GF-X strikes gold in online booking trend

PUBLISHED : Tuesday, 17 September, 2002, 12:00am
UPDATED : Tuesday, 17 September, 2002, 12:00am

The aviation sector has had one of its worst years in history, with reduced passenger numbers, falling freight rates and volumes, and uncertainty in the financial markets.

Given the limited control over revenue, many airlines have turned to streamlining internal operations to cut costs, including the cargo-booking function.

While the second quarter picked up slightly in terms of air cargo, particularly from Asia to the United States, there are still worries about the market.

The overall picture is of an industry in trouble, with gloomy forecasts, bankruptcies and depressed financials among the airlines. Adding to the woes are increased fuel prices, caused by market jitters over the threat of a US strike on Iraq.

'Fuel costs typically amount to about 20 per cent of operating costs of an airline,' a Singapore-based aviation analyst says. 'There is not much an airline can do about it, other than a certain amount of hedging. But even the largest airline is unlikely to protect its exposure to a rising fuel price 100 per cent.'

In light of the mercurial nature of demand and revenue, airlines have little option but to rationalise costs. This usually involves slashing routes and the workforce.

However, even for cargo divisions, the airlines are also looking at streamlining the booking function, which in its traditional state is beset by high manpower costs, the propensity for mistakes and lack of transparency.

The move to online booking has come through the use of airline Web sites - a move that has had little uptake so far - and commercial portals such as Global Freight Exchange (GF-X).

GF-X is a wholesale exchange providing an electronic platform for forwarders and carriers to buy and sell cargo space. Unlike a number of the transport exchanges that popped up in the late 1990s, it does not intend to replace a layer of the booking function (the forwarder), and therefore bars shippers from the exchange. Its main purpose, says the company, is to streamline the often arduous booking process.

'The large forwarders would like to have one platform for all of their bookings - they do not want to have to open a different airline's Web site every time they want to do a booking. This is where GF-X comes in, and where our number of participating airlines is important,' says company vice-chairman Jean Godart.

The London-based exchange has a strong base in the European air-cargo market, with equity holders that include British Airways, Lufthansa Cargo, Panalpina, Deutsche Post World Net, owner of DHL and AEI Danzas, and Swissair Group. In the United States, American Airlines is a shareholder. Continental Airlines Cargo, EGL Global Logistics, Emirates SkyCargo, Kuehne & Nagel and Schenker are participating members. Air France signed up in April.

Since the portal went live in 2000, it has seen impressive growth, and now accounts for more than 40,000 bookings a month.

'So far, we are satisfied with our development,' says Mr Godart. 'We have more than 19,000 routes in the system, and, if the carriers ramp up the products available through it, the numbers will increase significantly. In April, Lufthansa and British Airways announced plans to expand their co-operation with the booking portal by launching more of their products on to the system.'

GF-X's expansion has continued despite the depressed state of the aviation market, which can be attributed to the savings on offer through the system, Mr Godart says.

'It is a more efficient way of doing business, allowing greater speed and flexibility for participating members,' he says. 'There is a saving rate of between US$10 and US$20 per transaction, which is significant if an airline is writing one million air waybills a year, and a similar level of saving for the forwarder.'

According to the company, efficiency improvements for airlines include forwarder queries being handled by the system, reducing calls and faxes, bookings requests being sent electronically, obviating the need for re-keying information and booking responses being returned electronically to the forwarder.

For forwarders, bookings can be transferred electronically in bulk from the system, removing the need to prepare and send faxes manually, and options can be determined without having to call around the carriers.

In May last year, the company released its permanent booking function, allowing it to move into an area that constitutes the bulk of air-freight bookings and away from solely ad hoc shipments.

'The biggest savings will be for the larger forwarders. A forwarder based in one market and using one or two carriers will be better off using an airline's Web site, but it is different for the multinational forwarder,' says Mr Godart.

GF-X is now looking at the Asian market, basing its strategy around recruiting the region's airlines, which will then act as an incentive for the forwarders to join. Given the importance of the Asian market in terms of air-cargo and future growth, the market is an obvious target for the firm.

'We are continuing our discussions with all large regional airlines and we are confident they will recognise the benefits that GF-X can provide in their local markets as well as internationally,' says operations director Demetrios Zoppos.

'Asia is an important and exciting market for us, and in time we hope to sign up Asian carriers,' says Mr Godart.