Air Freight Transport Notes

Characteristics of Air Transportation

Advantages & Disadvantages

  • Cost: Air freight is very expensive per ton-mile compared to other modes of transportation.
  • Speed of Delivery:
    • Pros: Fast, especially for long international movements due to rapid airport-to-airport transit times.
    • Cons: Potential delays due to airport congestion, handling, paperwork, and customs.
  • Service Reliability: High.
  • Location Flexibility:
    • Pros: Worldwide access, enabling market flexibility; enhanced flexibility when linked with trucks.
  • Capability:
    • Suitable for commodities with high value-to-weight ratios, perishables, fashion goods, spare parts needing quick delivery.
    • Cons: Size and weight restrictions; security considerations limit cargo types.
  • Security:
    • Reduced risk of theft or damage due to controlled environments.
    • Less prone to physical damage and breakages.

Infrastructure

  • Types of Air Freighters: Common large capacity air freighters exist.
  • Air Cargo Handling:
    • Unit Load Devices (ULDs):
      • Aircraft pallets and pallet net combinations or aircraft containers.
      • Subject to strict civil aviation authorities' requirements (design, testing, production, operations, repair, and maintenance).
      • Facilitate efficient and safe cargo stowage, maximizing space utilization.
    • Air Cargo Handling Equipment:
      • Sophisticated systems developed for quick and safe cargo transfer due to aircraft design restrictions.
      • Fixed conveying systems with powered rollers for pallet movement and direction changes.

Operation in Air Transportation

Structure of the Industry

  • International Civil Aviation Organization (ICAO):
    • A specialized and funding agency of the United Nations.
    • Funded and directed by 193 national governments.
    • Supports diplomacy and cooperation in air transport as signatory states to the Chicago Convention (1944).
    • Aims to realize safe, secure, and sustainable air operations globally.
    • National regulatory requirements take precedence over ICAO standards.
    • Vietnam has been a member since 1980.
  • International Air Transport Association (IATA):
    • The trade association for the world’s airlines, founded in 1945.
    • Represents approximately 290 airlines, accounting for 82% of total air traffic.
    • Supports airline activity and formulates industry policy and standards, including those for safety, security, training, and ULDs.
    • Vietnam Airlines, Vietjet, and Bamboo Airways have been members since 2006, 2017, and 2020, respectively.
  • Airlines:
    • Companies that own (or lease) and operate aircraft for passenger and cargo transport.
    • Some national airlines are government-owned (flag carriers).
    • Some airlines specialize in specific services.
  • Cargo Agents:
    • Freight forwarders licensed by IATA to handle freight on behalf of customers.
    • IATA sets operational standards, ensures insurance, and allows agents to issue house air waybills (HAWB).
  • Airport Authorities:
    • Own (or lease) and operate airport infrastructure.

Air Hubs and Spokes

  • Air hubs are strategically located to maximize carrying capacity efficiencies over long distances, considering geographical position and market proximity.
  • Cargo is consolidated by freight forwarders or airlines and carried between air hubs.
  • At hubs, cargo is deconsolidated and loaded onto feeder aircraft or other transport modes for final delivery.
  • This system prioritizes the lowest transport cost rather than the shortest route.

Documentation in Air Transportation

Air Waybill (AWB)

