Latest / The Loadstar / Navigating airfreight volatility: rates, capacity & the ecommerce shake-up

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Navigating airfreight volatility: rates, capacity & the ecommerce shake-up · The Loadstar

• 0:01
  Speaker A: Hello and welcome to the Lodestar Podcast. The following clip has been taken out of our recent episode of News in Brief, where I caught up with Avery Aviation Software's Tristan Koch to talk all about the air freight market and Avery's latest products. So enjoy. I'm joined by Avery Aviation Software's Chief Commercial Officer, Tristan Koch. It is great to have you on the podcast, Tristan.
• 0:29
  Speaker B: Thank you. Pleasure to see you again, Charlotte.
• 0:31
  Speaker A: Before we start, are you able to quickly introduce yourself and what you do at Avery?
• 0:35
  Speaker B: Yeah, sure. So my title is Chief Commercial Officer, but that actually is probably only a small part of what I do. We're quite a light team at senior management level, so we're pretty fluid across the roles that we each perform. So my. I guess my primary goal is to bring revenue into the company, finding new clients, working with existing clients to make sure they're getting the most from the partnership. But because of the way that we work at Avery, I mean, we're an IT company, but we're actually. A lot of us come from the air cargo industry, so people like Phaedra Den Hertog, myself, and more recently, you've seen we've appointed Cornelia Korsch and Gianluca Marchangelo, both industry veterans. So we very much build products that we know the industry is going to want rather than building something and hoping that they come and buy it. So we spend a lot of time on product development as a team and a lot of time helping clients on board, which is a key part of what makes us successful, and a lot
• 1:26
  Speaker A: of time winning hackathons as well.
• 1:28
  Speaker B: Yeah, we just talked about it before we kick this off, but yeah, one of our. Sort of one of the proud things we take great pride in is we're not just industry experts. I've just named a few of the people that work with us, but we're backed by probably the most technically capable people in the industry. I mean, Ukraine has an amazing aviation history and, you know, story to tell. The majority of our developers and project managers are still based in Ukraine, a lot of them mostly Ukrainian people. So you blend those two things together and it's the perfect recipe for delivering the right products into the marketplace. So, yeah, the hackathon is really the icing on the cake. We've been to five and we've won five. And I'm not going to name and shame the others, but we're up against very big organizations with very deep pockets and a lot of people, and they do an amazing job of those hackathons as well. But to come away with five victories. And I think before we started I showed you the back of my T shirt which has the five trophies on it. So you might see it next time you meet.
• 2:23
  Speaker A: Very impressive. So let's get into the news now. So we had some fresh data from Trade and Transport Group and Avian showcasing the latest E commerce movements which is for the month of August. So Avian's latest outbound China E Commerce data recorded a 16% year on year decline in August which is the steepest fall so far. This was driven by a 40% drop in exports to Europe. So Trade and Transport Group data also showed that Chinese loan value in E Commerce exports to the European Union fell by 65% year on year in August following already a 54% decline in July. I mean this is of course the impact of the market continuing to weaken following the introduction of the €3 per item fee in the EU. So Avery oversees end to end operations within the air cargo supply chain. What have you been seeing in terms of rates and capacity in the last few weeks on Asia to Europe and how is this comparing with the other major lanes?
• 3:19
  Speaker B: Yeah, I mean it's a very different, that market is totally different to the one I remember from 10, 15 years ago at the airlines like British Airways and American Airlines. China and Asia into Europe and across to the US was underpinned by large shippers like Apple, et cetera. And you would take season long capacity at a fixed price and then there'd be, you know, some, some more transactional stuff around the edges. It's now E Commerce is now really driving that capacity situation and the volatility is, is like nobody's seen before. You can't predict week to week, you know, day to day because of, mostly because of the regulatory changes that you've just alluded to. So you really need to be very nimble in that market. It's harder for the freighter operators who you know, need to, I guess adjust schedules and operations more than the passenger people who are probably going to be flying those aircraft anyway. But we've certainly seen exactly those patterns that you're talking about from that research. And what I think is interesting is the way that it, it's a bit like water. If it doesn't come this way, it finds another way out and you'll see, see an uptick in places like India, Africa. You know, I think some of that is, is, is referenced in the data you're talking about. Yeah, it's, it's, we have to be on our toes to, and I think technology is part of that solution, enabling that, that, that.
• 4:31
  Speaker A: I mean, like you said, yeah, it is like water, it flows whatever path you block. But it does seem like these changes are happening more and more regularly. So these constant changes and external pressures and then subsequent huge swings in where volume is moved and how much is moved, have you seen it push shippers to be favoring shorter agreements? I mean, are there any trends that you've been seeing in terms of contracting?
