Global logistics

AIR FREIGHT

Manu Singh – 25

Emergence of Air FreightAir freight was once reserved for emergencies and

critical products.Now air cargo is a way to reduce inventory costs and

improve customer service.Today’s modern aircraft can carry thousands of

pounds of cargo just about anywhere in the world within 24 hours.

Typical air freight commodities include- high value products, time sensitive shipments, medical supplies and critical parts.

Inventory carrying costs, which include insurance, risk of product obsolescence, finance costs, etc can account for as much as 25% of the value of the goods.

INTRODUCTIONAir transport is a vital component of many

international logistics networks, essential to managing and controlling the flow of goods, energy, information and other resources like products, services, and people, from the source of production to the marketplace.

Using aircrafts and ware housing services for the transport of goods quickly from point of origin to point of consumption for satisfying the requirements of customers.

It involves the integration of information, transportation, inventory, warehousing, material handling, and packaging.

The operating responsibility of logistics is the geographical repositioning of raw materials, work in process, and finished inventories where required at the lowest cost possible.

Larger cargo airlines tend to use new or recently built aircraft to carry their freight, but many use older aircraft, like the Boeing 707, Boeing 727, Douglas DC-8, DC-10, MD-11, Boeing 747, and the Ilyushin Il-76.

Some of the world largest international scheduled freight tonne-kilometers flown are

Korean Air 8.164 millionLufthansa Cargo 8.028 million

Singapore Airlines Cargo 7.143 millionCathay Pacific 5.876 millionChina Airlines 5.642 millionFedEx Express 5.595 million

Eva Airways 5.477 millionAir France 5.384 million

British Airways 4.771 millionCargolux 4.670 million

ADVANTAGES Faster delivery of informationTighter control over cargo– less chances of

theft, pilferages, and damage.Perishable goods can be transported to

longer distances.Air-freight insurance premium charges are

lesser.

DISADVANTAGESIt is relatively more expensive mode of

transport.It is not suitable for transporting heavy and

bulky goods.It is affected by adverse weather conditions.It is not suitable for short distance travel.In case of accidents, it results in heavy losses

of goods, property and life.Airlines do not accept goods mentioned in

IATA’s Dangerous Goods Regulation(DGR) like explosives, certain chemicals, etc

IATAThe International Air Transport Association (IATA) is

an international industry trade group of airlines headquartered in Montreal, Quebec, Canada

IATA is present in 150 countries and represents some 240 airlines comprising 84% of scheduled international air traffic.

IATA's mission is to represent, lead, and serve the airline industry-To promote safe, regular and economical air transport  for the

benefit of the peoples of the world, to foster air commerce, and to study the problems connected therewith;

To provide means for collaboration among the air  transport enterprises engaged directly or indirectly in international  air transport service;

To cooperate with the newly created International Civil Aviation Organization (ICAO - the specialised United Nations agency for civil aviation) and other international organisations

Unit Load DevicesWith the increasing number of wide-bodied aircraft now in

operation, Unit Load Devices (ULDs) have become a key element of high efficiency in air transport. Having the right equipment to do the job is a concern in any industry and is no different when it comes to ULDs in the airline industry.

IATA's ULD Panel develops specifications, recommendations, and guidelines on the manufacture, registration, handling, maintenance and control of ULDs. It includes:Specifications and other technical material relating to the

construction and maintenance of Unit Load Devices.Guidelines and Recommended Practices relating to handling of

ULDs and associated equipment.Specifications and other technical material relating to the

fabrication, use and maintenance of cargo restraint equipment.

Steps involved in air cargo logisticsSource

of Cargo

Regional Warehouse

(Source)

Central Warehouse

(Source)

Freight Forwarding

Transshipment of Cargo

Central Warehouse

(Destination)

Regional Warehouse

(Destination)

Destination Intended

Players Involved Shipper (or Consignor) – the one who requests service in

transporting the cargo (source node of the supply chain)

Freight forwarder (or forwarder) –the forwarder typically arranges for the transportation of cargo from the shipper’s warehouse, delivers (or has a contractor deliver) it to the departing airport, prepares the necessary paperwork, picks up at the arriving airport, and delivers (or contracts for the delivery) to the consignee.

