Slow connection for air-cargo portals

Slow connection for air-cargo portals

Everyone agrees they're a great idea - Internet portals that enable a customer to obtain information and book cargo with multiple airlines through a single online connection. But that's where the consensus stops.

Last month, four trans-Pacific carriers launched Ezycargo, the third online air-cargo exchange to begin operation. The outlook for online air-cargo portals, however, remains unclear. The oldest of the portals, Global Freight Exchange (GF-X), which began operation in 2000, says it's least a year away from profitability. Cargo Portal Services, launched in January, lists the routes of only four airlines.

Although the portals' officials and industry leaders speak positively about the online exchanges, and the roster of participating carriers and forwarders continues to grow, there is little public information to confirm how well the portals are succeeding in their mission to wean the industry from its reliance on paper.

At the height of the dot-com boom, online booking was seen as a can't-miss strategy. But forwarders and carriers have been hesitant to abandon the fax and the telephone, which enables them to chat with friends and exchange industry gossip. Some also are reluctant to switch to new technology, particularly if a portal can't offer access to the cargo capacity of all airlines. Carriers, meanwhile, are reluctant to embrace a new system unless they're confident it will produce enough revenue to justify their investment.

Like their counterparts in ocean transportation, air-cargo portals have struggled to build business while portal members continue to develop their own Web sites. The airlines say they want to offer multiple channels for selling capacity, as they do in the passenger business, where customers can book directly with carriers or through portals such as Travelocity or Expedia.

Jim Friedel, president of Northwest Airlines Cargo, a member of Cargo Portal Services, admits he's frustrated that CPS hasn't caught on faster. He said, however, that overall CPS usage is rising by 9 percent a week. And he said more than 10 percent of Northwest's international air waybills are booked through the portal, whose virtues Friedel touts at every opportunity.

Cargo Portal Services does not charge fees to forwarders. Nonetheless, the only carriers whose capacity it lists are the three founders - Northwest, United Airlines and Air Canada - as well as Austrian Airlines, which joined CPS in July.

The newest air-cargo portal, Ezycargo, allows forwarders to book and track shipments with Cathay Pacific Airways, Japan Airlines, Qantas Airways and Singapore Airlines.

Global Freight Exchange offers participating forwarders the capacity of 15 carriers, including Lufthansa, Air France, British Airways, American Airlines, Continental Airlines and Delta Air Lines. But GF-X has failed to attract a single Asian carrier. Reasons include the portal's cost and a reluctance by Asian airlines to hand over their capacity to a third party.

GF-X charges fees to forwarders and carriers. Citing confidentiality agreements with customers, the portal refuses to disclose its prices, which are driven mostly by volume and by the number of offices a forwarder has.

One advantage that the air-cargo portals have over their ocean counterparts is that while ocean carriers deal with thousands of shippers, forwarders and non-vessel-operating carriers, more than 90 percent of air cargo is booked by forwarders - a business increasingly dominated by large companies.

Although some global forwarders would prefer to deal with a single portal for all their worldwide shipments, they may face a future with multiple exchanges, each having a strong regional base.

Schenker's primary portal is GF-X, but Patrick Moebel, president of the German forwarder's U.S. subsidiary, said Schenker is not averse to other online systems as long as they facilitate electronic transactions bookings. "You can't have 50 portals, but it's good to have competition," he said. "We want to do electronic transactions wherever possible."

That approach could boost the survival chances for all the portals. GF-X is strongest in Europe. CPS's base is North America. Ezycargo, backed by four leading Asia-Pacific carriers, seems poised to become the dominant exchange in that region, especially if it can attract additional members.

Daniel Foong, manager of business technology for Singapore Airlines Cargo, said Ezycargo is negotiating with several prospective partners he wouldn't identify. He said Ezycargo plans to attract as many carriers and forwarders as possible and allow them to offer capacity to any destinations in their global network.

Ezycargo was developed and operated by Cargo Community Network Singapore Pte. Ltd. and Global Logistics System (HK) Co., also known as Traxon Hong Kong. It was launched in Hong Kong on Sept. 25 and will be rolled out this month in Singapore, next month in Australia, and December in Japan. It will allow forwarders to book spot shipments and process regular shipments - for example, three pallets every Friday with a carrier from Hong Kong to Los Angeles. No schedule has been set for introduction to the U.S. market.

With Asia playing an increasingly dominant role in the global economy, portals have a strong interest in establishing themselves in that region. Friedel notes that 13 percent of Northwest's bookings in Tokyo and 25 percent in Hong Kong are done through CPS. Although the only two Asian forwarders using GF-X are Japan-based Yusen Air and Sea Forwarding and Hong Kong-based Jetspeed, the region still accounts for 30 percent of the exchange's total volume, said Andrea Sinclair, GF-X's senior vice president for business development. That's because of the business it gets from global forwarders such as Exel, Panalpina and Schenker.

Friedel said CPS is "tantalizingly close" to announcing that it has signed up a major carrier - much larger than Austrian Airlines, a current member. Such a deal would put CPS in position to attract more forwarders, which would help lure more carriers, he said.

CPS's limited capacity has hampered its growth. Associated Global Systems, a mid-sized U.S. forwarder, was waiting for additional carriers to be part of CPS before it recently decided to test the portal.

Although CPS is free, some forwarders see little value in using it or the other portals. Jennifer Gold, director of project management and business analysis for BDP International, said BDP doesn't need the exchanges. "As a large forwarder, we have specific space allocations directly with the airlines," she said. That leaves little incentive to use an exchange, except perhaps for the occasional spot-market booking.

Other forwarders report satisfaction with portals. Gary Schultheis, vice president of airfreight in the Americas for DHL Danzas, said it has slashed its error rate at stations where it uses

GF-X for regular allocations. Robert Frei, head of corporate relations for Panalpina, said GF-X has enabled it to process regular shipments, along with any changes, in just one hour per month - a task he said used to require the equivalent of two days of a staffer's work each month at each of its 20 major gateways. Frei said Panalpina's top objective with GF-X is not to save on personnel costs but to free staffers to serve customers instead of spending time on tasks such as re-entering air waybill data.

Demetrios Zoppos, GF-X's managing director, said the portal is expected to post an operating profit by the end of the year. "We're well on track. We have a financial plan that shows we will get enough revenue to cover our operating costs," he said. GF-X's investors, led by Consolidated Press Holdings, an Australian investment company owned by Kerry Packer, and Morgan Stanley Dean Witter, have invested $85 million in the company. American Airlines, British Airways, Deutsche Post World Net, Lufthansa and Panalpina have also taken equity stakes in GF-X.

"Our investors are in it for the long term," Zoppos said. "We don't have anyone expecting to get a quick buck. They are patient to get a return on equity."