New Pact Announced Between Freight Forwarders and Air Cargo - Global Trade Magazine
  July 29th, 2016 | Written by

New Pact Announced Between Freight Forwarders and Air Cargo

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  • New IATA-FIATA agreement reclassifies freight forwarders from selling agents to purchasing-customers.
  • New IATA-FIATA agreement could not come at a better time.
  • The plan is to pilot new IATA-FIATA agreement in early 2017 in Canada with global rollout in 2018.

For businesses in the air cargo industry, any good news these days is welcome.

Recently, the International Air Transport Association (IATA) and the International Federation of Freight Forwarders Associations (FIATA) have agreed on terms to implement a revised IATA-FIATA Air Cargo Program (IFACP).

The agreement, the result of four years of ongoing discussion, was created to better reflect the new relationship between airlines and freight forwarders, which were once viewed as selling agents but are now classified as “purchasing-customers.” In other words, from now on freight forwarders will be involved as equal partners in many of the decision making processes.

The plan is to roll out IFACP in early 2017, with Canada as the pilot country, with complete global rollout in place by the end of the following year.

According to Aleks Popovich, an IATA senior vice president, the IFACP “provides a framework to ensure that industry standards are relevant, pragmatic and fit for purpose. These standards cover the endorsement of freight forwarders and more broadly the safe, secure and efficient transportation of air cargo shipments”.

Two Decades of Turbulence

Whatever benefits are achieved from the agreement could not come at a better time, as the air cargo industry remains mired in a struggle with lower demands and lower yields, predictably resulting in lower cargo profitability.

The glory days of the 1980s, when it seems every package had to absolutely, positively get there overnight, are long gone. The air cargo boom was grounded by the dot-com implosion that started with the new century. That triggered a recession that affected many of its customers, particularly the IT firms that were among its most active clients.

Demand has been flat ever since, as many companies now view next-day delivery as a luxury reserved only for the most urgent shipments. The decline in global trade demand also hasn’t helped. In a recent survey, just 42 percent of air cargo industry professionals expected an increase in volume by July of 2017. Such disappointing predictions are echoed by IATA, which has already forecast a six-percent decline in 2016 yields.

It is hoped that IFACP will result in the elimination of unnecessary administrative procedures and costs, and make it easier for the industry to focus on future goals such as more efficient e-cargo priorities and better compliance with safety and security standards. Hopefully it will also expedite the industry’s ability to implement and improve digital processes between airlines and forwarders, to combat the perception that the average air cargo shipment spends 80 percent of its transit time on the ground.

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