutilized by the offering carrier. One level up, airlines can embark on strategic alliances such as those between Delta, Air France and Virgin Atlantic, or Singapore Airlines and Lufthansa, for example. However, these also tend to occur more on the passenger side of the airline business. Joint ventures are an even stronger form of cooperation, though often hampered by regulatory compliance and other complexities. And a further alternative is to actively lease cargo aircraft from existing providers in the market.

“Any form of partnership or interline agreement looks good on paper but can pose large operational challenges since often more than one ground handler is involved in addition to the airlines’ own digital systems, and therefore differing software solutions need interfacing,” says Cédric Millet, President of CargoTech. “Also, the cargo market seeks long-term capacity stability, and yet airline schedules, negotiations and allotments are usually done on a seasonal basis, which can be difficult to balance. Three points are important when it comes to optimizing available assets and delivering better revenue: smooth digital interaction, easy access to partner capacity, and ensuring optimum use of all available space. Three of our CargoTech members offer precisely those solutions.”

Finding the right match and the right markets

Rotate’s team of experienced air cargo consultants supports airlines in defining their fleet, network, and partnership strategies. Various scenarios can be analyzed using Rotate’s Fleet and Network tool, and Rotate Live Capacity data assists in identifying ideal interline partnerships. Similarly, the team can source and advise airlines on leasing additional freighters to supplement their existing fleet, and what the feasible ACMI rate would be to ensure profitable operations. Lastly, Rotate’s experts can advise on network synergies between carriers looking to combine space and enhance the load factors on their available routings.

Leveraging interline capabilities

CargoAi offers an interline specific module as an extension of its popular CargoMartPro solution, which allows customers to book on any number of airlines. The Interline module is an enhanced feature that enables airlines to cross-book into available capacities, as well as combine capacities from different airlines and offer these as AWB neutral to customers. This solution removes the complexity of the booking process, ensures real-time data transfer to all involved parties and, at the same time, that the user is shown real-time capacity and rate information.

Making the most of the available space

With the network and booking processes established through Rotate and CargoAi, Wiremind’s CARGOSTACK then ensures that all available capacity is optimized. CARGOSTACK sets the required Entry Conditions and offers rate management across the partnership entities. It highlights exceptions (through custom alerts and flagging) and opportunities in real-time, enabling efficient inventory management. CARGOSTACK’s exception management helps airlines spot drifts in demand, booking behavior or allotment behavior, and allowing them to quickly adjust their short-term offer accordingly.

“Capacity optimization requires reliable, real-time information, excellent IT interfacing, and useful scenarios suggestions on which to base quick, commercial decisions,” says Michael Teoh, Head of Strategy of CargoTech. “CargoTech delivers the digital framework and human expertise to fully support partnering airlines in maximizing on available capacities in the market. Our aim is an agile, responsive, and profitable air cargo industry – one with a future, despite its current space limitations.”