Carrier – The firm who provides the air delivery of cargo from the origin airport to the destination airport. There are primarily two classes of carriers: cargo carriers that primarily carry cargo and freight (e.g. FedEx, DHL), and combination carriers that carry both passengers and cargo that is stored in the bellies of aircraft (e.g. Korean Air, Lufthansa, Delta).

Ground Handler – An agent at an airport that physically handles the freight; this usually refers to whenever freight is loaded, unloaded, transferred, stored, retrieved, broken down, or consolidated.

Consignee – The receiving party that the goods are sent to (sink node of the supply chain)

Import ProcessChecking of pre-alert documents.Pre alert documents – -- issued when the cargo is ready for departure-- final checking of all shipping documents-- obligatory-- final chance of correctionPre-alert for air-freight must include: Show document list AWB (international air-freight waybill) filled-in

strictly in accordance with SK-EXPO instructions; Proforma - invoice signed & stamped; Pre-alert letter for air-freight. 

• Documentation Department• ICE GATE – under bill of entry (electronic

declaration) regulations 2011- Indian customs electronic data interchange

gateway, an e-commerce portal of the central board of excise & customs.

A unique number is assigned to the bill of entry.Bill of entry – declaration by importer/exporter of ::Exact naturePrecise quality Value of goods examines by custom/authority• CHA- advance noting of bill of entry

• Shipment arrived• Status updated on web/call by airline

CHA – customer house agent , licensed toact as an agent for transactions related with entry/departure or import/export of goods and conveyance at CFS.

IGM generated by custom in EDI IGM – import general manifest, to be filled correctly

by the carrier of goods i.e. airlines.Personal inspection by airline handling staffCargo forwarding towards import W/H.Finalized IGM with updated flight number and R

number.R number – Symbolizes the cargo location in W/H and

necessary for custom clearance.• CHA – passing of documents

- payment of applicable duty- Physical inspection with original TR6 challan- payment of AAI charges.

TR6 challan – Document for the payment of service tax.

CHA – prepare N form and applicable octroi payment at the gate

Octroi is local tax collected by state government/munciple.

Application for exemption in respect of articles imported for immediate export (within 7 days or 168 hours after issuing N form)

EDI – electronic data interchange between computer networks

Export consideration – Documents received from shipper/CHABest suitable/preffered carrier option is opted.

MAWB is allotted & forwarded to carrier.MAWB – Mater air way billIt is issued by a carrierNon negotiableCovers transport of cargo from airport to airportIt is an 11 digit numberFirst 3 digits are airline prefix, next 7 are running

numbers with one number for each consignmentLast digit is check digitThe seven digits running numbers are divided by 7.

The remainder becomes the check digit. Example: Serial Number 8114074 divided by 7 is

1159153, remainder 3. Therefore the serial number plus check digit is Air Waybills are issued in sets of different colors.

-- The first three copies are classified as originals. -- The first original, blue in color, is the shipper’s copy. -- The second, colored blue is retained by the issuing

carrier.-- The third, colored orange, is the consignee’s copy. -- A yellow copy acts as the delivery receipt or proof of

delivery. The other copies are all white.Carting orders are collected from carriers office located

at air cargo complex. Carting orders – final declaration given by the custom

department to either load or export the cargo after import clearance.

At last EGM is allotted with the physical departure of shipment.

EGM- export general manifest - statutory declaration for every shipment leaving

indian air/water territory with the intentions of carrying cargo is bound to deliver EGM.

Process Flow : An OverviewWhile shippers may deliver their cargo directly to the

airport, the majority of cargo is handled through a freight forwarder.

Shipper sends cargo details to forwarder and ask for the quotation and according to that shipper sends the confirmation of airline and forwarder books the airline.

Generally the forwarder first reserves space, then confirms and picks up the freight only after receiving confirmation from the carrier.

In most instances, the forwarder will pick the freight up from the shipper or the shipper’s warehouse.

Simultaneously, all the documents received from the shipper will send to CHA for custom clearance.

Along with the allotted MAWB no. the booking will be forwarded to the shipper.

The cargo is usually temporarily stored in a warehouse facility at the airport as it waits to be loaded.

