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Forwarders and airlines bury the hatchet

By Hpanchal on November 27, 2012

During the recent FIATA Airfreight Institute meeting in Los Angeles, forwarders from around the world gathered to hear the details of a cargo modernization initiative sponsored by FIATA and IATA. When the forwarder speaker finished his remarks, he yielded the floor to the IATA representative described as the “other side of the table.” Glyn Hughes, IATA’s director of cargo industry management, speaking on behalf of the airlines, quickly responded that despite past perceptions, forwarders and airlines were now on the same side of the table and have always been.

The IATA response is indeed a hopeful sign of promise in a historically contentious and confusing relationship between forwarders and the airlines. Understanding when and where the acrimony began is as difficult as explaining the philosophical differences between Republican and Democrat political parties in the U.S. Both believe their specific fundamental principals are the most suitable for the country’s direction, but only one party can win the presidency.

Airlines began the airfreight business as soon as planes could hold packages. Their primary purpose was attracting people and mail to the skies. Airfreight forwarders, long trusted by shippers in the pre-aviation world, began offering their services to airlines as a way to fill ever-expanding belly holds of modern aircraft. Quite simply, forwarders found the freight for the airlines to fly.

In the beginning, international forwarders were routinely viewed as agents to the carriers. Shippers understood and agreed that the carrier controlled the Conditions of Carriage and the forwarder merely acted as an intermediary. For decades now, forwarders have taken responsibility for many more aspects of the shipping process than ever before. Their customers have become more demanding, requiring precise transit times and low rates to fit tight budgets. Airlines have become but one component of the service package; customers now require programs not commonly offered by carriers.

As directors of the customer relationship and shipping process, most forwarders today see themselves not as agents of the airlines, but as customers. They realize that the flight between two cities is but one part of the overall shipment. The carrier is now considered the forwarder’s vendor in an increasingly complex shipment process. This is not to say that the airlines have lost importance in the eyes of the forwarder.

Forwarders have withstood the loss of many carrier partners racked by the effects of deregulation, passenger fare wars, labor unrest and high fuel costs. But as airlines reduced the size of planes or amended schedules to accommodate passenger preferences, shippers began to hold forwarders, not airlines, accountable for still getting freight to its destinations on time. As a result, the forwarder, once merely viewed as an agent, became the demanding carrier customer responsible for supporting thousands of relationships with shippers.

This is a simple explanation, minus any regulatory complexity of why the perception between airline and forwarder has and continues to change. Airlines are good at flying planes, not managing personal shipper relationships. Many carriers have tried, and few have succeeded, at dealing with the varied needs of shippers. They know it is difficult, and therefore, they trust their forwarder partners to find shippers for flights.

Airlines seem to like the arrangement; many have trimmed sales departments and now depend on forwarders to fill the bellies of their flights. They understand that if the cargo does not fly or fails to reach its destination on time, the forwarder and his shipper customer may not return.

The new, recently proposed FIATA-IATA Freight Forwarder Program acknowledges the realization that forwarders are customers, not agents. Seven joint councils have been proposed, each comprised of six carrier and six forwarder members. Ad hoc working groups will determine training and financial criteria, while a forwarder advisor will be appointed to the IATA Governing Board.

Airlines and forwarders can depend upon one another to meet the challenges of the global recession by discarding a relic of the past and adopting a new relationship perception that clearly reflects present realities and looks toward the future.

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