CLASS / SECTION = BBA- Aviation & Logistics

SUBJECT = BBA402 - Introduction to Air Cargo Management

( IACM)

Unit 1 Air Cargo Concept

1 History of Air Cargo in Brief

2 Introduction – Operations and Industry Regulations – Service Function,
3 Organization and Liability – SLI,
4 Types of cargo-Handling of Perishable, Valuable Cargo and Special Cargo.
5 Air cargo Tariff, Rates & Charges – Valuation charges and Disbursement.
6 Airway Bill, Function, Purpose and Validation.
7 Air Cargo Stake Holders

History of Air Crago

A) Even before the aircraft, mail was moved by balloons, and carrier pigeons.
B) The first cargo moved by aircraft occurred on 7 November 1910 when a few bolts of
silk were transported by air from Dayton to Columbus, Ohio.
C) The following year in 1911 experimentation with the movement of post was started,
and by 1914 regular air service began in the United States.
D) In Germany, the first official air mail flight occurred in 1912.
E) World War II caused a rapid expansion of the aviation industry and for the first time,
large scale movements of freight were carried out to support the war effort.
 Introduction – Operations and Industry Regulations – Service Function,

Introduction:

The ability of an airport to support air cargo can be an important part of the economic
growth and vitality of a region. Similar to commercial airline passenger service, air cargo
service is typically driven by demand and air carrier decisions. The benefit of air cargo to a
local economy includes additional jobs, wages, and economic activity.

Air Cargo Definition / meaning:

Air cargo is another term for air freight. It is the carriage or the transportation of goods
through an air carrier. Transport services via air are the most valuable when it comes to
moving express shipments around the globe and it consists of air mail, air freight and air
express.

Regulatory and Policy Issues for Air Cargo Development

Regulations and policies affect every movement in the air cargo system. These regulations
and policies can create challenges and risks for airports and affect air cargo market
performance and future development. Security, safety, and environmental regulatory
changes have the potential to impact air cargo operations. Following are the regulatory
Policies Issued

A) Security Policy: Since the events of September 11, 2001, the security regulations of the
air cargo sector, like the passenger airline service, have increased drastically. The
TSA (Trasport Security Administration) which is part of the DHS (Department of
Homeland Security) has several policies and programs that impact air cargo
shipments in the U.S.

B) Safety Regulations: Air cargo carriers must follow an FAA (Federal Aviation
Administration) approved aircraft maintenance program. Currently, the certification
standards for cargo aircraft are less stringent than passenger carriers, but this may
change in the future as concerns about an aging fleet and aircraft modifications
increase. The FAA also conducts aviation safety oversight assessments of other
countries to determine if they are complying with their obligations under the 1944
Chicago Convention. If the FAA finds the country meets the safety practices, it
assigns a Category I rating and allows for a bilateral agreement.

C) Environmental regulation: Airports must be aware of and be prepared to address the

additional noise and emissions that could occur with increased air cargo operations.
Over the last several decades air cargo, which often uses older, less-efficient, noisier
planes, has had a higher negative environmental impact–including greenhouse gas
and carbon emissions–than other modes such as land and sea. Environmental and
sustainability policies aimed at improving carbon efficiency and cutting emissions
are becoming more prevalent around the world and many air cargo carriers have
voluntarily taken steps to reduce their environmental impact through improved fuel
efficiency, fleet renewal, and improved e-commerce. As more and more countries
adopt environmental policies, the U.S. may also feel the pressure to adopt new
policies regarding emissions control. New aircraft technology and bio-fuels are
allowing for improvements in emissions.
 D) International Regulations & Policies: International aviation is governed by bilateral
and multilateral agreements between two or more countries’ governments. Freedoms
of the Air are the international aviation agreements that were developed during the
Chicago Convention to set forth a framework for air commerce. There are nine
freedoms of the air that grant a country’s airlines the right to enter and land in
another country’s airspace. The U.S. has an Open Skies policy and has set forth
agreements with hundreds of countries around the world. It is anticipated that
bilateral agreements and air freedom rights will continue to expand over the next
decade which will allow for more efficient movement of air cargo and continued
expansion of trade.