  • Definition: A contract issued by the carrier airline to transport goods by air (Rushton et al., 2014).
  • According to Article 129 of Vietnam Civil Aviation Law No. 66/2006/QH11, an air waybill is a document of cargo carriage by air, evidencing the contract, cargo receipt, and acceptance of contract conditions.
  • Making Out of Air Waybill:
    • The air waybill is made in three originals (Article 129, Vietnam Civil Aviation No. 66/2006/QH11):
      • Original 1: Signed by the consignor, given to the carrier.
      • Original 2: Signed by both consignor and carrier, given to the consignee.
      • Original 3: Signed by the carrier, given to the consignor after cargo receipt.
  • Function:
    • Unlike a sea-freight bill of lading, an air waybill is non-negotiable.
      • Serves as a receipt for goods shipped, including quantity, description, and condition, forming the basis for cargo claims.
      • Acts as evidence of the contract of carriage.
  • Classification:
    • Master Air Waybill (MAWB): Issued and signed by a carrier airline, detailing the contract between the freight forwarding company and the carrier airline.
    • House Air Waybill (HAWB): Issued and signed by a freight forwarding company, which assumes liability as the carrier. Individual HAWBs are detailed in a MAWB.
  • Comparison of MAWB and HAWB:
    • Issuer:
      • MAWB: Carrier Airline
      • HAWB: Freight forwarder
    • Parties on AWB:
      • MAWB: Carrier Airline and freight forwarder
      • HAWB: Freight forwarder and shipper; shipper and consignee; freight forwarder and freight forwarder’s agent; real seller and buyer
    • AWB No.:
      • MAWB: 11 numbers, with the Airline code as the first 3 digits.
      • HAWB: Typically includes numbers and letters.
    • AWB form:
      • MAWB: Name and logo of Carrier Airline
      • HAWB: Name and logo of Freight forwarder
    • Payment method:
      • MAWB: Normally Prepaid
      • HAWB: Collect or prepaid
    • Cargo name:
      • MAWB: Normally "Consolidation shipment as per attached manifest"
      • HAWB: Specifically named AWB
    • AWB modification:
      • MAWB: Normally more difficult
      • HAWB: Normally easier

Other Documents

  • Packing lists, commercial invoices, certificates of origin, and other cargo or country-specific documents may be required by airlines, security, and customs services.

Pricing in Air Transportation

Structure of Transportation Charges

  • Air freight (Transportation Charge)
    • Weight charge
      • General Cargo Rate (GCR)
      • Specific Commodity Rate (SCR)
      • Class Rate (CCR)
      • Bulk Utilization Charge (BUC)
    • Valuation Charge
  • Other Charges

Air Freight

  • Air Freight: The amount charged for the air shipment, also known as “freight costs” or “freight charges.”
  • Air Cargo Tariff:
    • The amount charged by the carrier for carriage of a unit of weight, covering transportation from airport to airport only.
    • Sectoral air cargo rates determined by each air carrier or at the industry level.
    • The amount inserted into the Air Waybill (AWB), serving as a base for calculation of special commodities (live animals, human remains, valuables).
  • Weight Charge
    • General Cargo Rate (GCR)
      • Applies to commodities without a specific commodity rate or commodity classification rate.
      • Includes minimum rate (M), normal rate (N), and lower charge in higher weight (Q).
    • Specific Commodity Rate (SCR)
      • Published for specific commodities from a specified origin to a specified destination.
      • Offers attractive prices to optimize airline carrying capacity for a specific route.
      • Usually lower than General Cargo Rates.
      • Subject to a minimum weight restriction.
      • Usually takes precedence over Class Rates and General Cargo Rates.
    • Commodity Classification Rate (CCR or Class Rate)
      • Published for specific commodity classes from a specified origin to a specified destination, shown as Surcharged (S) or Reduced (R).
      • Expressed as a percentage of GCR, can be higher or lower.
      • Takes precedence over GCR regardless of comparisons.
    • Bulk Unitization Charge (BUC)
      • Charged by the carrier to the shipper or freight forwarder based on the ULD (container or pallet).
      • Consists of the minimum charge for the sector and the ULD used, plus an excess weight charge if applicable.
      • Restricted Items: Dangerous goods, live animals, human remains, and valuables.
  • Weight Charge Calculation
    • Air freight rate covers cargo carriage from one airport to another.
    • Measure the actual volume and gross weight of cargo:
      • actualvolume=lengthimeswidthimesheightactual volume = length imes width imes height
      • Actual gross weight is inserted into AWB and Manifest.
    • Calculate the Chargeable Weight (CW):
      • Chargeable Weight considers the actual volume of cargo and how it occupies space on the aircraft.
      • CW is determined by the actual Gross Weight (GW) or the Volume Weight (VW), whichever is greater.
      • VolumeWeight(kg)=extCargovolume(cm3)/6,000=extCargovolume(m3)imes166.67Volume Weight (kg) = ext{Cargo volume (cm3)} / 6,000 = ext{Cargo volume (m3)} imes 166.67
    • Calculate the Weight charge:
      • Weightcharge=extapplicablerateimesextchargeableweightWeight charge = ext{applicable rate} imes ext{chargeable weight}
      • Applicable rate depends on consignments, the sector carried, and the chargeable weight.
      • If the weight charge is lower than the minimum charge set for a sector, the minimum charge applies.
  • Valuation Charge
    • When the shipper's "declared value for carriage" on the Air Waybill exceeds a specific value (e.g., 22 SDR per kilogram), a valuation charge (e.g., 0.75% of the excess value) is applied.