On arrival of the shipment at cargo complex, On the basis of nature of cargo the CHA arranges for examination of the shipment. After examination and report is generated the assessment will be done by the customs.

After assessment is completed and Let Export Order given by the customs; the shipment along with the destination set/ exporter’s copy of the shipping bill will be handed over to the selected carriers counter/ person present at cargo complex.

On receipt of the cargo and documents the airline handling staff arranges to move the cleared shipment to respective airlines shed / allotted area for cooling of the shipment.

As per planned schedule the shipment will be moved from shed to ramp for loading the shipment in air craft.

The cargo is then retrieved prior to arrival and loaded via a unit loading device (or ULD) and secured.

On physical departure of shipment the customs will allot EGM to particular flight which will be used in generation of E.P. copies.

Prior to Arrival of the shipmentAfter checking the pre alert documents

received from overseas forward the documents to documentation department.

On the basis of pre alert documents and CAN the CHA can arrange for advance noting of the bill of entry.

On arrival of the shipmentAirline will update the status of arrival of the shipment on web

or over a phone. On the basis of manifestation the IGM will be generated by Customs in EDI.

On physical arrival of the flight airline’s handling staff will inspect the flight in person.

After the flight check in is over the cargo will be forwarded to the Import W/H (called as forwarding).

In mean time IGM will be finalised along with updated flight no. and the ‘R’ No will be allotted.

In mean time the CHA arranges to pass the documents along with the assessment.

After assessment is over CHA make the payment of applicable duty as the case may be.

Along with the original copy TR6 challan the CHA conducts the physical examination of the shipment which has arrived in the Import W/H.

After examination is over and report is generated the documents are forwarded for Out of Charge depending upon the nature/ value of the shipment.

CHA arrange for payment of applicable Stamp Duty and AAI (W/H) charges against the subject shipment. On receipt of out of charge and payment of applicable charges the shipment will be available for delivery.

CHA prepares ‘N” form or make applicable Octroi payment at the gate of Air cargo complex and the shipment will be moved from W/H.

From the airport, a forwarder typically will deliver the cargo in the reversed order from where the forwarder delivered the cargo to the airport.

The air cargo process is driven by the freight forwarder, the carrier, and the process flow.

Transshipment- Process

I) Transshipment of cargo from a gateway airport to an inland airportSteps involved:

Import the cargoFile application and avail for transshipment permitTransport to transshipment warehouse of the domestic

carrier under the Customs preventive escort.Acknowledgement of goods by the customs officer Execution of bond with the domestic carrierPreparation of EGMs by domestic carrier on receipt of

goodsCopies of EGMs sent to customs at the destination airportChecking at the destination airport with reference to

EGMFinal clearance

ii) Transshipment of cargo received at an airport in India from an airport abroad to an airport abroad.

Steps involved:

Receipt of cargo to be transshipped at an airport

Storage of transshipment cargo under Customs supervision by the concerned airline

Cargo transfer manifest is required to be presented in triplicate to the Customs.

Loading of cargo in the aircraft is undertaken under the Customs supervision

iii) Movement of export cargo from an inland airport to an airport abroad through an Intermediate airport in India

Filing shipping billsAssessment of goods at the domestic airportSafety Assurance by furnishing bonds at domestic airportThe domestic carrier is to carry cargo only under E.G.M. duly

certified by the Custom.At the gateway airport, transportation of the cargo received to

the transshipment warehouse.The domestic carrier presents the EGM copies to the officer in-

charge of warehouse.Storage of goods in transshipment warehouseFiling cargo transfer manifest to the Customs by the domestic

carrierTransportation of goods in closed trucks under Customs

supervision to the warehouse of foreign airlinesReconciliation of records by officer in-charge on the basis of

EGM submittedEndorsement evidencing receipt of cargo and subsequent export

on the copies of EGM brought by domestic carrier from the originating airport.

Air Freight- Services and PricingDomestic:

Same DayOvernightSecond DayDeferred (3-5 business days)Time Definite

International Services:Consolidation ServiceDirect ServiceDoor to AirportDoor to Door

Currency Revaluation Airport

Curfews

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