Aviation Logistics Knowledge Lecture – Airlines Operating Principles

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Aviation Logistics Knowledge Lecture – Airlines Operating Principles

Happy weekend has passed again, 520 has passed too, time flies so fast. Some careful friends may have found that our title has changed. It used to be “knowledge” of aviation logistics, and now it has become “lecture”. Hmm… There is no special reason, but I suddenly want to use this word today, because our account is mainly to publish aviation logistics knowledge. Speaking of lectures, it should not be an exaggeration.


OK, so let’s get to the point. Many friends feel that airlines are a very mysterious and unpredictable industry. But in fact, the airline is only a very common link in the supply chain. Most of the time, he and the freight forwarder are on the same front. Many small partners have this idea, probably because everyone is not familiar with the airline’s workflow and nature of work, so they think it is very mysterious. So today, I will give my friends a general introduction to the thinking of the airline and the general distribution of functions.


Whether it is a domestic airline company or a foreign airline company, it is generally divided into the passenger department and the cargo department (of course there are other departments). There are also some companies that only do cargo, such as CV (Luxembourg Airlines), and some are mainly passenger, and then the cargo is done by the passenger colleagues. The passenger part is not what we want to discuss, then we will see what the cargo department of the airline is doing. Every airline has a headquarters, which is also called a hub. For example, the hub of QR is in DOH, the hub of CZ is in CAN, the hub of AY is in HEL, etc. Why is it called a hub? Because, all the planes flying out of the station have to fly back to the hub in order to connect the flights to other places. Therefore, if you want to take the LH plane to HEL, then the route is likely to be: Origin-FRA-HEL. Similarly, if you take a QR plane to LHR, the route is likely to be: Origin-DOH-LHR. In this process, the function of the hub is to receive the goods of all outbound flights, and then load the goods to the same destination on the flight of that destination. Hub is coordination, overall planning. So hub is very important.

Airline hub

Airline hub (The picture comes from the Internet)


Of course, in addition to this function, the hub has many more functions. Such as managing aircraft, managing ULDs, issuing prices, doing aircraft balancing, publishing company policies, etc. Each function is performed by a different department. For example, the maintenance department will monitor the flight data of each aircraft, and timely remind the company that a certain aircraft needs to be inspected regularly. ULD Control manages ULDs at different sites. The Pricing department will control the prices of the headquarters and each site. The Weight & balance department is responsible for trimming. The HR and Marketing departments are responsible for issuing various company policies, etc. In this way, each of them performs their duties and cooperates with each other, and the entire airline will operate in an orderly manner. Each company has a different name for a department, but the functions are similar. For example, it has become popular to call marketing strategy or development in recent years, but in fact it basically means the same thing.


The entire cargo department has the same goal, which is to fill up the planes and at the same time increase profits as much as possible. All policy formulations are inseparable from these two points. The work of the local site, of course, is carried out around these two points. Airlines want to raise prices all day long. In fact, the same is true of agents, but they only raise prices for customers. The reason why the airline can’t raise the price to the sky now is that he is not the only one doing it. The price of going to a certain destination, if the average price in a certain place is about 20 yuan/kg, then, if there is an airline company Selling 30 yuan / kg, it must be out of stock, because it is too expensive. Conversely, if there is a destination that only one airline can go to, the price can skyrocket. And if there is demand for this point, even if the price goes up, the plane will still fill up. Of course, in real life, no such ideal situation exists. When Airline A finds a destination that can be tapped, Airline B will immediately follow up. This is also determined by the laws of the market. There is also a situation where the airline deliberately raises the price very high. Then, it is possible that the airline does not want to accept the goods at this point, so the price is raised. Or the position of a certain destination is very scarce, and the price will rise, so the price will also rise.


Now the general agents will have an inertial thinking, that is, they are always thinking about reducing the price of airlines and then raising the price of customers. That way you can make more money. Yes, this is a way to make money, but not a good way. As mentioned earlier, the price is determined by the market. The current market price is so transparent. If the customer unilaterally raises the price of the customer, the customer will run away, and it is not advisable to unilaterally reduce the price. Therefore, a more rational sales method for a freight forwarder should be to sell services and added value, rather than simply selling freight. The previous article also said that if the price difference is still being made, then the company’s living space will become smaller and smaller. Besides, as a freight forwarder, if you want to get the customer’s goods, you have to sell the product, but to put it bluntly, it is actually selling this and selling yourself. This is not an easy task. The personal charm of sales is very important. How to communicate with customers, how to use tone, and how to strategy should be taken into account. Remember, real bull forks are sold at high prices. Otherwise, if I have the lowest price in the world, why should I sell it? Just put a price and go out, and a bunch of goods will come to me. Guys, right?


