July 18, 2003
Surprisingly there are some elements in the airline transportation industry that believe the International Air Transport Association (IATA) represents them. While that may be the case on a limited number of fronts, that should not be the case when it comes to determining what the commercial relationship is between an airline and it’s customers. In that regard, I believe IATA needs to carry out a much needed introspection and reinvent their mission.
Case in point, last year the IATA proposed a change to Resolution 502, which is one of the many resolutions contained in IATA’s repertoire of regulations. For anyone who hasn’t been following this debacle, Resolution 502 deals with the rules and application of density charges for air freight carriage. Operating in what was perceived by many to be a cartel-like fashion IATA sprang this on the trade in an almost fait accompli fashion with a short advance notice and without any consultation.
Perhaps the IATA was not anticipating the response that they would receive, but it was international and it was unanimously negative. They received comment from everyone in the transportation supply chain and then some. Manufacturers, shippers, forwarders, associations representing each of these entities and even carriers within the IATA framework questioned the sanity of the proposal as well as the methodology employed in introducing the proposal. The fact that the proposed change would have a monumental impact on the manufacturers and shippers transportation expense budget was almost eclipsed by the necessity for these parties to retrofit their entire packaging program IF they were to continue shipping by air freight. That was a very large if. On this side of the Atlantic Ocean particularly, the back room cartel-like process was not received warmly. The supply chain parties in our open, free market enterprise system have grown accustomed to bilateral relationships between the shipper/forwarder and the air carrier that enable them to negotiate terms between themselves. And the system works.
The IATA was forced back to the drawing board, reviewed and rewrote their submission and withdrew the October 2002 implementation of the change. However, it didn’t take long to resubmit the proposal, which was presented to the U.S. Department of Transportation for review earlier this year. Public comment was allowed until the end of May following which a judgment would be forthcoming.
Enter the U.S. Department of Justice who had a few things to say about antitrust and current policy of letting the market decide what should happen between a supplier and a purchaser when it comes to rates, etc. And the Department of Justice made it crystal clear to the Department of Transportation that they should tread very lightly when it comes to deliberating the merits of IATA’s proposed rule change.
I propose that the IATA’s mission and modus operandi are no longer in keeping with today’s business world model. Free enterprise allows for both the small and large enterprise to negotiate bilaterally with their service provider without any intermediate organization acting on their behalf. It is a system that has worked for many years to the benefit of all parties. The IATA has a role in the air transportation industry to oversee issues of safety and governmental relations globally on behalf of air transportation. They do not have a role in determining commercial relationships and the sooner they realize that the better our industry will be.
David E. Wirsing, Executive Director, Airforwarders Association
1600 Duke Street, Suite 400, Alexandria, Va. 22314