Formal relations between airlines and freight forwarders are finally set to advance beyond rules from a bygone era and catch up with commercial realities that have shaped their interaction over the past three decades. FIATA, the global forwarder organization, is poised to officially sanction a new framework outlining the rules of engagement between the two sides that will be known as the IATA FIATA Air Cargo Program (IFACP). It will replace a 50-year-old regime known as the IATA Cargo Agency Programme. This will open the road to pilot projects in a couple of jurisdictions, followed by global implementation in 2017.
The existing regime has long been out of step with the way airlines and forwarders conduct business. “The IATA agreement was built on archaic thinking and not true of the commercial relationship between airlines and forwarders today,” said Brandon Fried, executive director of the US Airforwarders Association.
Essentially, the current framework has not changed since the 1960s, an era when there were no widebody aircraft, no consolidations and forwarders received a commission from airlines for booking cargo on their flights, pointed out Bill Gottlieb, a member of the FIATA/IATA consultative committee that has worked on the changes and a former president of FIATA.
“The only changes that were made came about in response to regulatory issues,” he noted. “As a result, the current programme is somewhat dysfunctional. It contains parts that are antiquated and no longer applicable.”
The fundamental change in the new framework is the acknowledgement of the forwarder’s role in the business. Instead of being defined as an agent of the carrier operating on a commission basis, it acknowledges that he is a customer of the airline.
“Instead of seeing agents as subordinates of the airlines, it now sees them as principals, which puts forwarders and airlines on equal footing,” said Fried.
The new status is also reflected in the composition of the governance board that will oversee the new framework. It will consist of six representatives each from both sides, and any decision will require a majority. FIATA will act as governance manager and IATA will take care of operations management, while both sides will fund it jointly.
IFACP signals an intention to end the antagonistic relationship between airlines and forwarders that at times had deteriorated into fierce arguments, such as the dispute who had the right to deal with shippers. Over time carriers have come to accept that they have neither the resources nor the infrastructure to compete with agents for shippers, but vestiges of the anachronistic view of forwarders as their agents remained stubbornly in place.
“In the past, airlines had a ‘my way or the highway’ attitude. When it came to disputes they would often fall back on the agency agreement terms, arguing that these did not allow them to meet forwarders’ demands,” said Fried.
In terms of day-to-day business IFACP will not usher in a new ear but rather acknowledge commercial practices that have been in place for decades. “There is not going to be much change in daily operations. It is going to be business as usual,” said Fried.
“A lot of this is housekeeping from a legal and operational point of view,” agreed Gottlieb. He described the old programme as deeply entrenched in rules and regulations that made it difficult to respond to new issues like e-freight or the evolving security regime.
“We have not been able to capitalize on the forwarder-airline relationship as strongly as we should,” commented Gottlieb. “We want something that is more pragmatic and also see what is doable in terms of best practice.”
Beyond re-defining the relationship between the two main players in the airfreight supply chain, IFACP will include reference to ready for carriage conditions, operational criteria like dangerous goods training requirements and best business practices. This aims to help to raise both sides’ awareness of their responsibilities and their compliance to agreed operational requirements.
Gottlieb expressed hope that FIATA will be able to give the green light to IFACP in the second or third quarter of this year, which will be followed by pilot schemes in Canada and subsequently Latin America, paving the way to global implementation in 2017.
One major chunk of the globe will not be covered by IFACP, though – the US, which is not governed by the current agency agreement.
By Ian Putzger
Air Freight Correspondent | Toronto