Some of the service Functions of Cargo Department:

a) Framing corporate policies on AAI (airport Authority of India) cargo handling at

international as well as domestic airports
b) Implementation of IATA (International Air Transport Association) rules, ICAO
(International Civil Aviation Organization) recommendations, Implementation of
BCAS, (Bureau of Civil Aviation Security) CBEC (Central Board of Excise &
Customs) objectives and regulations, pertaining to cargo handling.
c) Liaison at apex level with the regulatory Ministries, and other bodies, as well as user
agencies such as Central Board of Excise and Customs, DGCA, (Directorate General
of Civil Aviation) Ministry of Commerce
d) Tapping hitherto untapped areas of operation for harnessing additional revenue
from cargo handling, including Express and Courier Operations.
e) Setting up of cargo terminals and managing them by providing services comparable
to international standards
f) Modernisation of cargo handling system, re-engineering systems and procedures for
hassle free terminal operations resulting reduction in dwell time.
g) Finalisation of tariff on cargo handling services in consultation with the user
community like airlines, freight forwarders, etc.
h) Make proposals on various policy and operating matter to the AAI board;
implementation of the policy decisions taken by the Board/Government of India
i) Finalisation of Training programs for cargo personnel in consultation with ED
(Training) to inculcate better professionalism amongst AAI's cargo functionaries.

Update on Cargo Liability for International Air Freight/ Cargo

Liability of air carriers for cargo lost or damaged during transit has been limited since the
dawn of air transportation.

For instance, the original Warsaw Convention limited liability to 250 French gold Francs per
kilogram. The Montreal Protocol to the Warsaw Convention set the limitation at 17 Special
Drawing Rights (SDRs)

However, on December 30, 2009, the limitation of liability for cargo that is lost or damaged
during international air transportation between countries who are signatories to the
Montreal Convention increased from 17 SDRs to 19 SDRs per kilogram,

As of January 28, 2010, the value of one SDR was $1.55419, thus increasing the limitation of
liability from $26.42 per kilogram to $29.53 per kilogram.
Exactly what are the limits of liability and why have they changed?

The Convention maintained the limitation of liability for cargo of 17 SDRs per kilogram as
was contained in Montreal Protocol No. 4, subject to the same proviso, unless the consignor
has made, at the time when the package was handed over to the carrier, a special declaration
of interest in delivery at destination and has paid a supplementary sum if the case so
requires. In that case the carrier will be liable to pay a sum not exceeding the declared sum,
unless it proves that the sum is greater than the consignor’s actual interest in delivery at
destination.

Aviation Regulation

a) International Air Transport Association (IATA)

➢ Represents the airlines. Its members are only carriers.
➢ Used to fix prices up until US deregulation.
➢ No longer involved in price management.
b) International Civil Aeronautics Organization (ICAO)
➢ UN agency deals with civil aviation issue.
➢ Agency that brings government representatives together to organize a
common set of regulation.
➢ Mostly include technical standards, safety standards, and to a lesser degree
business standard.
c) Bilateral
➢ Every scheduled flight (passenger and cargo) that moves between two
countries needs to be agreed upon in advance in a treaty between the two
countries.
➢ A treaty between two countries, not between any airlines
➢ A bilateral is a very long and detailed agreement on what rights each country
gives each other in regard to airline service.
d) Freedoms of the air - Five Freedoms agreement
➢ First freedom, overflight
➢ Second freedom, service stops
➢ Third freedom, passenger deliver.
➢ Fourth freedom, repatriation
➢ Fifth freedom, on carriage
➢ Several other "freedoms" have been added, although they are not officially
recognized under international treaty
e) Mirror effect
➢ When new routes are agreed upon. That route goes from having no service to
two airlines at the same time.
➢ There is a big jump from no capacity to two airlines
f) Charter flights
➢ A charter is a one-time flight and not part of a routine schedule
➢ It needed to be for an affinity group.
g) Airline Deregulation Act, 1978, US
➢ Allow airlines to operate whatever routes (domestically) they wanted, and
charge whatever they wanted
 h) Open Skies Agreements
➢ Bilaterals that were very liberal to promote competition in international
flights
➢ Asia have been remarkably liberal in their competition policies
➢ The worse cases for liberalization is China, has most dangerous airlines in the
world
➢ North Korea has also not embraced the open skies approach.

