Airline Cargo

Airmail – Challenges to Airlines

Airmail – Challenges to Airlines

In today's world where the buzz word is digital, would one imagine receiving messages, notes, letters and anything written or published through postal mail? Well, the answer is a big YES. In the world of emails and instant messenger apps, letters are still written and posted, not online – but through post offices. Even today in many parts of the world, the good old pen pals are exchanging letters with their friends so far away, where meeting face to face might not be an easy option. Besides bringing in a personal touch, it also keeps a big service behind it running - the service provided by the friendly post office. One of the key components enabling the post office to carry those mails – letters, parcels etc from different corners of the world is the airmail carriage.

Coming to the carriage of mail by air, how complex should the business of airmail carriage be? Not much, one may suppose. However, the reality is quite different. Even when there exists standards defined by UPU (Universal Postal Union) to which most global postal authorities are signatory to, there are still diverse processes specific to countries and the postal authorities in the respective countries follow the processes. One of the conspicuous examples being the standard 29-character barcode used to scan the mailbags which is still a wishful thinking in many countries, especially in the case of domestic mail.

A good case in point is USPS (United States Postal Service), which follows its unique process of billing and settlement of the mail transportation charges, with a flavour of incentives, and disincentives also included. To share some basic info about USPS: USPS is one of the biggest postal service providers in the world. In fiscal year 2019, USPS delivered 143 billion pieces of mail through its network of 31,000 post offices to 160 million delivery addresses. As per figures published by USPS, they process and deliver a massive 47% of the global mail volume. This is supported through contracts that USPS awards for international and US domestic mail carriage to airlines through a bidding process. The bid-price for specific lanes and the operational efficiency committed through on-time delivery performance are the key criteria for contracts. 

USPS Specific Business Model and Comparison to Global GPAs

Going one level down into the USPS specific processes, the first and foremost distinctive aspect is the billing method. As against the normal process, where the airlines invoice the postal authority for the mail transported, USPS adopts a reporting mechanism whereby the USPS sends INVOIC files to the airlines. These INVOIC files, based on specific stipulations, contain the mailbags that USPS considers as having been carried by the airline. The airline will ultimately be paid on the basis of the content carried in this file. The airline is expected to upload and process the same, to compare the data therein with their own records. To that effect, any discrepancy with respect to the same is the responsibility of the airline and as such, the airline is expected to create a Claim file to claim the money for those mailbags wrongly valued or missed altogether in the INVOIC file. The claim file format is again specific to USPS and to be generated as per the predefined specifications published by them. Following the defined business process for international mail, the INVOIC file is sent by USPS on a monthly basis. It contains the amounts that USPS is expected to be paid for the mail scans which adhere to the service levels mandated in the contract. Likewise is the process for domestic mailbags, with similar conditions on service levels, the only difference being that the INVOIC file is sent on a weekly basis.

The airline's operational performance in the form of 'on-time' mail delivery record plays a key role in its selection and awarding of the contract by USPS. On-time performance prevents delay in air mail transportation, thereby ensuring time bound handover of mail to USPS at the destination. To ensure this and to motivate the carriers to ensure performance efficiency, USPS has the practice of incentives and disincentives. It has defined 'on-time' delivery as one t satisfies both the Postal Service's transportation service window and the time committed to by the carrier. As per the norm, the transportation service window is for a specified lane and the same comprises of service standard, as in a day count and the Handover Time (HT). The time committed by the carrier for delivering the mail is the Required Delivery Time (RDT). The transportation service window defined by USPS specifies the time a carrier should take to transport mail between a specified origin-destination pair. 

What it requires from IT applications to support it

To support all of the above mentioned processes of USPS, the airline should basically ensure that the mail handling and mail accounting system has the ability to maintain and configure all the attributes necessary for evaluating the performance of mail carriage. Further, the capability to set up the incentive/disincentive slabs and calculate the same is essential and on periodical basis – to basically realize what the airline should expect to be applied in the payments due from USPS. In addition to all this, the capacity to store relevant contract rates based on varied parameters is also another ask from the system. For instance, in the case of USPS domestic business, the rates for four aspects are required to be maintained, i.e. Line-haul fuel, Line-haul Non-Fuel, Terminal Handling and Terminal Handling Scanning. 

How iCargo supports it

From an airline perspective, these diverse requirements from different mail transportation business partners they work with throughout its life cycle – from mail handling to mail accounting – make- it really challenging to manage within a single system without any major customization. On an average, there are two to three different systems managing the end-to-end mail business, each covering specific areas like mail handling, scanning the mail tags, processing the INVOIC files, calculating incentives/disincentives, and finally billing and then accounting.

The iCargo Mail Revenue Accounting (MRA) solution, which is part of the iCargo product suite, offers a completely integrated and automated solution to handle all the USPS specific processes – for both international and domestic mail. This covers all the aspects related to the reconciliation of INVOIC files from USPS, and has an integral calculation engine duly recommending the applicable incentives and disincentives based on the authentic scan data. It ends up providing the airline with clear transparency of and visibility into the net disincentive (if any) that USPS would apply, after duly discounting the applicable incentives. In order to support revenue protection and ensure that the airline is not short-paid, iCargo MRA has the added capability to consider the data related to the INVOIC file, the incentives/disincentives and use all these to calculate and generate the Claim file to USPS, duly making an allowance for the Force Majeure accords acknowledged by USPS.

iCargo Mail solution, being a fully integrated mail handling (MHD) and mail revenue accounting module (MRA) of iCargo product suite, ensures that the scanned mailbag data is readily available in the Mail Revenue Accounting module, completely decimating duplication of efforts and the associated errors in doing so. The real time availability of 'Ready for billing' mail data effectively helps in faster Mail Billing to postal authorities, Mail Revenue recognition and Mail Interline Billing through reduction in the billing cycle, leading to a positive impact on the mail revenues and cash-flows – both of which are vital in a successful mail business for the airline.
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Tuesday, 16 April 2024

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