Risk Management in the Air Cargo Industry

This paper discusses risk management approaches in the air cargo industry. It gives a concise overview of developments, business practices and complexities of the air cargo industry and draws cross-references to comparable industries. It introduces supply contracts for capacity and the inherent risks in the shipping process. Based on that, approaches to mitigate risk are studied. The work elaborates on the historically grown research field of revenue management and puts emphasis on the discipline of overbooking in the air cargo sector. Capacity options and financial intermediation are presented as more innovative approaches for capacity risk management. The application of these various risk management methods is evaluated in an expert study among air cargo industry professionals from different market perspectives. With that, obstacles to the successful implementation are identified and potential solutions are named.

2;Introduction;10 2.1;Current Developments and Practical Relevance;10 2.2;Focus of the Book;11 2.3;Motivation;12 2.4;Literature Survey;13 2.5;Structure of the Book;14 3;Air Cargo Industry;15 3.1;Dimensions and Scope;15 3.2;Industry Characteristics;17 3.3;Industry Trends;18 4;Risk Mitigation Approaches in Theory;22 4.1;Revenue Management;23 4.1.1;Revenue Management in the Air Cargo Industry;23 4.1.2;The Air Cargo Revenue Management Process;24 4.1.3;Complexities of Air Cargo Revenue Management;26 4.1.4;Revenue Management Models;32 4.2;Overbooking in Revenue Management;35 4.2.1;Definition and Goals;36 4.2.2;Importance and Complexities;36 4.2.3;Overbooking Models;37 4.3;Capacity Options;45 4.3.1;Air Cargo Contract Types;46 4.3.2;Capacity Option Models;50 4.4;Financial Intermediation;56 4.4.1;Freight Rate Derivatives;56 4.4.2;Development of Financial Intermediation;58 4.4.3;Pricing of Forward Freight Agreements;59 4.4.4;Price Discovery Function;61 4.4.5;Market Impact of Forward Freight Agreements;62 5;Empirical Study: Application of Theoretical Approaches;63 5.1;Introduction;63 5.1.1;Sample;63 5.1.2;Data Collection Method;64 5.1.3;Data Analysis Method;64 5.2;Findings;65 5.2.1;Revenue Management;65 5.2.2;Capacity Options;70 5.2.3;Financial Intermediation;71 5.2.4;Industry Lifecycle Model;73 5.3;Summary and Recommendations;74 6;End Matter;76 6.1;Summary and Conclusions;76 6.2;Outlook;77 7;Formulaic Notation;79 8;Risk Management Questionnaire in English;80 9;Risk Management Questionnaire in German;81 10;References;82 11;Authors;82 12;Contents;4