Other Charges

  • Fuel Surcharge (FSC):
    • Charged by carriers, typically based on chargeable weight, to account for variations in fuel costs.
  • Security Surcharge (SSC):
    • Charged by Terminal Providers to cover additional security measures.
  • Airline Terminal Fee:
    • Charged by Terminal Providers for cargo handling.
  • Delivery Order Fee (D/O fee):
    • Charged by Carriers or Forwarders to issue a D/O for the consignee to receive goods at the airport.
  • Air Waybill Fee:
    • Charged by Carriers/Forwarders to issue an AWB.
  • Screening Fee (X-ray):
    • Charged for screening cargo before loading onto an aircraft.

Legal Requirements for Air Transportation

Legal Requirements

  • International Legal Framework:
    • Warsaw Convention 1929
    • Hague Protocol 1955
    • Guadalajara Convention 1961
    • Guatemala City Protocol 1971
    • Montreal Additional Protocols 1975
    • Montreal Convention 1999
    • Vietnam is a party to the Warsaw Convention 1929 and the Hague Protocol 1955.
  • Vietnam Regulations:
    • Vietnam Civil Aviation Law No. 66/2006/QH11 (June 29, 2006)
    • Law amending and supplementing articles of the Vietnam Civil Aviation Law No. 61/2014/QH13 (November 21, 2014)

Carrier Liability

  • Scope of Application:
    • The Warsaw-system conventions and the Montreal Convention 1999 apply to carriage between two Contracting States to the same international air convention, or within a single Contracting State if an intermediary international stopover is agreed.
  • Period of Responsibility:
    • International Conventions: the period during which the goods are "in the charge of the carrier", excluding carriage by land, sea, or river outside an airport.
    • Article 161, Vietnam Civil Aviation Law No. 66/2006/QH11: from the time the consignor delivers the cargo to the carrier until the carrier returns it to the entitled recipient, excluding carriage by sea, land, rail, or inland waterway outside an airport or airfield.
  • Basis of Liability:
    • International Conventions:
      • Presumed liability of the carrier for loss or damage if the event causing the damage occurred during carriage by air.
      • Presumed liability of the carrier for damage caused by delay.
      • Claimant does not need to prove carrier fault.
    • Vietnam:
      • The carrier is liable for damage in case of loss, lack, or damage to cargo (Article 161).
      • The carrier is liable for damage caused by delay unless it proves it took all measures to avoid the damage (Article 164).
  • Exceptions to Liability:
    • International Conventions:
      • Inherent defect, quality, or vice of the goods.
      • Defective packing of the goods.
      • Act of war.
      • Act of public authority.
    • Vietnam:
      • Natural characteristics or inherent defect of the cargo.
      • A decision of the court or a competent state agency.
      • The outbreak of war or an armed conflict.
      • Fault of the consignor or the consignee (Article 165).
  • Limitation of Liability:
    • International Conventions:
      • Under the Warsaw Convention 1929 and the Warsaw-Hague Convention 1955, liability is limited to 250 gold francs per kilogram.
      • Under more recent conventions, liability is limited to 17 SDR per kilogram.
    • Vietnam:
      • If the consignor has not declared the value of the cargo, the limit of liability is 17 SDR per kilogram.
      • If the consignor has declared the value, the carrier is liable up to the declared value, unless it proves the value is higher than the actual value.
  • Time Limit for Suit:
    • International Conventions:
      • In case of damage or delay, written complaint to the carrier must be made within a specified number of days from the date of receipt (damage) or the date cargo should have been delivered (delay).
      • A claimant has two years to bring a court action from the date of arrival, the date the aircraft ought to have arrived, or the date carriage stopped.
    • Vietnam:
      • Written complaints must be lodged within:
        • 14 days for damage to cargo from the date of receipt.
        • 21 days for loss of cargo from the date of delivery.
        • 21 days for delay in carriage from the date the person entitled to claim receives the cargo.
      • If the complaint is rejected or unanswered within 30 days, a lawsuit may be initiated.
      • The statute of limitations for lawsuits is two years from the date of arrival, when arrival was expected, or when carriage stopped, whichever is later.