Higher yields are good, but higher margins are even better

IATA’s most recent Cargo Tracker indicates air cargo business experiencing better operating conditions over recent months, leading to an increase in air freight volumes, stabilization in yields, and a more optimistic outlook for 2013. This is good news for most carriers, but how do you turn this into GREAT news for your organization. The question is as yields stabilize, how can a carrier improve margins? The general answer lies in three key areas: enhancing revenues, preventing revenue leakages, and reducing costs.

Specifically, revenue enhancement comes from rationalizing and streamlining schedule, products, and prices and managing available capacity and controlling access to capacity. Preventing revenue leakage has several dimensions to it, including but not limited to accurate dimensioning (while tendering of shipments), better asset management (ULD tracking), and accurate rating and billing/invoicing. Route optimization, efficiencies in unitizing, staffing, processes and contracts, and reducing service failures can lead to reduction in costs.

While focusing on all of the above areas at the same time may appear to be an insurmountable task, there are some quick hits and low hanging fruits that will have immediate impact to the bottom line. Identifying these areas and addressing some of the inconsistencies and challenges can result in up to 10% increase in margins.

We, at RTS, use our industry recognized Airline BPM 2000 methodology to help carriers realize the financial benefits in terms of margin improvement that involves the following:

• Envision – Establishing management commitment and vision
• Initiate – Communicating to the stakeholders
• Diagnose – Documenting existing processes
• Redesign – Define and analyze new process concepts and design measurable KPIs
• Reconstruct – Reorganize processes, communications and data
• Evaluate – Evaluate process performance

Time is of essence here. Capacity is perishable, so is time…let us talk. Leave me your thoughts and comments below.

Raja Kasilingam

President