Hello everyone, it’s our monthly aviation logistics knowledge lecture again. This time, by coincidence, I wanted to write about how to ensure the income of flights, and a small partner also wanted to know about this topic. I think this topic is also what many other friends want to know? Then we’ll just talk about it.
In fact, this topic will be very complicated to expand, involving issues in various dimensions such as the entire airline operation and corporate development strategies. Some friends may wonder, don’t just look at the unit price to do it, it’s very simple. In fact, price is only one factor, and it is not the decisive factor. If you only rely on the unit price to do it, it is just roasted seeds and nuts. Roasted seeds and seeds will cause a lot of confusion in the market, and it is more likely to turn back on itself. This is why some customers now feel that our industry is not very trustworthy. If we want to manage a route well, we should not only look at the unit price, but also start from the overall situation and see where our advantages are. Only when we are targeted can we promote the healthy development of the industry and bring effective benefits to ourselves.
How to understand? For example, for example, a company that originally sells European goods and has sufficient European goods, then he may be able to make a good profit by signing with any airline company, because he is already very familiar with the European market, and there are many pitfalls for him. All can be avoided, and at the same time, the customer resources are also very rich, and he deserves the money. But the problem is, if he has not touched the US line before, and now suddenly wants to do it, he will probably hit a nail due to his unfamiliarity with the market and the lack of stable customer resources. Therefore, if you do not have a clear view of your own advantages, or if you do it rashly without knowing where you are going, you may have some short-term benefits, but in the long run, the situation may not be optimistic.
Well, after we have ensured that the airline is in line with the company’s development strategy, we have signed the airline. How should we operate this airline and gain profits? There are many more people signing routes, but not everyone is profitable.
This is the focus of this article. Let’s first take a look at how to maximize the benefits in the case of cladding.
First of all, we have to look at the contract clearly and look at several things stipulated in the contract:
- what is the model
- what is the frequency
- How many boards are contracted to us on each flight
- What is the shape of each board given to us by the contract?
- What is the price per kilo
- what is the pivot (basis weight)
- What is the penalty of under pivot
- How long is EQ
Why watch these? Let’s explain one by one.
First of all, if you understand the model, you can know how much cargo the entire aircraft can hold, and how much the board you signed accounts for. This seemingly unimportant thing is actually very important. Suppose you signed a 5 MD and the aircraft type is 330, then the board you signed has already stood for more than half of the entire plane. But if you are flying a 747 all-cargo aircraft, then the board you signed will only account for more than 10%. This percentage determines your deliveries per flight. If you account for a lot, you will definitely have a lot of positions in free sales, because the contract is rigid, and the responsibilities you bear cannot be escaped. As the saying goes, with great power comes great responsibility. As responsibilities rise, your powers, of course, have to match. In free sales or applying for adhoc, your chips will also be bigger. Airlines always look at the performance of the agent ( click here to review the agent performance). Those who can perform well and take great responsibilities will also give them corresponding rights. To give an inappropriate example, just like we usually play stocks, the greater the risk, the higher the return. Therefore, it is necessary to understand what the model of the contract is, which can help us analyze our benefits and risks more clearly.
Second, frequency is also an important factor to consider. Suppose now that you have handed over a ticket for free sales. That is to say, the goods are not on the fixed board, which means that the goods may be pulled. Then in case it is really unlucky to be pulled, but if the flight frequency is dense, the time of pulling down will not be less obvious, and customers will be more accepting. If it is a weekly flight, this flight is pulled down, and it can only fly on the next flight. This is really a bit of a headache. This can also negatively impact customers. However, each flight will definitely be overcharged, which means that there will definitely be a standby, and if there is a standby, there will be goods. This is the normal operation of the industry, and we can’t blame the airline for this. Because the airline cannot guarantee that each shipment of goods can be successfully entered into the warehouse and declared to the customs as scheduled, if there is a problem in any link, the goods cannot be loaded on the plane, which will affect the stowage and revenue of the plane. You can think about whether there is any accident that caused the empty warehouse to be released by the airline. The so-called often walking by the river, how can you not wet your shoes, right? In this case, everyone can understand each other.
