Rising pallet costs, supply issues, trade imbalances and competitive demands are all contributory factors to ULD shortages but one main inherent cause which seems to be constantly sidelined is freight forwarders failing to return the ULD back to airlines on time.
With the exception of a few airlines, there is currently no financial penalty in place for late return of equipment in the air cargo industry unlike other logistics industries. This is despite the fact demurrage is noted within the ULD Control Receipt (UCR).
Airlines find themselves in a catch-22 situation where they are resistant to charge freight forwarders for fear of losing their customers but at the same time, are losing business anyway by not having their asset returned back in time.
In the current climate where manufacturers have reached their capacity, the cost of making a new ULD has now doubled over the course of the last two years – the price of aluminium has doubled in the past two years, rising from $1,500 to $3,000 a ton today – and the ULD industry is now competing with other players like aerospace who rely on the same product, it is clear, as ULD Care puts it, that ignoring the issue of demurrage is no longer sustainable in the long term, and it’s now time for the industry to take action and start applying demurrage fees.
In its recent White Paper: ‘Demurrage charges for ULD equipment in Air Cargo’, ULD Care is calling for demurrage for ULD in the industry to be standard practice.
Nobody gets a free out of jail card in the maritime industry, they all pay a demurrage
“Nobody gets a free out of jail card in the maritime industry, they all pay a demurrage,” explains Bob Rogers, ULD Care Vice President. “They call it detention, which is about 3-4% of its annual revenue, working out to be around $4 billion a year. No freight forwarder likes to tell you their opinion on the charges, but nobody likes to pay speeding or parking fines either.”
Charging demurrage fees to retrieve the ULD from customers would be significant source of revenue for airlines as ULD Care found out, however it must be said that having the assets back is the primary point of any such fees and ideally there would be no need for any financial penalty to be paid by anyone at any time.
Based on data collected from 20% of the world’s ULD owning airlines, there are currently around 20,000-25,000 empty ULDs that are overdue for return after five “free” days. This means, hypothetically, if airlines charged forwarders a $25 a day demurrage cost, they would earn in the region of $600,000 a day or $200 million a year. “And this is on the low side, we believe,” said Rogers.
“Ideally, the airlines will want to get their equipment back, but if they can’t get it back for whatever reason, they at least deserve to get their money back. We have got thousands of pallets sitting in freight forwarders sheds because they have no incentive to return them. This is not the solution to ULD shortages – there are many other factors – but it is low-hanging fruit that can return a considerable amount of money and equipment which the airlines want.”
For decades ULD operations have often missed out on tech advancements but this has been changing thanks to improvements in technology, using BLE tags and IoT and now Smart Phone apps, that all make tracking air freight equipment easier. Some airlines have already adopted in-house ULD tagging solutions, or in other cases work alongside ULD suppliers such as Jettainer or Unilode.
ULD Care, however, is calling for a common IT platform that all stakeholders can use to check the status of the ULD, especially when it is taken off-airport. So it is looking to update the current demurrage system, set up by 50 years ago by the Interline ULD User Group (IULDUG), which only records ULD interline transfers but doesn’t capture transfers outside the airport terminal.
“We did a lot of work to change this, but we were flummoxed by legacy IT and EDI systems and business practices, and nothing really happened,” said Rogers.
In 2018, however, ULD Care considered using blockchain as the platform to capture and ran a proof of concept with SITA where they replicated the functions of the in-house system and proved that it worked and expanded to handle off-airport transactions. But now it believes potentially blockchain might be the solution for the future rather than for today.
“Although we liked blockchain very much and see a lot of longer term opportunity with it, for the shorter term we believe we will go more with a conventional solution,” he said.
Despite remaining tightlipped on a potential mobile app platform in the making, Rogers said it is already functional, with built-in change request capabilities etc in place. “It’s got everything,” He enthuses. The next two challenges for ULD Care now is finding the finance and the launch customers to proceed to the next stage.
“It would be nice if the airline industry would invest in it but given the current state of the airlines, they are not that keen. But we think it presents a very interesting business model for investors to help us commercialise the operation of the platform.”
He stressed that ULD Care are the neutral party in the middle. “We are not trying to make money out of the demurrage, we are simply processing the data. We can’t get involved with the money side that would be anti-trust if we set a demurrage rate and number of days. So all we are doing is setting up the platform and selling the data, which someone has got to pay for and run the system. It’s all about managing the data. We fully hope to receive data from the likes of Jettainer, Unilode and others.”
More often than not, airlines are reluctant to implement a demurrage system fee because they feel it will upset their customers. “In shipping, it is universal but the airline industry is giving it all away as a competitive advantage but it is no longer a competitive advantage, it is a competitive disadvantage for anyone that does it. This doesn't make sense, which is why we are putting a strong case forward to the industry and have been surprised by the many airlines when we have reached out to them and they all go: ‘You are right! This is a right mess, we have no control over these assets’.
Rogers now hopes that more airlines will come on board with the project after speaking at the recent Air Cargo Handling & Logistics (ACHL) Conference in Athens.
“We are not looking for any new technology,” he insisted. “We are applying existing technology and that reduces the risk hugely. We have already ran a demurrage system for 50 years. So it’s a no brainer, completely straight forward; we think it’s just a matter of overcoming industry inertia.”
TIACA and FIATA are among the trade associations that ULD Care is calling upon to assist in making the practice work across the industry.
Furthermore, Rogers points out, the air cargo industry needs to persue a strong sustainability agenda, so achieving a higher utilization rate for the roughly 1 million ULD in global circulation can only be good for the planet.
