Online business

Online portals promise to turn air cargo into a paperless industry by enabling bookings to be made via the internet. These systems also offer cost savings and greater visibility, which is encouraging their adoption in the region.

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By  Neil Denslow Published  January 4, 2004

|~|Demetrios Zoppos 2.jpg|~|Demetrios Zoppos, managing director, GF-X|~|The air cargo industry has traditionally been paper-intensive and based on communication via the telephone. However, these practices are now being swept away by electronic means. Cargo Community Systems (CCSs) are already firmly entrenched in the local market, and cargo portals, offering either carrier-specific or cross-carrier functionality, are set to join them. The role of a CCS is to provide communications between freight forwarders, airlines and other parties involved in cargo, such as ground handling agents and customs. CCSs, such as Mercator’s Equation, Tradevision and Cargo Community Network (CCN), automate messaging between these groups by electronically sending data entered into the freight forwarder’s system to the other parties. This then means that there is no need to pass on information verbally over the phone, which can lead to delays while trying to contact a busy service centre, as well as inaccuracies when the data is re-typed. “To avoid that re-entry of information, you catch it at one point then it transfers from one system to another electronically,” explains BPP Gajanan, business solutions manager, IT department, Mercator. CCS messaging enables a range of functions, such as shipment track and trace, checking flight schedules and space availability, accessing booking information and receiving alerts from carriers, which all greatly reduce the need for forwarders to call a contact centre. Yet despite the advantages offered by CCSs in terms of automating communications, they have inherent limitations. CCSs necessitate that the data be transmitted in a strictly structured format, additional information, when required but not supported by the message format, cannot form part of the message. As a consequence, this tends to restrict the amount of information and functionality offered by the traditional CCS. To enhance the functionality offered by electronic systems, the air cargo industry is turning to internet-based portals, either run by an airline, such as Emirates’ SkyChain, or carrier-neutral exchanges, such as G-FX and Mercator’s i-EQ. These systems make use of modern technology to offer a much greater range of functionality, while considerably improving the user interface. The enhanced functionality includes receiving information on rates, schedules and capacity, as well as the ability to print air waybills and barcode labels online. Furthermore, the use of newer technologies enables alerts to be sent by SMS or WAP, while the fact that the portals are accessed via the internet means that once forwarders are hooked up, they only need to pay a local phone bill. “It’s really cost effective,” says S. Anilkumar, sales manager, Mercator. “We provide the forwarders a near immediate return on their investment through our value added services.” Portals and e-booking have yet to take a wide hold on the industry, although they are gathering momentum. A recent survey on unisys.com found that 75% of the 190 forwarders who responded were already doing some bookings online, although for about half of them e-bookings represented less than a quarter of their total bookings. However, within a year, 58% of forwarders said they expected to be doing more than half their bookings online, with a further 26% expecting to do a quarter to half of their bookings this way. A huge majority of respondents – 94% – also said that the ability to book via the internet was valuable to them. Emirates’ SkyChain has been one of the most successful portals around the world and it has quickly grown into a major booking channel for the airline. It was set up in March 1999 and the number of bookings made worldwide has grown from just two in the first month to the current total of over 5000 per month. The site also registers over a million transactions a month including bookings, air waybills, creating status, status updates and flight displays. “It’s been extremely successful, especially in emerging markets like Pakistan and Bangladesh,” says Akshay Shrivastava, information services manager, Mercator. “We have had flights coming out of Pakistan completely booked on SkyChain.com. Every single shipment.” SkyChain and other online portals offer a number of benefits to forwarders. Aside from the speed and accuracy advantages offered by electronic bookings, the system is also much more transparent, so forwarders are easily able to check capacity and track multiple shipments, for instance. “Now that information is up there [on SkyChain.com]… the forwarder can go to the internet portal and see what is happening to their shipment. That is part of a big advantage that has attracted people to SkyChain,” says Shrivastava. The system has also supported Emirates’ rapid expansion as it has enabled the carrier to quickly establish outstations in places with poor infrastructure. While legacy systems would require complex equipment and leased lines, a SkyCargo office only needs a PC and a connection to a local internet service provider (ISP) to instantly connect to SkyChain. “We can set up outstations in Southern India, for example, very quickly — in a matter of days or hours even, rather than months and sometimes years,” says Shrivastava. However, despite the advantages offered by SkyChain, like other carrier-specific portals, it has the drawback of only allowing access to one airline. Thus while these portals are a valuable tool for forwarders who do the vast majority of their bookings with only one carrier, forwarders who use multiple carriers can be forced to visit a large number of sites to keep track of shipments. In the recent unisys.com survey, for instance, 33% of forwarders said they used one or more sites for tracking, 41% used three to five sites, and 13% six to ten sites. Similar problems are found when a forwarder is looking to find capacity on a flight. If the forwarder knows which airline they want to book on there is no problem, as they can book directly though the CCS. However, if their preferred carrier is fully booked or they want to shop around, they will need to contact numerous carriers either by phone or online to find the capacity they want. These calls can quickly multiply and eat up a lot of time. One GF-X customer, for instance, calculated that it was making 200 000 calls a day across its global network of offices just sourcing capacity. “Typically, this process [finding capacity] can take 20 minutes on a good day. On a bad day, the airline reservation office might be very busy, and it might take up to an hour,” adds Demetrios Zoppos, managing director, GF-X.