At 12.55 CET on May 21st 2022 I wrote a message to Brendan Sullivan (right), asking a few questions as arranged at the FIATA Headquarters’ meeting, where he had been one of FIATA’S key speakers. One question ran as follows: “At FIATA’s you said that cooperation is the keyword, but many in the forwarders’ arena complain that there is seldom a peer-to-peer relationship and there have been questions on this point. Do you think airlines would prefer a less fragmented market in the forwarding sector than there actually is today so that cooperation can be easier?”
     There was a precise reason for such question. On August 12th 2021 an old friend had sent me a video, where B. Sullivan was interviewed, with the following comment: “In this 25 minutes’ interview with IATA’s Head of Cargo, the word “Forwarder” was pronounced just one time, and that was when he spoke about enforcing rules and penalise those who do not adhere to regulations.” The video is no longer available on the internet, so I am no longer able to verify by watching it again, but I remember the comment did not sound out of place.
     In the ensuing conversation, I noted: “interestingly the word forwarder was placed close to the concept of those who deliberately flout the rules: not a good way to assess the relationship. It was also very interesting to hear Sullivan’s reaction to the idea of ‘fragmented industry’: he sounded embarrassed to disclose his preference for an industry that is totally integrated,” i.e. an industry where protecting the interests of the airlines is easier. There is no such mention in IATA’s portal today, but protecting airlines’ interests was prominently present years ago. In the end this is the reason why IATA exists and I think it is normal in a free marketplace governed by supply and demand. By and large airlines are represented by IATA and freight forwarders by FIATA.
     If you are an airfreight forwarder and you need to deal with airlines, you will sooner or later become acquainted with the CASS system, which has the task of facilitating payments from forwarders who buy airlines’ services. This is what IATA writes on its own website: “Apply to become a CASS Associate: 1) Visit the IATA Customer Portal. 2) Create an account by clicking on ‘Create a user’, or log in if you already have an account. 3) Under ‘My Services’, click on ‘IATA Accreditation & Changes’. Then choose ‘New Accreditation Application’. 4) Follow the instructions.
     In no time you will understand that there is one thing to do and that is to follow the instructions. As far as I know this is one of the few examples where, on a global scale, customers get instructions from their suppliers’ representative body. In no time you will understand that there is one thing to do and that is to follow the instructions. Many of you may have heard or read comments in recent times about forwarders being frustrated with the CASS system. In particular, we have read CLECAT’s comments from Brussels here: Surely CLECAT also read statements made by FIATA’s President Turgut Erkeskin and Bill Gottlieb from Canada, who is one of FIATA’s Past Presidents. I am focusing on CLECAT’s comments because, as is typical for this extremely well managed association, it points to the real problem: the issue of competition. I am focusing on the real problem here:
     The Official Journal of the European Communities reports a procedure for making the Cargo Agency legit in Europe as far back as 1990. After financial services were created for the travel industry in 1971, CASS has been in place for generations, despite dissatisfaction surfacing every now and then. One could consider CASS a legacy of the past, from other points of view it can be seen as a raft in the ocean of disorder that millions of transactions in the open could create. Competition could actually become pretty fierce if extending to payments and credits.
     When Reagan took office in the USA amid stagflation, he affirmed: “This Administration’s objective will be a healthy, vigorous, growing economy that provides equal opportunities for all Americans, with no barriers born of bigotry or discrimination. Putting America back to work means putting all Americans back to work. Ending inflation means freeing all Americans from the terror of runaway living costs. All must share in the productive work of this ’new beginning,’ and all must share in the bounty of a revived economy.” (Source: Reagan Foundation)
     With those words one of the strongest revolutions in the U.S. economy took place and indeed the USA sprang out of stagflation, giving an untested push to the rest of the world. Competition became a meaningful part of the change and deregulation also heavily impacted the aviation industry.
     The issue of competition is not new in the extended relationship between airlines and freight forwarders, but is it just the old problem? Competition is an issue with many faces: there could be competition within airlines and within freight forwarders, between airlines and forwarders, rarely vice versa, and even between their associations, which both run extensive training programmes. The many years FIATA and IATA spent in discussing a “modernisation” programme were laborious to say the least and suddenly came to a halt in the period of the pandemic. Many changes in our time have been ascribed to the pandemic, but I do not believe this situation applies.
     The air cargo modernisation debate started from the idea to build a global programme that could be similar to the existing European Air Cargo Programme (EACP), which was considered for years the benchmark of the industry, other than the CNS which worked only in the USA. In particular, the EACP was banking on the strong compliance record of European forwarders and allowed for less “bureaucracy”, this was the term used informally. There were regular meetings and the rules even included a sort of veto whereby forwarders could oppose IATA’s resolutions if considered unacceptable. Other programmes existed elsewhere, but the EACP was the blueprint for many. The co-existence of these programmes with CASS has continued for many years, but it is also the source of much discussion. Air Cargo Programmes have many facets and a complex nature, but it all boils down to the money, when their destiny approaches CASS. I know that my idea that the two concepts should be completely separated has never been taken or even liked . . . but, the longer we continue hearing complaints the more I remain convinced that the cargo programme and CASS should fare parallel, but distinct paths.
     In our 2021 conversation I added: “The course of these events is not surprising for me.” As I had anticipated nine years earlier, IATA eventually pulled the plug, but I had thought it would take only five years instead of ten for the modernisation programme to unravel. I also did not think that the Europeans, in view of a global, brighter future, would relinquish their own coveted freedoms, but they actually did. Indeed, it took a lot of patience to undo the creature that had been created in many decades’ negotiations at FIATA’s Air Freight Institute (AFI). “She sat like Patience on a monument, smiling at grief. Was not this love indeed?” (Shakespeare, Twelfth Night, act 2)
     One could argue whether forwarders’ love for airlines is unrequited: indeed, at times you have the impression that the rules imposed on forwarders are unnecessary and even ruthless. It is in fact true that forwarders have a stellar compliance rate, as IATA itself confirms. So why is this happening? There is also another way of looking at this: one could ask whether the enviable compliance record is the consequence of forwarders’ discipline or the stringency of the rules imposed by IATA. Maybe a combination of both?
     In the meantime, we have repeatedly heard FIATA state that its members need and want a global air cargo programme, so work with IATA has been resumed. Considering the busted attempt took over a decade to just fail, probably this requires more and more patience, in particular on the forwarders’ side. Will they have it? “How poor are they that have not patience! What wound did ever heal but by degrees.” (Shakespeare, Othello, act 2) – so IATA and FIATA are talking again of a global programme and we hope that their relatively recent divergence will be composed. This being said, sitting patiently on a monument may not be conducive to the solution. There must be movement if you wish to get anywhere. Progress in the market will not wait for FIATA’s or IATA’s consent.
     FIATA is also looking sideways. In the area of digitalisation, it has made friends with entities that are connected with payments and compliance. A quick look at FIATA’s website shows a list of partners who could potentially offer solutions. Many have the technology and potential to assist. I am unable to understand whether the audible signs of dissatisfaction with CASS on the forwarders’ side will find a way to create a novel settlement system with airlines, or even all those freight forwarders’ contractors out there. If you think of the myriad transactions they make, we are talking of big, very big money indeed. This is a period when modernisation may actually come through technology sooner than negotiations. Time will tell.
Marco Sorgetti