Carriers have been reluctant to join cargo e-booking platform GF-X. Now three airlines have got together to offer an alternative
Things have been looking up in recent months for Global Freight Exchange (GF-X), founded in 2000 as a neutral e-booking platform for carriers to sell cargo capacity to forwarders. However, its sternest test may be yet to come. With many carriers long refusing to join - saying to do so would be to lose control over the sales process - three airlines are starting their own portal, using cheaper and, they say, easier to use technology.
This year certainly started in a rocky fashion for GF-X, which since launching had not added any new carriers to its original pilot members. True, it had managed to sign up most of the big freight forwarders, which account for a significant chunk of air cargo bookings, but they were complaining privately that too few carrier routes were available on the system. One even admitted off the record that it had suspended use of GF-X, although it was still listed as a member.
No forwarder or airline disagrees that an e-booking platform is essential if air cargo is to realise process efficiencies. Bruno Sidler, chief executive of global Swiss-based forwarder Panalpina, points to the savings in staff and administration costs from e-booking. "If you don't have such a channel, then every time you get more business, you have to add more staff," he says.
Critics might suggest that Panalpina is not exactly neutral, being a shareholder in GF-X - something Sidler says he has regretted at times for this very reason. But there is also plenty of support from other leading forwarders. Ole Ringheim, airfreight director for Exel, the second largest user of GF-X in 2001, with 29,000 transactions, expressed his support for the platform earlier in the year, and has urged key airlines to join.
Even the forwarder that effectively suspended its use said that: "If GF-X fails, it would set us back a generation, because I can't see anyone stepping into the breach. The thought that air cargo would still be using faxes and phones for bookings in 10 years is so depressing."
To be effective, however, all agree that GF-X needs to have most of the major carriers online, but until recently it was making no progress on this. Then in March, Air France Cargo became the first to join since the launch, and at the same time existing members Lufthansa and British Airways declared their renewed support for the channel. Lufthansa, in particular, signalled its intention to put its entire product portfolio online by the end of the year. Until then it had only used the site for express products.
That was good news, admits a relieved Sidler. Before Air France joined, he says, he thought it "was very much touch and go" whether GF-X would gain critical mass. "But now I think we are over the hill. This is now the platform, and is only a matter of time before a big Asian carrier signs up," he adds.
Getting an Asian carrier onboard is proving a tough nut to crack, however. Leading carriers such as Singapore Airlines and Cathay Pacific remain lukewarm about GF-X. Hwang Teng Aun, president of Singapore Airlines Cargo, says one concern is that it is like handing control of the inventory to a third party. "We take the risk - why should we not also have the control?" he asks.
This makes the May announcement by Air Canada, Northwest and United Airlines that they would launch their own portal all the more interesting. Dubbed Cargo Portal Services (CPS), it will be free to forwarders - unlike GF-X, which demands a hefty membership fee - and will need no systems integration on the forwarder side, again unlike GF-X. Best of all from the point of view of many carriers, it will not include pricing or rating information, and carriers will be able to brand the portal however they like and tailor it individually to different parts of their customer base.
Leaving out rating information is the most radical step, and one that makes it markedly different from GF-X, which has struggled to shake off its dot.com image as a spot market for distressed cargo inventory (an image GF-X itself insists was never accurate).
Jim Friedel, president of Northwest Cargo, explains that CPS is aimed at reducing transaction costs - which he puts at $10-15 per air waybill - and not at creating a new business model. "What we are trying to get rid of is having staff in a booking centre listening to numbers over the telephone and typing them into a system for $35 an hour," he says. "We want to give forwarders the same access to our system that those staff have."
Rates are irrelevant, Friedel says, because 75% of bookings are made on pre-negotiated contract rates, that rise to 90% on some routes. "But if a rate is needed, it is best handled by a salesman. Spot rates are needed in specific situations that cannot be explained on a computer. In such cases it is better for the customer to pick up the phone."
CPS has been created out of pre-existing web functions on the Unisys cargo management system used by some 20 carriers. As well as bookings, it offers shipment management functions such as tracking or matching shipment progress against the milestones set by Cargo 2000, the IATA-sponsored initiative to streamline processes between carriers and forwarders. The service is accessible through a web browser and is designed to be used without any initial training. It can handle block bookings through uploading information from standard spreadsheet applications, and can book against pre-agreed allocations.
On the face of it all, this looks pretty impressive. A big test is whether forwarders will think the same. CPS did its best to ensure that they would by carefully consulting a panel of nine leading forwarders about functionality ahead of a test launch due this month. It also says it has already had unsolicited queries from 300 forwarders. The system will go live to all-comers in January.
All of this leaves GF-X looking a bit leaden footed. Unlike CPS, which promises to offer all the routes a carrier wants to put online from day one, GF-X's more complex system integration requirements and the need for staff training has required it to roll out country by country. Thus in Europe, while Germany, Benelux, Sweden and Switzerland were already online in September, France and Italy remain in the pipeline. In Asia, China, Malaysia, and Thailand were added to Hong Kong, Singapore and Japan in the same month, and US usage is being ramped up.
GF-X now has 19,000 routes, according to chairman Jean Godart, and 40,000 transactions a month, about the volume of bookings that a large forwarder such as Exel might make. That compares to 30,000 transactions in March, so business is building. Godart predicts a doubling of volumes in a few months. Air France products will be available on the system in November, and Air France's SkyTeam alliance partner Delta Air Logistics announced in September that it would also join GF-X.
This was an interesting development, as Delta cargo spokesman Ernie Martin admits that Air France's membership, along with forwarder pressure, did influence its decision. This opens up the possibility that GF-X might be able to woo other carriers in the alliance.
Korean Air, the Asian partner in SkyTeam, is a particularly tempting target, as it took part in the original GF-X trials but decided not to proceed to full membership. Kyung-Ho Choi, managing vice-president of Korean Air Cargo, says it was put off by uncertainty about which way GF-X might develop. "We are now evaluating it very seriously," he said in September, though admitting there were no concrete negotiations as yet.
Godart is hopeful, saying it was largely systems problems that prevented Korean joining, and pointing out that in SkyTeam Cargo's US joint sales venture, Korean staff will soon be using GF-X to book shipments on Delta and Air France. "So they will see how it works," he says. With members of both SkyTeam and WOW, [the Lufthansa-led cargo alliance that includes Singapore Airlines and Japan Airlines], he believes "an Asian member is only a matter of time".
However, Friedel says the three founder CPS members would also like to get other carriers on board to give them critical mass, adding that he has already approached partner KLM. Christopher Shawdon, vice-president for logistics solutions at Unisys's Global Transportation Division, says it is also tackling the other Unisys-using carriers, and reckons 30 is a realistic target. Non-Unisys users are also welcome - United is not a Unisys customer, although Northwest and Air Canada are.
So will CPS knock out GF-X? Friedel insists that is not the intention. "We are not competing with GF-X: we are competing with the telephone and fax," he says. "This portal is designed to do what the telephone can do, but better. If we can't do that, we will have failed."
REPORT BY PETER CONWAY IN LONDON
Source: Airline Business