Aviation Logistics Knowledge Lecture – Contract Types

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Aviation Logistics Knowledge Lecture – Contract Types

Hello everyone. Today we ushered in a new lecture on aviation logistics knowledge. What I said before was relatively basic, and it will be a little dull. Now everyone’s understanding of air transportation has reached a new height. Then it’s time for us to talk about some slightly advanced knowledge points.


Anyone who is a freight forwarder knows that the role of freight forwarding is sandwiched between the customer and the airline. It is the bridge linking the two sides. It is also a provider of logistics services. Therefore, the profit model of traditional freight forwarding is simply to earn the difference. However, with the passage of time, this model can no longer meet the requirements of customers, and the competition is getting bigger and bigger. If it still stays at the level of making the difference, then the business will not last long.


Before we further discuss this issue, first of all, let everyone know why the previous model of earning the difference can work, and let some people earn the first pot of gold first.


When air transportation was just starting, the Internet was not as developed as it is now, and the level of information exchange was not high, which resulted in the lack of timely information transmission between the origin, destination and customers, and airlines. This means that information asymmetry, information asymmetry will be profitable. So the mode of making the difference at that time can still survive. But now, customers are smarter than anyone else, and in addition to comparing prices with consignees, they will also shop around (even four, five or six) locally. In addition, the industry itself is highly competitive, and everyone does not know how to maintain market order and quote low prices to each other, which has resulted in the current situation of low overall profits in the freight industry.


So in recent years, many freight forwarders have transformed. The most obvious example is that in the early years, everyone heard a certain freight forwarding company say that it was in the supply chain, and in recent years, many freight forwarding companies have also joined the cross-border e-commerce industry. However, I would like to remind everyone here that the idea of ​​transformation is very correct, but it cannot be thrown into it. If you don’t know enough, don’t rush. Otherwise, the consequences will be serious. The supply chain provides a complete set of solutions for the entire cargo. At best, ordinary freight forwarding companies provide transportation solutions using specific means of transportation, which is far from the level of supply chain. And the e-commerce water is even deeper. Many small partners have invested a lot of money, but the returns are not ideal, and they have even been losing money. I’m not trying to pour cold water here, I just want to tell you that there are already many people doing e-commerce. Now to enter this industry, in addition to your own characteristics, the company must also have a strong platform and strong funds. Just do it.


At present, the more common profit point of ordinary freight forwarding companies is to provide more value-added services, such as: trailers, customs declaration, packaging, air + delivery and other services. Because of the simple profit margin model, there is not much “spread” that can be earned for you.


For local freight forwarding companies, the general growth path will be to first build the second and third generations, and then gradually start to build their own platforms after they have the volume of goods. The meaning of the second generation and the third generation is that they have not signed the airline themselves, but they are all freight forwarding companies that take the orders of the first generation (this practice is called borrowing orders). The first generation is also called the dealer, because they have the price and position of the airline in their hands, and they can sell these things. In the same airline, the freight forwarder with the most positions is Dazhuang.


In the past, everyone generally had a misunderstanding, thinking that Dazhuang was very profitable, but not necessarily, sometimes Dazhuang lost more than anyone else. We will continue to discuss this topic in the future.


There are also some large global companies that may not have signed up with airlines either. Some friends will ask, how can such a large-scale company not sign? It’s a matter of minutes for them to sign. You are right, but in fact, Global also has Global considerations. There are many reasons why they choose not to sign with an airline. It may be because they feel that the offer given by the airline company is not competitive enough, it may also be because they are not familiar with the local gameplay and dare not sign it, or it may be that they have already cooperated with the airline company at the headquarters, and the local cooperation may be directly applied to the headquarters. The contract does not need to be signed separately. The situation of Global companies is rather special. We will first discuss the operation methods of most Local freight forwarding companies.


Generally speaking, when a new freight forwarding company wants to sign a contract with an airline company, it is not possible to sign it from the beginning. First, the airline company needs to review the qualifications of the agent, including the agent’s hardware, such as whether it is a first-level agent and whether there is a CASS. , the volume of historical records, etc. Because if you sign an agent at random, and the agent does not contribute, it will only waste management costs and positions.


Assuming that an agent is now fully qualified, and the airline also intends to sign the agent, the general practice is to first include the agent as a ticket agent. Taking a single agent means that now the agent can directly ask the airline for the ticket number, and ask the airline for the price and position. And this action is something that the second and third generations cannot do. This is the reason why many agents want to be a generation now. But at this time, there is no contract between the airline and the agent, which means that the agent does not have to promise how much cargo, and the airline does not promise how much storage space it will give. It is conceivable that such positions and prices are of course not guaranteed. At this time, the contract model came into being.


If the Nathan agent does a good job and wants to strengthen cooperation with the airline, and the airline is willing to have a vacancy for the Nathan agent, then the two parties can start to discuss cooperation in the form of contracts. But if you think that after signing the contract, you can go to the peak of your career and marry Bai Fumei, then you will probably be disappointed, because there is a long way to go to make a good flight.


Speaking of contracts, there are many types of contracts on the market, but these two are the most popular ones: CPA and BSA. Let’s talk about these two contracts separately.



