By Whom And How Are Air Freight Rates Calculated?
The pricing of air freight is governed by the International Air Transport Association (IATA) who continues to provide an “Official Rates Policy” which they publish under the title of “The Air Cargo Tariff” (TACT) along with their rules governing transportation. The air freight rates are generally derived from meetings that are held between IATA Regional Tariff Committees and which are subject to international inter-governmental agreements on rate levels by route or country. Those air freight companies who wish to introduce or apply a new rate require the permission of IATA and these rates can often be subject to the relevant country’s government approval. But now generally they are used as guide lines and often no attempt is made by either IATA or governments to enforce their use.
However today IATA tariffs are being increasingly ignored by the many air freight companies on the major routes because there is so much competition, but they still continue to provide a general guideline for those lesser developed markets around the world. Often where most commodities are concerned an air freight rate of a charge per kilo of cargo is applied (and discounts are provided for volumes over 100 and 500 kilos).
Although there are specific commodity rates available these are the exception and are lower than normal rates as they are designed to encourage certain types of cargo to be air freighted on specific trade routes. What would happen is a given commodity and its rate would be filed by the air freight company to IATA and they in turn would obtain permission to apply that commodity rate on a given route to the relevant countries’ government.
Also in addition to the specific commodity rates there are class rates which are for such commodities as human remains, live animals and perishable cargo (fresh food etc) and there are specific rules that need to be applied for calculating the charges for each type of commodity that is shown under this list. But generally the rules are based on the country of origin, were the goods are destined for and what type of product it is.
There are also air freight handling rates which are based on weight for non unit load traffic and per unit for unit loads and these rates used to be set by IATA but more often than not are now set between the handling terminals.
However the majority of air cargo leaving the UK uses “net” airline buying rates and these are confidential air freight rates and these rates follow a similar structure to the IATA rates in that there is a rate per kilo but they are subject to a minimum charge.