Glyn Hughes, TIACA’s Director General, believes that commercial decisions on matters such as pricing, charges and fees are up to individual carriers to determine and communicate to their customers and partners.
“In the area of ULD management the industry needs to take some leaps forward starting with adoption of the digital control receipt (eUCR) which records the asset transfer,” said Hughes. “This will then lead to more effective asset management, control and utilization. This should increase awareness of ULD safe condition and should promote more timely return to service which will enhance asset use optimization. This is the key to get assets back into the system as quickly as possible.”
Tech players
Frank Hung, VP Sales and Marketing from Descartes, said he welcomed ULD Care’s call for an industrywide IT platform to process ULD transfers as it would lead to greater accountability for all stakeholders.
“There is still no single platform for the airline, ground handler or forwarder and the customer to check the location of their asset. This is something we are pushing hard for. If you can log in and see, there will be no arguments because everyone can see the same data.
”Hung admitted the shortage of ULDs is still a concern since demand has soared as airlines opened their
network following the pandemic. “There is more demand but the supply remains the same. Manufacturers are
up to their limits,” he said.
Descartes has the largest reader network for air cargo tracking with more than 200 airports and has extended its business to off-airport. Using tags which communicate with the reader via a SIM card, the customer can log in and see the status of their shipment.
“We try to deal with tracking from airport to airport and have expanded the network to outside the airport so we can also track the ULD to the next destination,” he said.
On the industry’s slow response to digitalisation, he said: “The airline industry has been really hesitant to digitalise and still follows systems from the 1970s. It wasn’t that long ago that we started using e-tickets, but the pandemic was a wake-up call for the airline industry to speed up its digitalization which will help everybody.”
Moving forward, Descartes is working on a new device and hopes to expand its business and work with third parties to join its network.
“Customers don’t want to only track their ULD but also know the condition of the cargo. During the pandemic, airlines wanted to ship the vaccine so you have to include other features like temperature. So, for the past 18 months we have been working on a device that can track the condition, light and humidity conditions while still using the same reader network.”
In other recent ULD developments, Unilode and OnAsset Intelligence have deployed the world’s first airborne IoT network which will tackle the issue of ULD shortages.
Joseph Jensen, Chief Technology Officer, said: “ULD shortages are caused by many reasons. This includes increased backlog of freight, extended travel times, ULD out-of-service rates, and lost items. If you were to pareto all the reasons a customer is short of ULDs you will see airlines lose visibility of ULDs between 3-15% of their fleet for times greater than 35 days. The deployment of the new IoT network helps immediately address the lost and missing ULDs and get them back into circulation. Once that is done the immense amount of data then can be used to make data-driven decisions on how to improve the supply chain. Shortages is just the thing we will attack.”
Unilode owns and operates the world’s largest digitally enabled unit load device (ULD) fleet, over 120,000 digital ULDs strong and growing, built upon a global network of OnAsset’s SENTRY IoT gateways installed at airports, repair stations, freight forwarder warehouses and trucks, and now this IoT network extends to the aircraft itself.
Everything in the supply chain is becoming connected, and Unilode is leading the charge” said Adam Crossno, OnAsset Intelligence CEO. “Extending real-time visibility to the aircraft itself, during flight and ground operations, is a real game changer because we can provide critical operational visibility at the very edge where it counts most. We can now deliver seamless location, status and chain-of-custody visibility across all aspects of the aviation supply chain, and that’s never been possible before.”
Jettainer
Jettainer recognised the challenges which Covid brought to the sector but it was able to navigate the crisis and supply ULDs to customers at all times.
Around 100,000 ULDs out of approximately 900,000 worldwide are managed by Jettainer. “We can confidently say that our business model has proven robust and crisis-proof,” said Thomas Sonntag, Managing Director at Jettainer.
Compared to airlines working with in-house solutions, the ULD managing expert Jettainer offers its customers a global network and local teams around the world. Its intelligent integrated IT solution, supported by AI, optimizes the steering within the network.
In addition to managing standard and cool ULDs for existing and new costumers Jettainer also equipped preighter flights with belts and nets to keep supply
chains running. The global leasing service lease&fly also played a decisive role. "For example, through our Hong Kong office, we were able to organize short notice ULD transports to airports which are usually not connected to our customers' network," explains Sonntag.
Most recently, staff shortages in particular continue to cause slow handling processes at many airports. To counteract bottlenecks, Jettainer plans ahead and coordinates very closely with its customers. For example, ULDs were steered from the outstations to the hubs in time for the peaks during the summer holidays. In addition, all repairable ULDs are reconditioned within the global repair network and fed back into the networks as quickly as possible.
In special cases, instead of containers of the AKH type, AKWs of the same dimensions which are actually used for valuable cargo, can also be deployed as an alternative and additionally secure the supply.
“Due to supply chain constraints and limited manufacturer capacities, much longer lead times need to be considered. Accordingly, planning and forecasting at the earliest possible stage is crucial to meet demand from both existing and new customers,” explained Sonntag.
And growth plays a big role at Jettainer. With the acquisition of new customers, the fleet managed by the ULD expert continues to expand. The latest additions are Norse Atlantic Airways, T'Way and Avianca Cargo. Etihad recently extended the cooperation. Further airlines are in the pipeline.
“The crisis has driven ULDs to be perceived much more as what they actually have always been: a valuable resource that needs more attention," emphasized Sonntag. "This relates to the proper handling of the units to reduce avoidable damage. And it relates to their steering. Because with more efficient management, the utilization of existing units can be optimized and thus empty flights can be avoided, which has a positive impact on our customers’ carbon footprint and fuel costs.”