Air cargo transport: Advantages and disadvantages

Advantages of cargo air transport
1) Speed: It allows you to reach any point in the world in just a few hours.
2) Flexibility: Flexible schedules and dates that allow any merchandise to reach its
destination quickly and efficiently.
3) Loading capacity: Although cargo is more limited than in the case of maritime
transport, freight aircraft allow the transfer of numerous goods of small, medium
and large size.
4) Innovation: The air sector is one of the biggest changes in recent years from its speed
to its combustion.
5) Borders: In the air transport there are not as many physical barriers or customs, as it
happens with the rest of means of transport.
6) Accessibility: The plane makes it possible to reach practically hidden places, where
other means of transport are not able to reach.
7) Cargo:: It is the ideal way to transport perishable, fragile or high value merchandise.
8) Security. It is the safest for the transportation of goods.
9) Temperature. It is possible to ensure a specific temperature if necessary.
Disadvantages of cargo air transport
1) High cost: It is significantly more expensive than other means of transport.
2) Weather: Conditioned by the weather which can cause delays.
3) Law: Legal restrictions that must be taken into account depending on the different
countries of destination of the merchandise.
4) Independence: Air transport must be complemented by land, train or truck. So, it
does not count by itself as the only means of transport in commercial operations.
5) Limited load: Although the charge is wide it is not infinite.
6) Cargo: It does not allow to send all kinds of merchandise. Lithium batteries, liquid
products such as fuels or oils, or hazardous materials, such as explosives, gases and
other toxic substances, can not be transported.
7) Documentation: It is not exempt from paperwork. Declarations, certificates of origin
etc., must be completed by the different agents that operate along the entire transport
chain.
 What Is a Shipper’s Letter of Instruction (SLI) and Why Is it Important?
One of the many documents that you may need to arrange when organising a freight
shipping overseas or export is the shipper’s letter of instruction, letter of instruction or
simply SLI.
What is the Shipper’s Letter of Instruction?
The Shipper’s letter of instruction is a document that the shipper (person or company that is
sending the goods) provides to the freight forwarder (the company who transports the
goods) where are stated the characteristics and requirements of the cargo, the contact person
for any questions concerning the cargo or the export itself and the reason for the export.
What is Shipper’s letter of instruction used for?
a) Having all the information in one place: The SLI contains all the information
concerning the shipment from collection to delivery in one single document making
it easier for a freight forwarder to process the shipment.
b) Issuing Export documents: If you are not familiar with export-import requirements,
issuing a shipper’s letter of instruction is the best way to assure that the freight
forwarder has all the required information to issue other requested export
documents such as the Bill of Lading and the Electronic Export Information extract.
c) Proof of the provided instructions: When providing an SLI to the carrier, the shipper
has a written confirmation that all specifications, requirements and special needs
concerning their cargo were passed on to the carrier.
d) Allows the freight forwarder to act on the shipper’s behalf: When provided with an
SLI and a written power of attorney, the carrier can handle the cargo and oversee the
transport on the shipper’s behalf.
Types of Cargo
So we can divide air cargo types as
1) General Air Cargo.
General Dry Cargo Shipping Dry goods are any items which do not contain liquid, such as
textiles, retail or consumer goods, machinery and hardware, electronics, etc.
2) Special Air Cargo..
1. Temperature Controlled
2. Hazardous Material/Dangerous Goods
3. Heavy weight and over dimensional freight
4. Live Animals
5. High Value/Fragile Items
6. Human Remains/Organs/Tissue Samples
 Handling Valuable Cargo ::
Valuable cargo requires special handling, so certain restrictions may apply. Precious
shipments need special attention to ensure safe and secured transport. They are handled
under specific security measures from acceptance to delivery in accordance with local
regulations and conditions both at origin and destination.
Following items are examples of Valuable Cargo shipments requiring security services:
• Vehicle
• Gold, platinum group metals.
• Legal banknotes, travelers’ cheques, securities, share coupons, and stamps.
• Precious stones, including diamonds rubies, emerald, sapphires, opals and pearls.
• Jewelry, watches and articles made of silver, gold and platinum.
Few of the key security service features for your valuable shipments:
• Security escorts for the transfer of the shipment to/from the aircraft/warehouse.
• Storage in secured storage area that has been designed to prevent unauthorized
access.
Handling perishables Cargo
Over the years airlines have developed processes and facilities for handling chilled and
frozen goods with chilled storage and freighter capacity, alongside the development of
temperature control packaging methods. There are several categories of perishable goods for
the purposes of shipping and include:
➢ Fresh food items such as produce and meat
➢ Frozen food items
➢ Non-refrigerated food items with short shelf life such as bread
➢ Pharmaceuticals
➢ Biological materials such as tissue samples etc.
➢ Fresh flowers and other live plants

Considerations for safe transportation of perishables

1) Familiarise yourself with the best practices for packing and shipping the relevant
perishable products you are transporting.
2) Using the correct temperature control packaging as recommended by an expert
relevant to the perishable type.
3) If needed, carry out trials of different types of temperature control packaging to
ascertain the best solution for your needs considering the method of transport and
potential delays in loading and unloading and the consequential exposure to
ambient heat and sunlight.
4) Ensure compliance with the regulations governing the transport of perishables:
5) Ensure that a chain of custody is in place to ensure that shipping instructions are
followed and regulations are adhered to.
6) Ensure the perishable goods are clearly identifiable as perishable.
 7) When shipping internationally be aware that customs delays may mean perishable
cargo is exposed to adverse temperatures for long periods.
8) Packaging solutions include thermal pallet covers, polystyrene boxes, gel ice packs,
foil container liners, and temperature plotters.

