Aviation Logistics Knowledge Lecture – Why Air Freight Prices Changes A Lot

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Aviation Logistics Knowledge Lecture – Why Air Freight Prices Changes A Lot
Seafood (The picture comes from the Internet)

Seafood (The picture comes from the Internet)


As soon as you come in and see the pictures of seafood, some friends may be misunderstood. Didn’t we say air freight? What does it mean to send a seafood? In fact, what we are going to say today has nothing to do with eating seafood, but it is true that it has something to do with seafood. Because we are talking about the price principle of air freight.


In air transportation, everyone says that the price is the price of seafood. It is modest to change every day, and it is not an exaggeration to change it three times a day. But have you ever wondered why it has changed so much? Today we will discuss it.


Friends may have tried this situation: a price was quoted today, a week later, the customer gave bkd, and then we gave it to the airline, and then the airline informed that the price could not be used. Have to re-quote with the customer and explain. Many small partners expressed incomprehension to this show. But in fact, as long as you understand the principle, you will be relieved.

The price of air freight, as I said before, is largely determined by the market. So what are the factors that affect the market price? The answer is: a lot. And there may be different places, and the factors that affect the price will also be different. For example, in the Guangzhou area, there are many goods from the Middle East and Africa. Among them, LOS is a big one, but the price of LOS has changed a lot before. There are from ten to thirty yuan. Because of what? First of all, Nigeria’s economy and politics are not very stable. If you change the president, there may be unrest, and a vicious civil incident may cause unrest. As a result, the local people can not do business with peace of mind. When they are afraid to do business, the volume of goods drops, and with it, the price of air freight drops. vice versa.


At the same time, Nigeria’s economy is also unstable. Although Nigeria’s economic strength is already very strong in West Africa, it cannot guarantee that it is as stable as China. Moreover, the economic policies of the government in different periods will also have a great impact on the economy. Once the international oil price fluctuates, the oil price in Nigeria will also be affected. Once the government tightens foreign exchange spending, neither the US dollar nor the renminbi can leave the country. These two points can greatly affect the volume of LOS. Of course, smart airmen will always find a lot of channels to deal with the foreign exchange control of the local government. After all, in our line of work, our brains need to be very flexible.


Of course, there are exceptions. I remember that in the 2014 or 2015 elections in Nigeria, the president changed from a Muslim to a Christian. Before the election, it should have been said that the political situation was not stable enough, and the volume of goods should not be very good, but at that time, there was a large batch of goods to be shipped. I remember because I handled that shipment. I found out that the contents of this ticket are ballot boxes, stationery, small flags, etc. that will be used in the presidential election. So this also caused a wave of small climax. Although it is an accident, it is also reasonable. Because the price is determined by the market. If the market needs this, then this product will emerge.


For another example, in 2008, a volcano erupted in Iceland. All European inland airlines are grounded. Because the volcanic ash was so powerful that it covered almost the entire European continent. There was only one airline that still had restrictions on providing civil aviation flight services at that time. That bull’s fork airline is LH. I was also fortunate to be working at LH at the time. So I personally experienced a real case where the market determines the price. I remember that before the eruption of the volcano, Ouki Point was usually about 20 yuan. Back then, it wasn’t as exaggerated as it is now. It was more than a dozen yuan at every turn, and even a bit more ruthless would get a single digit (I was also drunk. What is the concept of single digit in Europe?). Digressing… At that time, the price of LH rose directly from the 20s to the 40s. There are still bkd coming in. why? Because only his family is flying! At that time, CZ did not fly European cargo planes, and CA also used LH positions to fly at that time. Therefore, his price increase is not only reasonable but also very reasonable. Besides, the LH service was really good at that time, and the onward tracking was in place. Even if there is no volcanic eruption, his price is above average, which is the charm of the brand.


This example once again proves the principle that the market determines the price. After all, it is a universal truth that a rising tide lifts all boats.


The above are objective factors. Let’s look at the subjective factor again. What are subjective factors? We cannot interfere in the presidential election, and we cannot control volcanic eruptions. These are called objective factors. However, if it is the price fluctuations of competitors, this is subjective. For example, if you also go to FRA, Airline A sells it for 18 yuan, and Airline B sells it for 19 yuan. When he arrives at Airline C, can he sell it for 25 yuan? It’s impossible to think about it with your ass. Usually, a destination will have a relatively uniform price. There won’t be much difference between airlines. Unless the airline itself has other considerations, for example, he does not want to charge this point, so he deliberately increases the price, or does not want to charge the ticket, etc. There are also some special cases. For example, the market price is 18 yuan. An airline wants this ticket very much, and a special price is approved for 15 yuan. In this case, if other airlines also want this ticket very much, it is very likely that the price will be reduced. But we have to look at the original intention of a certain airline to grant special prices. If it is to break into this market and intentionally hurt people, and the market is xx price, he will deliberately reduce the price to receive the goods. So, this is vicious competition. This is something we do not support or encourage. Of course, most of the airline competition is benign now, and everyone is tacit.


So, if there’s a new airline that wants to hit a destination that’s already played by others. Then this new airline will definitely follow the market price. When he has reached the industry benchmark, no one can match the service level, and no one can match the brand influence, then he will be able to dominate the market with his own price.


The competition of airlines is the same as the competition of agents, but the probability of vicious competition between agents will be higher. When we quote our customers, we often ask our own routes: How much is the xxx point of xx airline? The airline usually asks the airline company, analyzes the cost of its own company’s operation, and adds it to the sales as appropriate. At the same time, also take into account the quotations of other experts. For example, if we go to FRA, the expert A will report 18 yuan, and our cost is already 20 yuan. Then the airline will consider whether this ticket can be collected at a loss. This is not to say that those who lose money are not charged, there is no such absolute thing in this world. Take all situations into consideration. For example, do I have to receive this shipment, so I can complete the pivot; is this customer a long-term cooperation and is very loyal to us; what is the customer’s previous payment situation; how do I make up for the loss of this shipment? , and when will it be possible to make up for it, etc. Therefore, the route will be quoted for sales after comprehensive consideration (this is the practice of general freight forwarders, not to say that all agents do this).


Now, it is basically clear to everyone that the market determines the price. However, there are some friendly reminders to give you. One of the previous articles has already said that the type of goods will affect the price, so I will not discuss this. The other is what I mentioned at the beginning of this article. After the quotation is given to the customer, the customer places a booking a week later, and then finds that the price has changed. This situation is very common.


The goods shipped by air are inherently time-sensitive, or the goods are of high value and need to be quickly transported to the destination. Therefore, prices also change rapidly. For the price quoted today, we must tell the customer that there is an expiration date, and if it expires, we must re-quote. As a general practice, airlines update prices once a week. However, it does not rule out that there will be some price updates in the middle of the week, or all updates. Like the example just now, the bkd is only available after a week, and if the price changes, you can’t blame others. All prices are subject to booking. You have asked the airline for the price, but the price of bkd will not prevail. Of course, most airlines are very contractual. If there is no major change in the quoted price, and the time has not passed for too long, the price will generally be respected. However, it cannot be ruled out that prices will change. I haven’t settled for a day without a bkd. So, if you apply for a special price, be sure to tell customers that the price may change if you don’t hurry up and place bkd. This way, you won’t be caught off guard when prices change. It also avoids the censure of customers (our business is really difficult).


OK, here we go. Everyone understands why the price of air freight has changed so much, and also knows how to chat with customers, right? That’s it for this issue, see you next time.


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

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