It means Capacity Purchasing Agreement. It is a relatively loose contract. This form of contract was first seen with airlines operating inland European routes. Because these airlines fly all passenger planes, and the storage space of passenger planes is not stable, first of all, we must ensure the storage space of luggage, and there are not many storage spaces that can be given to cargo. Therefore, the airlines may not be able to guarantee each flight. How many positions are given to you. The assessment method of the contract is that within a certain period of time, the airline company has to give full xx tons of storage space, and the agent has to give full xx tons of goods, then even if both parties have fulfilled the contract. If it cannot be completed, the agent may be fined or penalized for the position.


It is said that this contract is relatively loose because there are not many regulations in this contract. Compared with BSA, it can be said that it can be completed with eyes closed. However, this contract is generally only applicable to narrow-body or passenger flights. Because if it is a freighter, there is no such thing as an unstable position, and the airline wants a stable supply of cargo, and there is no idle talk about CPA in the sales of freighter.



It means Block Space Agreement. This is a very strict form of contract, which is more common in the sale of cargo aircraft positions. Why is he being strict? Because this contract has a clear description of many details. Of course, the advantages of BSA are also obvious. For example, when the peak season comes, you don’t have to worry about running out of positions, because the positions have been reserved for you early in the morning.


BSA will stipulate that the airline company must give you the xx position on a certain flight, and the agent must also deliver according to this number. If you don’t deliver enough, the airline will fine you. Because this is Allotmnet – fixed slot, whether you deliver or not, the slot will be reserved for you, so if you don’t deliver or don’t deliver, there will be vacant slots, and these vacant slots are a waste of money . The penalty for not delivering enough goods, we call it: Dead Freight. That is to say, no matter whether it is delivered or not, the money will be charged. In the BSA, there are probably the following clauses:

  • Accept the flight of agency cargo, including flight number, DOW (Day of Week), etc.
    • Why specify flight number and DOW? Because there may be 7 cargo planes a week, but the one signed with agent A can only be loaded on the flight with the flight number AB001 on Tuesday. The contract signed with agent B was on Monday, and the flight with the flight number AB002 was loaded. Therefore, it must be clear to the agent on which flight to pick up the goods.
  • The board positions that each flight can accept, and the Pivot for each board.
    • After determining the flights that can be loaded with cargo, it is also necessary to specify how much cargo can be loaded on each flight. This is determined by the board position. Generally, the BSA is more inclined to use the board position as the assessment standard, of course, it also uses the tonnage.
    • Pivot means: the minimum weight to be paid per ULD. If you don’t pay enough pivot, it is under pivot. is to be fined.
  • Specifies where the destination of the goods on the board is.
    • Yep, it’s that strict. Of course, this destination can be a single destination or multiple destinations. Anyway, everyone remembers that there is a prescribed destination.
  • Specify what the price is for each destination.
    • There is definitely a price for a purpose.
  • Set EQ deadlines.
    • EQ means Equalization. It is a clause that gives the agent a breather. For example, if the EQ is a week, if the agent does not pay enough for a certain flight, he can make it up within a week.
    • It should be noted that the airline can refuse the option of “filling up”. Because the contract does not stipulate that you must set aside a space for you to fill. When the proportion of BSA contracts for flights is relatively high and there is no vacant seat, the airline does not have a seat for you to “fill”. Moreover, even if you are out of stock, the airline will give you a vacant seat. To put it bluntly, even if the goods are not available, they will be charged.
  • Provides fines for failing to complete tasks.


The reason why the BSA is the strictest contract is that it stipulates all the above clauses and must all be implemented. If you are a single flight EQ, then, if a board is missing on a certain flight, it may not be able to make up for the next flight, because the contract will not write that the position can be filled. If I can make it up for you, it means that I have to reject other high-priced goods and accept these goods at the contract price. Obviously this is not worth it.


BSA is generally negotiated on a year-round basis, so new contracts must be discussed based on the performance of the previous contract period. This performance is usually called Agent Performance. If the performance is poor, the airline has the right to refuse the renewal. Before a new BSA is negotiated, you must check whether your historical delivery records are sufficient, whether the routes the agent makes conform to the destinations recommended by the airline, whether there is any bad record on the CASS, and whether you are willing to cooperate with the airline’s arrangements to make allocations. A series of factors such as the mobilization of goods. Therefore, to sign a BSA, it is not a matter that can be decided by a slap on the thigh for an agent or an airline company, and many aspects must be considered comprehensively. Generally, a healthier approach is to sign an amount that you are more confident in, rather than signing an amount that you have not done before. For example, my volume in a certain destination in the past year was 100 tons/month, then I can try to sign a BSA of 50 tons/month, so that there is no risk of being fined.


Of course, there are also many agents who are quite wolves. With 50 tons in hand, they dare to sign 100 tons. Such an approach, if the company’s sales are able to have enough subjective initiative, and is relatively positive and optimistic, it can also be considered cautiously. But don’t forget that there is a counter-effect, which is that it will cause the sales morale of the entire company to be demoralized, and it will become increasingly impossible to complete the task. This is a question that must be thought through before making a decision.


Well, about the contract, we will talk about it here for the time being. See you next time.


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

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