Handling Special Cargo

Extensive experience in handling special categories of cargo is supported by a dedicated
team and well-equipped facilities. Some of the special cargo are ::
➢ Aircraft Engines
➢ Oil and Gas equipment
➢ Long industrial pipes
➢ Radioactive Material

What is ULD ::
A unit load device - is a pallet or container used to load luggage, freight, and mail on wide-
body aircraft and specific narrow-body aircraft. It allows a large quantity of cargo to be
bundled into a single unit.

7 steps to successful air cargo movement

 Air cargo Tariff, Rates & Charges – Valuation charges and Disbursement
How are air freight rates calculated?
Air carriers will charge by either volumetric weight (also known as dimensional weight) or
actual weight, depending on which is more expensive. The air shipping global rule of thumb
is to calculate the volumetric weight is to multiply the item's volume in cubic meters by 167.
How to use TACT air cargo solutions?
IATA’s TACT (The Air Cargo Tariff) air cargo solutions allow you to search in real-time for
rates, rules and compliance regulations as well as air cargo schedules. You can also leverage
our operational dashboards to keep track of market activity. As a result, you will no longer
need to contact individual airlines, handling agents, or airport operators! TACT air cargo
solutions are your central source of information containing over 5 million industry and
carrier tariffs. The information is updated in real-time to ensure that most recent changes in
regulations as well as rates are reflected.

What is an Air Waybill (AWB)

An air waybill (AWB) is a legally binding transport document issued by a carrier or agent
that provides details about the goods being shipped. It provides detailed information on the
contents of the shipment, the sender and recipient, terms and conditions, and other
information. The AWB is a standard form that is distributed by the International Air
Transport Association (IATA). The AWB used to be a one-page physical paper document,
but the e-AWB is considered the standard nowadays and is filled out and stored
electronically.
Functions of the AWB : The air waybill serves many functions, including:
a) Evidence of receipt of goods by an airline
b) Contact information among all parties
c) Contract of carriage between shipper and carrier
d) Freight bill
e) Customs declaration
f) Description of the goods
g) Guide for handling and delivering goods
h) Tracking of shipment
 Purposes of Airway Bill in Exports and Imports
a) A receipt, acknowledging consignment of goods from the shipper.
b) An evidence of the contract of carriage.
c) A contract between the shipper and the airline for moving the goods to the destination.
d) A freight bill as it contains all the details.
e) A document of instructions to carrier's staff in handling, dispatching and delivering
shipments.
f) A customs declaration
g) Airway Bill is issued and signed by the airways company. They are made out in the name
of the buyers or bankers of the buyers. The issuance date of the airway bill is considered to
be the date of shipment.

Why do Airlines need to Automate e-AWB Validation?

IATA has recognized that air shipping can only be more successful among shippers and
freight forwarders if the processes are simplified, more efficient, and completely digitalized
and automated.
There are several benefits for implementing e-AWB for all stakeholders of the air freight
value chain.
1) First, removing paper is reducing the costs of the process.

2) It also improves the accuracy of the data to a certain degree and it helps all stakeholders
to have real-time access to the air waybill data at every location.

3) Using electronic air waybills can also significantly reduce shipment handling delay due to
missing or illegible paper air waybill.

4) Previously, due to the absence of an electronic air waybill standard, paper air waybills
were exchanged between the shipper and the carrier at origin as evidence of the contract.

5) The paper air waybill is now sent in electronic format from origin to destination, not
transported with the shipment but produced upon demand.

What are the benefits of automating the E-AWB validation Process?

1) By automating the process airlines could achieve better data quality and decrease the
manual work needed.
2) This has speeded up the handling times of e-AWBs, airlines have seen a significant
decrease in delays in deliveries and fewer unexpected offloads.
3) The operations didn’t only become more efficient, but airlines have seen a significant
decrease in costs related to this process and they were able to improve their gross profit
margins on the shipments.
4) Using automation tool allows airlines to have full visibility over all the electronic air
waybills in real-time on any device for all relevant stakeholders and send notifications to
General Sales Agents (GSAs), Freight Forwarders, and Ground Handling Agents (GHAs).
5) Additionally, it helps the possibility to search specific data, create queries and reports.
 Strategies of key Air Cargo Industry Stakeholders and how value is delivered
and captured in international air logistics chains;

1) Airports, Cargo/Express Terminal Operators

The Airport Operator plays an important role in the air cargo logistics Chain to create
adequate infrastructure facilities for all the stakeholders & for the processing, storage and
smooth handling of international cargo at all the gateway airports of the country as well as
domestic airports. The airport operators also discharge their duties as the Custodians of
international cargo on behalf of Customs. The Cargo Terminal Operator discharges its
function on behalf of the airport operator. The Ground Handling Agents are duly authorized
by the airport operators to discharge their duties in the airside of the airport that includes
Ramp Handling under the aircraft, Handling & transportation of baggage &
Cargo/express/mail from the aircraft to cargo terminal & vice versa.

