The air cargo industry is showing increased interest in digital booking platforms. Considering the slow pace of digitisation in air freight, Aviation Business News speaks to Oliver T. Neumann, co-founder of cargo.one, about bringing digital change to the market.
In December last year, Lufthansa Cargo announced that it was stepping up its cooperation with start-up company cargo.one, after having acquired a minority shareholding in the young Berlin-based company.
Essentially, Lufthansa Cargo switched from being an early adopter of its technology to a minority investor.
Cargo.one was founded in 2017 by Moritz Claussen, Oliver T. Neumann and Mike Rötgers.
The start-up has developed a platform for booking and marketing air cargo capacity, and through its focus on offering dynamic spot rates, the company says it is the first platform of its kind.
Clearly, the minority investment by Lufthansa Cargo demonstrates that if a major player is impressed, then there must be something to be said about the technology.
Oliver Neumann, co-founder of cargo.one, together with his co-founders Moritz Claussen and Mike Rötgers, were looking for an industry ready for change, and eventually found themselves sitting together with a freight forwarder in Frankfurt.
He recalls that, while in this meeting, the forwarder received a shipping request, and witnessed the hoops he had to jump through to get a quote from airlines.
“He called several airlines and sent emails to others. It took hours for him to get responses, and when they arrived, they were unstructured, in different currencies, some contained surcharges, some not. It seemed like a lengthy and inefficient process,” he remembers.
Neumann and his team were surprised at the slow pace of digitisation in the air cargo market – they observed that bookings weren’t made online, documents weren’t digital, and communication was asynchronous, and far behind passenger air travel.
“As air cargo is a global, multi-billion industry, we were curious as to why it still ran mostly on emails and phone calls and EDI [Electronic Data] Interchange],” he recalls.
From this point onwards, the team saw a unique opportunity to create a platform that connects freight forwarders with airlines and to make the exchange of information between them synchronised, in real-time and consistent in the types of data shown.
The logistics industry has recently seen several start-ups, hoping to improve connectivity between the various players in global air cargo supply chains.
As a result, even traditional logistics companies are recognising the opportunities available to them through investment in new digital business models.
This digitisation of air freight comes at an opportune time to the industry to help it reduce costs and improve revenue potential against a backdrop of challenging business conditions, generally.
cargo.one and Lufthansa Cargo initially announced their cooperation contract in November 2018, the globally available capacities of Lufthansa Cargo integrated into the cargo.one offering.
The partnership enabled air freight forwarders to book available air freight capacities, completely digitally and in real time across the entire available route grid of the cargo carrier.
At that time, Lufthansa Cargo said digitisation allowed information to be distributed around the globe in fractions of a second.
This has given rise to new expectations with which both carriers and freight forwarders are confronted – including offering customers the opportunity to exchange prices and capacities even faster and to book services even more easily.
Neumann asserts that partnering with Lufthansa Cargo brought the mission of making air cargo bookable digitally and in real time closer: “Many solutions on the market promise digital bookability.
The reality is that in most cases the rates offered do not give access to capacity.
At times of high demand, our solution offers air freight forwarders a quick and easy access to capacities with immediate confirmation at live spot rates.”
When speaking about technology that’s incorporated into the booking platform, Neumann quickly emphasises that the software is a ‘one size fits all’ solution.
“We have a stellar IT team that works together in close collaboration with the airline’s teams to ensure a quick and effortless integration into their booking system.
“There is little work required from the airline side, and it can take as little as six weeks for an airline to go live on cargo.one. For forwarders, it is as easy as this: they just need to go onto our platform app and start booking.”
Neumann explains that the quotes shown on cargo.one are the same as forwarders would get from each airline directly, and the platform makes them comparable at a glance.
He continues: “Traditional providers and many of our so-called competitors have designed their services around management and administration of rate sheets – a dated process.
“Our platform supports air freight airlines in digitalising their capacities, jointly designing proprietary interfaces, which benefits the forwarders by enabling them to book capacities at live spot rates and with direct confirmation.”
The issue of spot rates clearly comes up frequently in discussion. By definition, these are a one-off rate obtained for transporting a shipment by sea freight or air freight.
Typically, valid for one shipment only and often restricted to a specific vessel, aircraft or date range, spot freight rates fluctuate up and down by the day dependent on the market conditions.
Neumann clarifies and explains the benefits to airlines and forwarders: “All rates shown on cargo. one are dynamic and reflect the airline’s rate for a certain shipment at a certain time to a certain destination – always taking into consideration available capacity.
These prices are real-time, so there is no waiting for confirmation needed and capacity is guaranteed.”
He says that forwarders can search and compare routes of several airlines within seconds on the platform and book the most suitable offer instantly. On offer are routes and capacities 30 days in advance for shipments up to 10,000kg.
For airlines, he says they gain a fully digital distribution channel and can reach more forwarders, even the smaller ones that with the current quotation process are too expensive to sell to. “Offering capacity on cargo.one means being visible where booking decisions are made.”
Cargo.one has made the conscious decision to only focus on spot rates: “This is because we don’t believe rate sheets will exist in their current form in the future.
“Over the past years, we have seen that leading airlines have introduced a more sophisticated yield management focusing on rates that are dynamic, based on available capacity, historic demand and current demand in form of price buckets.
“Dynamic pricing makes contracted rates useless, as it uncouples the rate from the availability of capacity. This is especially a problem in times of strong demand, when rate agreements fall below the airline internal hurdle or access rates.”
Neumann adds that booking on rate sheets becomes impossible and requires a manual process to enquire for the actual real-time spot rate.
“On the other hand, when the demand is low, many rate sheets are more expensive than the live spot-rate, as they were historically designed to be the median price over a booking period.
“Therefore, we see a growing number of forwarders in the market enquire for every booking above a certain size, usually around 300 kilos.”
Evidently, this is where cargo.one steps in. “We make spot rates bookable at the click of a button, and subsequently make the forwarders’ lives easier.”
In January cargo-one reported having successfully raised seed financing of $3.2million for the digitalisation of the distribution and booking of air freight capacities, in a round led by Creandum and Point Nine Capital with the participation of Lufthansa Cargo.
The investment allows the company to further develop its technology for the digital distribution and booking of air freight, and to optimally meet the demand of more airlines and forwarders.
Neumann says it was a great achievement by the team: “This proves that our technology is considered state-of-the-art and will help us grow even further. We will use the funding to develop new services for customers and expand internationally.
“We are already now serving forwarders outside of Germany, mainly in France, Austria, Italy and the Netherlands. We expect to expand our customer base to Northern America and Asia next.”
The same applies for the airline side of our business, he says the next step is to offer even more capacities and routes to the forwarder’s customers.
“This means adding more airlines to the platform. Thankfully we see a rapidly growing demand for our online distribution technology by airlines, and many of them evidently decide to make use of third-party platforms, rather than trying to build their own. We are currently in the process of integrating capacities of several additional airlines,” he reveals.
In conclusion, Neumann expresses the importance of constantly exchanging ideas with the freight forwarding community and airline operators to develop solutions that enable them to better serve their customers in the future.
“New features are rolled out continuously, often to the surprise of our customers, that are used to slow and ponderous IT development processes. The additional capital will help us to further develop our technology on a larger scale and making it accessible globally.”
It is seeming that the market for air freight booking has huge potential for optimised and faster processes.
Visit cargo.one for more information.