In modern logistics and global trade, air transportation plays an extremely important role. Today, we will explore in depth a topic closely related to air transportation — freight rates. Air freight rates are not only the foundation for airlines' survival and development but also a key factor that every shipper, business, and cargo owner must consider when choosing transportation methods. So what exactly are air freight rates? How are they calculated? Let's start from the basics and gradually delve deeper to understand the principles and classification methods behind them.
Definition
First, what are air freight rates? Simply put, in international air transportation, freight rates — referred to as "Rate" in English — are the transportation fees charged by airlines for carrying cargo from the departure airport to the destination airport. We can think of freight rates as "tickets" for air transportation, where the price includes the cost required to transport goods to their destination. Unlike ocean freight, which is mostly quoted in US dollars, air freight rates are typically denominated in the local currency of the departure country. This means that regardless of your location, the freight rate you pay is tied to the local currency, making it easier for shippers worldwide to understand the cost structure.
Billing Basis
Next, let's examine how air transportation costs are calculated. Air cargo charges are typically based on the cargo class and chargeable weight. The chargeable weight is determined by taking the greater value between the actual gross weight and the volumetric weight. The volumetric weight calculation is relatively simple: every 6,000 cubic centimeters is converted to 1 kilogram. It's worth noting that for cargo weighing less than 0.5 kilograms, airlines often round up to 0.5 kilograms, while cargo exceeding 0.5 kilograms is generally rounded to the nearest whole kilogram. This billing method ensures that the size and physical characteristics of the cargo are properly considered during transportation.
Freight Rate Classification
Now, we will discuss the classification of air freight rates. Air freight rates can generally be divided into two main categories: negotiated rates and IATA rates.
Negotiated Rates
Negotiated rates are specific rates formed through direct negotiations between shippers or cargo owners and airlines. These rates are typically based on mutual cooperation between the parties and therefore offer greater flexibility. Each company's cargo nature, transportation needs, and frequency vary, resulting in negotiated rates that differ depending on the shipper or airline. For example, a company that frequently ships large volumes might negotiate preferential rates with an airline, while a company that occasionally ships small quantities might negotiate higher rates. This personalized rate arrangement aims to provide greater flexibility and convenience for commercial activities.
IATA Rates
The other category is IATA rates. These rates are established by the International Air Transport Association (IATA) and published globally in the form of a Rate Manual . IATA rates are more standardized and uniformly measured, catering to ever-changing market and transportation needs. They can be further divided into the following subcategories:
Published Through Rates
Published through rates are transportation fees directly indicated by airlines in their rate tables for shipments from the origin to the destination. These rates can be divided into several subtypes:
- General Cargo Rate (GCR): This rate applies to most conventional cargo, covering nearly all types of goods. It is set based on market conditions and operational costs, aiming to provide balanced transportation services.
- Specific Commodity Rate (SCR): These rates are designed for special types of cargo, typically requiring specific conditions such as temperature control, fragility, or hazardous materials. Such cargo must meet qualifying transportation requirements, and there must be published SCRs between the origin and destination.
- Class Rates: These rates are used for special cargo, with prices typically adjusted as a percentage of the general cargo rate. This adjustment accounts for the cargo's value, transportation complexity, and any special handling requirements.
- Unit Load Device Rate (ULD Rate): These rates apply to uniformly loaded cargo, typically involving large shipment volumes. As such, the rates are usually lower than general cargo rates, offering a discount.
Non-Published Through Rates
Non-published through rates include more flexible pricing schemes, typically comprising:
- Proportional Rates: These rates are influenced by multiple factors and are often used when no applicable published through rate exists. They are determined according to relevant international rate rules, reflecting market diversity and complexity.
- Combination Rates: When neither published through rates nor proportional rates are available, combination rates provide a strategy for combining the lowest possible rates, helping companies manage costs across different transportation segments.
Priority Rules
Next, we discuss the application sequence of air freight rates. In practice, the order of precedence for air freight rates is: negotiated rates, published through rates, and non-published through rates. This priority setting helps simplify the complex rate selection process, ensuring shippers can quickly and correctly identify the best rates for their needs. It's important to emphasize that air freight rates only cover transportation costs from the departure airport to the destination airport. This means they may not include other related fees, such as pickup charges, customs clearance fees, or tariffs. Therefore, when planning cargo transportation, shippers must also consider these additional costs to ensure smooth implementation of their transportation plans.
Appendix
To help readers better understand air freight rates, here are some useful references:
- Research materials from the International Air Transport Association (IATA) to learn how the association sets rate standards and regulations.
- Air freight rates are typically calculated per kilogram or pound, so regardless of your transportation option, understanding and applying these units is essential.
Conclusion
In summary, the structure of air freight rates is relatively complex, involving not only shippers and airlines but also reflecting changes in market conditions and diverse needs. Shippers must fully understand the basic concepts, billing basis, classification, and priority rules of various rates to make reasonable and effective transportation decisions. Although air transportation is relatively costly, its speed and efficiency make it irreplaceable in global trade. Therefore, understanding these transportation cost dynamics is crucial for optimizing logistics costs and enhancing corporate competitiveness. Mastering this knowledge will provide strong support and guidance for your transportation decisions.