2) Airlines::
The airline plays a very important role in the entire air cargo logistics supply chain. The
completion of exportation ends at the airline flight departure and the start of import
function starts after landing of the airline flight. The airlines are responsible for bringing in
and moving out the cargo in/out of the airport. The airlines have to intimate the customs of
the cargo that is coming in or going out. Their staff or their agents (Ground Handling
Agents) manage the documentation needed for cargo movement including the waybills, the
manifests. The carriers sell their belly space in the market to freight forwarders either
through their own staff or through General Sales agents.

3) Freight Forwarders
Freight forwarders orchestrate the entire movement of goods from shipper to consignee.
They are generally IATA approved agents for booking cargo ready for carriage condition for
airlines. Their roles involve collecting the shipments/documents from shippers, booking
space with carriers and preparing all the transport documents such as air waybill, house
manifests; at times doing the customs clearance activities, paying the airport charges and
sending prealerts to destination agents for transport activities at their end.

4. Shippers
Determine method of shipment and prepare bills, invoices and other shipping documents.
Assemble containers and crates, pack goods to be shipped, and prepare identifying
information and shipping instructions. Oversee loading and unloading of goods.

5. Ground Service Providers

Frequently, the ground service provider (GSP) is the link between the aircraft and the
warehouse. The GSP loads and off-loads cargo, moves it to and from the warehouse - and
even within the warehouse, itself. Historically, these operators have functioned in a fiercely
competitive environment where cost-minimization was the dominant criteria in bidding for
business.

6.Trucking
Ground transportation plays a critical, yet occasionally overlooked role in air cargo delivery.
Not only do trucking companies serve airlines and forwarders but the major integrators
rank among America’s largest trucking companies in fleet size. This activity utilizes
considerably more space than many airport operators realize, placing a substantial, yet often
neglected impact on facilities and road maintenance, planning and development.
 Expected questions on unit –1

Marks :: 1 each question

1) What is the definition or meaning of Air Cargo?

2) Name four Regulatory and Policy Issues for Air Cargo Development?

3) Which one of the following is history of Air Crago ?

a) Even before the aircraft, mail was moved by balloons, and carrier pigeons.
b) Even before the aircraft, mail was moved by Bicycles & auto rickshaws.
c) Even before the aircraft, mail was moved by pipelines.
d) Even before the aircraft, mail was moved by helicopters.

4) Which of the following increased from 17 Special Drawing Rights (SDRs) to 19 Special
Drawing Rights (SDRs) per kilogram?
a) Warsaw Convention
b) Airline deregulation act
c) Open skies policy
d) Montreal Convention

5) Name any four Aviation Regulation?

6) In Air Cargo Business, SLI stands for ___________________________?

a) Shipper’s Letter of Information
b) Shipper,s Letter of Instruction
b) Specific Language Impairment
d) Session Level Interface.

7) General Cargo & write types of General Cargo

8) Write meaning & use of Unit Load Device (ULD)

9) In Global Scenario of Air Cargo Industry, Busiest Air freight Airports are in____________
a) Africa and Canada
b) United Arab Emirates, Persian Gulf & Gulf of Oman
c) Europe, Asia and North America
d) Philippines, Japan & Koria

10) Name four companies involved in Air Cargo Global Market

11) Name domestic association of Air Cargo Industry.

12) What is the meaning or definition of air waybill

 Section 1 Marks :: 5 each question

1) Write any three Disadvantages of Air Cargo Transport & explain them?
2) What are the types of special Air Crago?
3) Write any Five Considerations for safe transportation of perishables?
4) What are the 7 steps of Successful Air Crago Movement?
5) What are the purpose of Airway Bill?
6) Write all the benefits of e-airway bill?

Section 2 Marks :: 10 each question

1) What are the service Functions of Cargo Department, write in details?

2) Write any six advantages of Air Cargo Transport & explain them?
3) What is Shippers Letter of Instruction & Why it is used for?
4) What is Air Way Bill & its functions?
5) Brief About Air Cargo Stake Holders and their role as a stake Holder.