||**||Fragmented markets|~|bpp_m.jpg|~|BPP Gajanan, business solutions manager, IT department, Mercator|~|Carrier-neutral portals are designed to allow forwarders to overcome this problem, by drawing together information from various different carriers into one central database. “A portal allows you to do everything in one place — to make bookings, to do tracking and to print waybills [for instance]… And the best thing about the latest portals is that the forwarder is able to book and to track, and to look at the schedule of all the airlines in the one place,” says Lim Yeok Chiang, director & general manger, CCN. These portals are particularly useful for forwarders who deal with a range of carriers, and some airlines realise that they compliment rather than compete with their own portals. Despite the success of SkyChain, Emirates, for instance, is also supporting and investing in carrier-neutral portals, such as GF-X and a Dnata portal scheduled to be launched next year. “People who do a significant part of their business through Emirates prefer to go to SkyChain. However, there are and always will be agencies that deal with a number of airlines, and they wouldn’t want to go to a SkyChain.com for Emirates and xyz.com for xyz airlines. They would want to have all those airlines available to them in one portal,” explains Shrivastava. While this is the plan, portals are yet to reach such an all-encompassing role, primarily because the market is still very fragmented. Three big portals are now on the market, all of which follow the same basic model of allowing forwarders free access to the system, while charging the carrier. At present, however, all three only offer access to a limited, if growing, number of carriers. The biggest portal is GF-X, which offers access to parts of 16 carriers’ networks, including Emirates, BA, and Royal Air Maroc. In the local market, however, the portal has yet to catch on, as so far only Emirates, Lufthansa and DHL are offering capacity through it out of Dubai. As such, Emirates estimates that only 10% of its bookings out of DXB are generated through the portal. “GF-X has not gone down so well in Dubai yet, mainly because we do not have many airlines connected to the system,” says Anilkumar. “For a forwarder, to have only three airlines onboard means the capacity is limited. Whereas with i-EQ there are 20 airlines onboard, so they can make bookings across a much wider range of participations than on GF-X,” he adds. However, the portal is likely to take on a much greater role in the future as more carriers sign up for it. Mercator, as GF-X’s representative in the Middle East, Africa and Indian subcontinent, is in talks with both BA and Air France about adding their routes out of Dubai onto the portal. “Once they come onboard we will have bigger airlines and we will be able to sell [GF-X] more easily,” predicts Anilkumar.||**||Mega portals|~|Christopher Shawdon 2.jpg|~|Christopher Shawdon, vice president, logistics solutions, global transportation, Unisys|~|The two other main portals on the market are mainly operating outside of the region. Unisys’ Cargo Portal Services (CPS) is used by Air Canada Cargo, Austrian Airlines Cargo, KLM, Northwest Airlines Cargo and United Airlines, while ezycargo.com, which was recently formed by CCN and Hong Kong’s Global Logistics System, is backed by Singapore Airlines, Cathay Pacific, JAL Cargo and Qantas. Despite their regional focus, both portals, like GF-X, aim to sign up the majority of carriers worldwide over time. “I would expect to see some major carriers join CPS, as well as other portals, in the same way that most merchants take VISA and Mastercard,” says Christopher Shawdon, vice president, logistics solutions, global transportation, Unisys. “It is likely that [airlines] will join more than one portal because the distribution of each portal is stronger in some regions than in another,” agrees Chiang. However, this point is still some way off, and aside from the recently merged Air France-KLM, no airline worldwide currently belongs to the more than one portal. There are a variety of reasons for why a mega-portal covering all airlines has yet to emerge, starting with the fact that the air cargo market itself is divided between innumerable players. This is primarily caused by the regulations limiting the number of destinations that a carrier can serve, but it makes the portals’ job of signing up a majority of the airlines worldwide much harder, hence their regional focuses. This fragmentation also makes creating a wide-ranging portal technically challenging as each carrier tends to run different systems, using different standards, as well as offering different rates and structures. “Booking is much more complex than simple EDI status messaging,” says Shawdon. “There are plenty of web sites today that you can go to and it will give you the tracking status on 70-80 airlines… That is very simple, but booking is much more complicated. It’s interactive, it involves rates, it involves long-term capacity agreements,” he explains. The large portals are also caught in something of ‘a chicken and egg’ situation. Forwarders are reluctant to use the portals until a larger number of carriers have signed up, however, airlines won’t joining until more forwarders are using them. To break this vicious circle, the industry needs a compelling reason to adopt electronic bookings. For instance, carriers could adopt similar practices to those used on the passenger side and offer incentives for online bookings, such as price reductions or loyalty points. “There is an advantage to me in going electronic [for passenger reservations], but on cargo, we haven’t really seen that pushed,” comments Shawdon. This would still require an active decision by the carriers to promote portals, and it might well be that outside forces provide a more compelling reason. The tightening security regulations governing cargo going to America may well create this impetus, as forwarders will be continually required to give the same information to the carrier and US Customs in order to avoid delay. “The US authorities are probably going to say we need to know who the shipper is, we need to know what is in the shipment, we need you to be on a known-shipper database. With all these things, which forwarders will do electronically, then the shipment will go straight through. Without them, customs is going to stop the shipment when it lands in the US, inspect it and possibliy delay it,” says Shawdon. “Therefore, I think the security aspect is going to be a big driver to get everybody [online].”||**||

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