So my friends, if you don’t keep thinking about reducing airline prices. Because the price is determined by the market, not by individuals. If there is a special reason for a certain ticket, it is also possible to apply for a special price, but this is only a special case, and it will not always be the same price. It is also conditional for airlines to offer special prices. There are several important factors to consider: First, it depends on how the agent usually performs. If he can consistently deliver the goods, the volume of goods will be very average regardless of the off-peak season. Off-season can contribute more. Then there is no doubt that this agent is a loyal agent, and the airline must like it. In the off-season, it is more inclined to give this agent a special price, and in the peak season, it is more inclined to give this agent for additional positions. The second is to see whether the destination that the agent handed in is the destination that the airline wants to collect. If Airline A wants to accept African goods now, and agent X always delivers European goods, and has to apply for special prices, then it must be very difficult for agent X to apply for special prices for European goods. Because airlines don’t want to charge Europe at all, and the price increase in Europe is too late, why do they still offer special prices?


Taking a step back, many local airline offices do not have the power to approve special prices. The special price will only take effect after it has been reviewed and approved by the pricing department of the headquarters or the pricing department of the regional. Therefore, applying for a special price is not a simple process, and it needs to be reviewed layer by layer. If the price applied by Local is to be approved by the headquarters, it has to be very convincing.


Speaking of which, let’s start with a word. I don’t know if my friends have thought about why the airline company wants to find an agent? Wouldn’t it be better for them to sell directly on their own? Generally speaking, there are not many people in the sales of airlines, and these sales are generally not directly to customers, but to agents. Because airlines want to give full play to the power of the people, spread their own services, advantages, and borrow the power of agents, the more people, the greater the power. A group of people sells better than a single person. Therefore, the agent becomes the bridge between the airline and the customer. This agency relationship is like Adidas. People in their headquarters in Germany will not go all over the world to sell their products, but will find a general agent in every place, and the general agent will find a distributor, and so on layer by layer. Sales will be much more efficient.


As for the local office of the airline, in addition to carrying out the tasks assigned by the headquarters, there is still a lot to do. For example, let the headquarters know the local laws and regulations, let the headquarters know the price level of the local market, let the headquarters know the local competitors and so on. Because loccal people will know what happened in locla, if the headquarters interferes too much, the things made may not conform to the laws of the local market.


The Local office is also responsible for some of the daily work of the site, such as counting agent performance, first reviewing whether the price applied by the agent is reasonable, coordinating with various airport departments to let the plane take off on time, following up on some after-sales problems of the agent, and managing ULD in the local area Inventory, holding various agent events and many other miscellaneous things. Therefore, the workload of general airline staff is very large.


Now, let’s talk about bills. Generally speaking, the airline settlement cycle is half a month, or 15 days. This account period is generally called up and down, or AB. For example, the bill for the first half of January is called “January On” or “January A” bill. That is to say, the settlement cycle between the agent and the airline company is much shorter than the settlement cycle between the agent and the customer. The current account period, if it is a connoisseur, is generally 30-45 days. Direct customers will only be longer, and state-owned enterprises have the longest account period. Therefore, airlines have very high requirements on the capital turnover of agents. Therefore, sales partners, in addition to the usual collection of goods, collection is also a very important job. We often see connoisseurs encountering payment problems. So be careful when you receive it. If it is the first time to cooperate with the customer, generally speaking, it is settled now. This issue is also related to the nature of air transport. As far as air transport is concerned, from the standpoint of airlines, there is no concept of CC (pay on delivery). All shipments are PP (Prepaid). This is also related to the nature of the air waybill. Because the air waybill is only a contract of carriage, and the ocean bill of lading is a document of title. Therefore, air freight must be paid first and then shipped. So the question is, in this case, why does the agent settle with the airline company for half a month? Isn’t this what you need to pay after delivery? Therefore, at this time, the role of CASS is reflected (Cargo Account Settlementg System). CASS can have the function of monitoring and supervising the collection. And if the agent fails to pay on time, he has the right to deduct the money from the deposit given by the agent. But once that happens, the proxy gets blacklisted. The CASS blacklist is no joke. Every so often, CASS sends notices to all airlines telling them who owes money for which period. If this agent happens to be cooperating with other airlines, then these airlines will be very nervous, and they will not even dare to accept the goods from this agent. Please see the introduction about CASS on the IATA official website below

CASS system (The picture comes from the IATA official website: https://www.iata.org/services/finance/Pages/cass.aspx)

CASS system (The picture comes from the IATA official website: https://www.iata.org/services/finance/Pages/cass.aspx)

Well, back to the responsibilities of the airline’s local office. One of the more important is to follow up the agent performance of each agent. As mentioned earlier, this performance determines your status in the airline. To be a big village, not by words, but by strength. Many small partners will have main routes, which means that which airline is the main target, I will put all my goods on this airline. This approach is correct. For the agent, the airline is the agent’s product. Should the product become stronger and bigger? It is definitely necessary, and it is one step at a time, down-to-earth. Do A and then start doing B. Unless it is really very wealthy and powerful, the consequence of casting nets everywhere is that no net can produce rich harvests.


Well, I wrote more than 3,000 words without knowing it… Every time I feel like I can’t stop. However, this is the end of the topic we are talking about today. If there is anything you want to know, please leave a message. Although we may not guarantee a timely response, we will try our best to take the time to respond. It might even be the topic of the next article.


In short, Keep on fighting. Airlifters, come on!


NB: Karron is the owner of the “NatureCalls” Wechat Official Account.

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