BIFAlink cover - British International Freight Association

tradeservices
www.bifa.org
IATA–Isawindof
change in the air
BIFA has consistently argued that some of IATA’s behaviour towards
solvent and profitable freight forwarders is unfair. This has been
highlighted again by some recent incidents. However, there are now
reasons to hope for an eventual improvement in IATA’s approach.
The UK forwarding community’s
overall settlement conformity to
the terms and conditions applying
to the settlement of airline
revenues, under International Air
Transport Association (IATA’s) Cargo
Agents Settlement System (CASS),
remains at or around 98%.
Remarkably, as has been
reported before in BIFAlink, this
impressive statistic has been maintained
despite the global financial
crisis that forwarders and their
customers have had to endure over
the past year or two.
Forwarders have compliantly
supported their airline membership
during this unprecedented period of
financial uncertainty. So readers
could be forgiven, therefore, for failing
to understand the reasoning
behind IATA’s remorseless crusade
against forwarders who it deems to
have had the temerity to exceed
their credit limit under the CASS
conditions.
By way of example and to set the
scene, the Secretariat was alerted
recently, by three members because
their hitherto monthly airline freight
revenue payments, settled through
CASS in full and without delay, had
exceeded their average in a given
month.
As a consequence CASS formally
requested that these members
subject their company financial
figures for audit by
CASS in order to establish
their solvency. As a
result of the reviews, each
received a subsequent
demand to provide substantial
bank guarantees. Failure to
provide these warranties could,
according to the CASS rules,
result in a withdrawal of airline
credit facilities.
It has beeen established that in
all three cases the members in question
had actually had the good
fortune (so you would have thought)
to have experienced a short-term
unexpected increase in business.
This in turn was reflected, we must
assume, in an equally welcome boost
to the bottom line revenues of the
carrier(s) who doubtless accepted
the bookings in the first place with
outstretched arms. All sums due, for
the months in question, were subsequently
settled in full and on time.
None of the members had any previous
record of default or late
payment.
Disconnect
In these cases, we would argue that
IATA’s rigid interprepation is symptomatic
of its inability to represent
the best interests of its membership,
the airlines and their customers, the
forwarders. Indeed, it would be
difficult to provide a better illustration
of the apparant disconnect that
exists between this prominent body
and the carriers whose interests it
purports to uphold.
The reality is that airlines and
freight forwarders contract daily on a
bilateral basis – being transportation
provider and customer respectively.
At no stage during this process,
which involves both parties reaching
commercial agreement on the like of
service levels and freight charges,
does IATA enter into the equation.
Not until, that is, it comes to the
settlement procedures for the freight
charges in question.
Here the airlines and forwarders
set aside any bilateral mechanism in
favour of using the centralised CASS
portal to process their revenues and
payments respectively. This affords
airlines and forwarders alike with a
single billing and payment facility,
and the attendant economies of cost
and efficiency.
What is not so equitable is that
the airlines have effectively vested
their authority in IATA, without
recourse to an airline or airlines, to
determine a forwarder’s suitability to
remain in the programme. This is as
unacceptable just as it is, ultimately,
we believe, going to prove unsustainable.
Using its own measurement criteria,
the financial credibility, or otherwise,
of a given forwarder can be
assessed by IATA.
In other words, a body that is not
party to the original contract
between airline and forwarder can
demand that the latter provide it
with financial returns. Not to accede
to its bidding, or the failure of the
figures provided to meet with
IATA’s own solvency criteria, can
result in IATA withdrawing credit
facilities for all airlines from the
forwarder in question.
The airlines choose to take no
part in such decisions, even though
it is their customers and their
revenues that are at the heart of the
issue. We could not imagine that, in
a similar scenario, members would
allow the BIFA Secretariat to exercise
similar authority over their business
activities.
One criteria relates to sales
growth. Turnover in the
current year is compared
with that in the previous
year. If the growth falls
below IATA’s own measurement
a ‘failure’ is recorded. So,
somehow sales growth equates to
financial solvency. Not, we would
submit, even in the eyes of an
informed accountant would that be
the case.
10 November 2010