Next is extremely important, the board position stipulated in our contract. The third and fourth points can be combined together, because they are to be considered at the same time. We must know the board position and version of each flight stipulated in the contract in order to receive the goods in a targeted manner. For example, if my contract stipulates that there is only one LD per flight ( click here to review the concept of LD), then I can only accept 12cbm cargo, because I can’t make more. What if I get too much? It may be placed on the board of the next flight, or, if the current flight position is sufficient, this flight can also fly away. But the decision is not in my hands. The plate type determines the packaging of the goods we receive. If I still take the example just now, then I can’t accept goods higher than 163cm. This is obvious, right?
The price per kilogram, we also mentioned just now, but as the article wrote, the unit price is not the primary consideration. With what we said before, we will consider the unit price. The unit price is only calculated for us, and cannot help us analyze. To give an exaggerated example, if a flight is flown once a month, the model is 737. Even if the price is low, it is not easy to receive. Because one pull is a whole month. Those Southeast Asian routes have arrived by sea in a month, right? For flights with low frequency, there is generally no overcharge, or the degree of overcharge is very low. Airlines are also afraid of bad reputation. At this time, the airline is undoubtedly taking more risks. Therefore, in front of the whole big picture, the impact of the unit price is not so great, because it is nothing more than a calculator. Of course, what the contract gives is the cost, but how we set the price to the customer also has to be considered. It’s a matter of how to balance receipt and revenue. The price is high, the goods are not received, the price is low, and the income is not good. Generally speaking, in order to achieve pivot (without being penalized) and maximize the benefits, we must adopt the method of re-bubble combination. I have said this many times, and interested friends can go and read my previous articles. The income of the bubble goods is relatively high, but if the bubble goods are only collected and the pivot is not reached, then the income may be used to fill the penalty.
Next, is the pivot problem that many small partners may ignore. In fact, each BSA will stipulate the pivot of each board, everyone should look carefully. Because pivot is sure to be satisfied, if not satisfied is under pivot, and it is necessary to pay a fine. If a board is under pivot for a long time, then the airline will also persuade this board. Friends, don’t think that airlines want to give penalty to everyone, and they don’t want others. Because this means that the performance of an agent is not good, it was not a wise decision to sign this board at first. They also have to write a lot of reports to report to the headquarters, and they also need to retrieve the previous records, calculate a lot of things, and then issue a debit note. This is tedious work. The best state is of course that every agent can pay enough for each flight, then this report card is very good.
But who can guarantee that every flight will be able to deliver enough. After all, in a year, there are low seasons and peak seasons, right? If there is really a situation where you can’t pay enough, there may be a penalty. And this penalty is also stipulated in the contract, we must also see it clearly. This is also an important dimension of financial control.
EQ, some friends may not be very clear about what it is, don’t worry, friends who are familiar with me know that, I will not leave a concept unexplained. We will talk about EQ in the next issue. Now let’s talk about it first. EQ is a time limit that can be pursued by an agent. Some airlines are single-board EQ, some airlines are single-flight EQ, some airlines are weekly EQ, and some are doing EQ according to their own regulations. This is completely determined by the airline’s policy. Sometimes the same airline may have different EQs between different routes. So why is it different? Mainly because the types of cargo on different routes are different. This determines when we will get all the under pivots back.
In addition to these factors, there are other aspects that can affect the revenue of a flight. For example, the quality of the board. A PMC LD can hit 12cbm if he plays well, but if he doesn’t play well, the most exaggerated one I’ve ever seen only hits 9cbm (I have to say, it’s really rich). But this is also related to the packaging of the goods. The packaged goods are all carton goods. Of course, the space utilization rate will be higher. On the contrary, it will take up too much space and cause waste. All that wasted is real money.
Well, what I just said is the situation of our signing board. So what if it’s a charter flight? In fact, many charter companies have comprehensively considered most of the above-mentioned situations before chartering the flight. It’s just that they are responsible for their own profits and losses, and more risks are to be borne by themselves. After the charterer has chartered a plane, they must also try to make good use of every inch of space to avoid waste. More importantly, they will overcharge based on factors such as flight frequency and aircraft type. The reason has also been mentioned just now. It is difficult to ensure that every shipment goes smoothly without overcharging. When there is a problem, the charterer will also be very passive. Of course, if it is a temporary charter flight that only takes one flight, it is unlikely to be overcharged, because it will be very troublesome to pull the goods. Usually, this kind of charter plane is also its own project cargo, and it is unlikely to receive market cargo.
In fact, the situation of chartering and signing is very similar, but chartering has more considerations and higher risks, but at the same time, the benefits may also be higher.
Alright, that’s it for this episode. See you next time.