In this first part of a conversation with Rudolf Zuvcic, a consultant and educator in pricing and revenue optimization, host Judson Rollins tackles the commercial challenges of lower-deck or “belly” air cargo. To maximize revenue, forward-thinking carriers must differentiate their service propositions and improve their demand forecasts.
Rudolf discusses how demand volatility and price elasticity impact the decision to sell capacity in spot agreements versus long-term contracts. The conversation also touches on how carriers must capture and analyze critical data to increase their market knowledge and optimize customer selection.
What You Will Learn In This Episode
- What determines whether a market relies more on spot or contract volume
- The value of displacement cost in determining price and volume commitments
- What non-express carriers can learn from FedEx & UPS
- How carriers and forwarders can collaborate to improve each other’s margins
“Airlines need to find a balance between how much to sell via allotment versus free-space [agreement]. With the allotment, if you really get the cargo that is promised, it’s actually a risk-free business. And one side of ensuring future revenues is to reduce the risk of not getting the cargo. So if I make an agreement that is respected from both sides, I don’t need to be worried about pricing up or pricing down. I can just play with the remaining part of my capacity, the free-sale capacity.” [10:31 – 11:09]
“Whether the solution is AI-based or not, you need data to back it up. One of the challenges is to get relevant data… The short-term win would be to get the visibility to understand what the market is, what the rates are, and how they behave.” [21:35 – 22:25]
Rudolf Zuvcic: https://www.linkedin.com/in/zivcic/