• 4:53
  Speaker B: Absolutely. As I just started this sort of our previous answer with those season long, you know, back to back agreements with shippers have just disappeared in the main. I mean, you've got one or two big, big sort of customers still out there waiting to do that. But it's become a really transactional marketplace and people aren't prepared to take the risk, perhaps that they were previously on that capacity because you could resell it and you're not sure now that the demand's going to be there, particularly with these. It's not just country to country, it's region to region. So you could end up with a lot of capacity and space very expensively that you can't do anything with. And there's not really much opportunity to recycle that through other routings. You know, you're committed to that trade lane and given the volatility of it, I think very few people would be prepared to do that.
• 5:37
  Speaker A: So while we're on the topic of rates, something that I wanted to ask you that I've been looking at recently is how forwarders have been reporting getting different rates and space levels shown across different booking platforms for the exact same flight. Obviously part of Avery's solutions that you offer is a cargo quoting tool which can make calculations based on advanced rates, database and flight schedules. So have you noticed a disparity across platforms in rates and capacity? Whether that's like a third party platform or from the, the airline itself. And do you think there is a solution to this?
• 6:06
  Speaker B: Yeah, I mean, I only have anecdotal evidence because we don't have, I'm not privy to all of the, that information that goes on, but certainly one, it doesn't surprise me and two, anecdotally, as I said, I've seen evidence of that, but actually I think that's a good thing. I mean, we are creating marketplaces. What is a market about competition? What does competition create? Differences in quality of service, price standards, et cetera. So I'm not at all surprised. And I mean, let's use an analogy. If you go to Fortnum and Mason later and buy some Marmite. It'll be a different price to go into the co op later and buying the same jar of Marmite. It's no different here. And if you look at the distribution channels that airlines, passenger airlines have used, you can get a ticket on booking.com, kayak, Skyscanner or the Airline Direct. You'll get five different prices, probably. And I think that's what we're seeing now. Airlines are becoming cleverer about the distribution strategy. I think the early days, they just chucked everything on the platform. This is my capacity. There's a price. Do you want to buy it or not? I think now they're getting more intelligent and they're using more advanced revenue management tools to actually say, do you know what? On this platform, for that rate or for this capacity, we're only going to show this much inventory and we'll perhaps push a bit more directly into our own channel. So I think you'll see people are starting to play clever games with it, which I think is a good thing, because I think this is how we advance as an industry. Just putting everything on there at the standard price doesn't really excite the forwarder.
• 7:23
  Speaker A: Yeah, it's an interesting take, actually. I've not thought of it like that, that you can actually kind of make it work to your advantage, so. No, that's. That's a good point. So, as we were previously talking about, this three euro fee in Europe is just kind of the latest thing to shake up the air cargo industry. Obviously, we've previously had the de minimis removal in the us. Then there's this continued geopolitical uncertainty and tariffs, all of that. There's also supposed to be a further handling fee for small parcels introduced in the EU in November, which again will likely shake up this market. All of this volatility, of course, now means it's more important than ever for companies to be able to monitor data points and to act on any changes that might be needed. So I saw this week that Avery has launched a new product to help make find these data points easier. What is this solution and why do you think it's needed in the market?
• 8:10
  Speaker B: It's called Ask Avery, which is the branding term. Now, this is where I'm going to go off, off piste a bit, because I'm the sales guy, not the technical guy, but it's really using artificial intelligence to shorten the workload for people wanting to extract data quickly and efficiently from large data sources. And Avery, the main ERP system is an Example of a large. It's a large database, a lot of information. But as a user, I just want to know, tell me quickly, how many kilos did I move from London to New York last week? What was the average load factor and yield previously? Some analyst has to sit down with some Excel spreadsheets, pull data from one source to another, and then create a report for somebody to look at and analyze. You can now write that query into Ask Avery. It then uses multiple AI sources, you know, the usual ones, ChatGPT, Claude, et cetera, under this MCP model they call it. Basically, it's just a standard way of interpreting data from multiple sources. So within seconds, you're now getting very complicated bespoke reports from a deep data lake, you know, within Avery or any other systems that you choose to look at. Where it's a little bit clever is we only allow it to look at information that we trust. So if you ask that question generically into ChatGPT, it's probably running off, looking all over the Internet and the world looking for information to glean, whereas we're throttling it back. So only look at the data we're giving you from within our own systems, which we trust and know is right. So the purity of that information should be much higher than a. Than, if you like, a general search of, you know, of the. Of the wider world. I mean, the technical people probably listen to this and go, he doesn't know what he's on about.
• 9:41
  Speaker A: It sounded good to me.
• 9:42
  Speaker B: Well, as a layperson, that's what makes sense to me. Ask me how it works. You'll need to get the clever people from Avery, like Vitaly, onto the call.
• 9:50
  Speaker A: Well, no, it sounded good to me. I mean, I'm not a techie person either, but. No, that makes a lot of sense. And I like the name Ask Avery. I think that flows very well. Tristan, thank you so much for joining me. It's been wonderful to speak to you.
• 9:59
  Speaker B: Yeah, lovely see you again, Charlotte. I look forward to some more Cheltenham tips in March, so thank you.