Operational Background to Cargo Consignment

The operational goals of cargo consignment are to maximise profit by carrying the optimum mix of cargo products on a flight. There are many important operations that must be performed and many issues considered before a piece of cargo can be accepted or rejected. These operations concern Capacity Planning, Space Management and Yield Management.

Capacity Planning

Capacity planning involves the creation of Route Capacity Control Advice (RCCA) sheets for each cargo carrying flight. This forms the foundations for all the business conducted by the Cargo section, by providing the information as to the available space on the flight for the various Cargo products. RCCA provides information regarding the plane type, layout configuration and sector payload (i.e. the total weight and volume that can be carried on the plane). To calculate the available weight and volume for cargo, the passenger baggage, crew baggage, catering, mail and courier weights are subtracted from the current sector payload.

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Block Bookings

A large proportion of freight carried in BA holds falls under the category of block bookings. These are bookings into reserved space on the aircraft with fixed rates. All the main agents and freight-forwarders make use of block space to guarantee that there will be space for their cargo. Block Bookings are divided into Mail, Courier and Permanent Bookings (PBs). Agents put in their requests for space based on their current level of freight and what they expect to sell for the following season. Decisions are made on basis of rate offered, weight carried and possibly other related factors such as customer service, through shipping etc. The main goal of Cargo section is to maximise profit by carrying the optimum mix of cargo products on a flight. PBs are generally reliable and place regular business with BA, but the rates for PB space are less than that obtained from free-sale.

The major problem is the poor utilisation rate of PB space. It was found that in 1994 the non-take up of PB space over all flights was 4 million cubic metres. Agents do not pay for the space, only for the cargo that is carried. No penalty is imposed for non-take up of space. Therefore, an agent is likely to put bids in to several carriers and take the lowest bid offered. Therefore it is important to monitor usage throughout the season to pull back space for free-sale.

Space Management

The overall objectives of space management may be divided into two parts: • Maximise the total amount of space available for Cargo Business

• Distribute the mix amongst the Cargo products to ensure the maximum utilisation and yield from the available space, i.e. minimise the total amount of un-utilised space given the demand for Cargo on the flight.

Unused PB space is automatically released into freesale 18 hours from departure when it passes to Capacity Control. Space can be released earlier if outstations inform that the space will not be required.

Most space reclamation methods used now are reactive, i.e. they claw back space after it has been found that it will not be utilised. This is usually too late to make any significant sales into the freed-up space. Forecasting methods based on historical data and current trends could give an indication of the likely available space on departure and by taking the most pessimistic case it should be reasonably safe to take this space into free sale at a much earlier date.

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Yield M anagem ent

The objective of Yield Management is to control space on key capacity constrained flights in order to maximise the revenue from the cargo carried. This is done by giving preference to high yield bookings over those offering lower yield.

Capacity M anagem ent O peration

Capacity management staff will look at all cargo which requires pallet or unit protection for weights over 300k. An average of 700 to 900 queue messages a day are processed. Their task is to check the weight and volume, and then reserve space for the cargo by writing down the consignment booked (using a program called PACKMAN to work out how many units are required) and then confirm the booking to the agent.

All bookings for yield controlled flights coming through a queue are initially processed by the automatic queue monitoring system ASP (Acceptable Shipment Package). ASP [37] looks at the queue every 5 minutes and processes any booking that it finds. ASP shows the target rate required to carry the cargo. It calculates using a weighting system whether or not to accept the booking. The Duty Officer will then make a decision based on the result from ASP and his own judgement and experience.

There are many factors that are not currently considered by the yield analysts when making a decision as to whether to accept a particular consignment onto a flight. This may be because either the information is unavailable or is only available through considerable time and effort on the part of the analyst. Information that would be important in the yield control process include :

Cost - Cost information has an important bearing on the value to BA of a consignment. The costs include those for transport, handling, and trucking. A consignment with an apparently high yield may also have a mitigating high cost which could result in a greatly reduced contribution or even a loss.

Status O f Free Space - Status of PB allotments usage, profiles on customer and agents.

• Flight Trends - Historical information as to how the flight filled over the last week, month or the same time last year.

The yield analysts develop their knowledge of booking acceptance through experience. This knowledge does not exist in any detailed written format. This may lead to individual ways of controlling bookings which are not consistent with those of other analysts. It also does not allow direct monitoring of a particular strategy for yield control.

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If an experienced analyst becomes unavailable then so does his knowledge of how to do yield management.