Fixed Block Space Agreement (FBSA):
In international air freight, a "block space agreement" refers to a sales agency agreement between a freight forwarder and an airline. Specifically, the freight forwarder commits to delivering a certain number of unit load devices (ULDs) on each flight on specific routes, which they can freely fill with cargo. This arrangement provides significant benefits to freight forwarders, such as guaranteed space, pricing advantages, operational flexibility, and increased shipping volumes. However, if the freight forwarder fails to deliver the agreed-upon quantity of cargo, they must still pay the minimum chargeable weight (base weight) for the committed ULDs to the airline.
Freight forwarders entering into block space agreements typically need to meet certain requirements, including but not limited to: sufficient cargo volume per month or per flight, adequate capital, Class I International Air Freight Forwarding Agency Qualification issued by the China Air Transport Association (CATA), IATA Qualification, and CASS Settlement Qualification. This operating model allows freight forwarders to be more competitive in the air freight market and better meet customer needs while improving service quality.
Risks and Challenges:
While fixed block space agreements offer numerous advantages in international air freight, such as guaranteed space, pricing advantages, operational flexibility, and increased shipping volumes, they also come with potential risks and challenges:
1. Minimum Chargeable Weight Risk: If the freight forwarder fails to deliver the committed quantity of cargo, they must still pay the minimum chargeable weight (base weight) for the committed ULDs to the airline, leading to higher costs.
2. Financial Pressure: Becoming a first-class agent requires significant capital, including deposits paid to airlines and funds to cover the risk of insufficient cargo volume in the short term.
3. Qualification Requirements: Freight forwarders need multiple qualifications, including Class I International Air Freight Forwarding Agency Qualification issued by the China Air Transport Association (CATA), IATA Qualification, and CASS Settlement Qualification.
4. Intense Market Competition: Due to high costs, the pricing advantage of first-class agents may not be significant, and continuous delivery is required to maintain a good relationship with airlines.
5. Cargo Composition Issues: If the cargo is too heavy or too large, it may lead to wasted ULD space or prevent other cargo from being fully loaded onto the aircraft, affecting the loading factor.
6. Impact of Forwarder Performance: The performance of the freight forwarder and their relationship with airlines can affect whether cargo is smoothly loaded, and freight forwarders who continuously deliver cargo are more likely to receive priority when space is tight.
7. Price Factors: In cases where space is limited, higher-priced cargo may have priority for loading, posing a challenge for lower-priced cargo.
8. Risk of Cargo Being Pulled at the Ramp: Even if cargo has reached the ramp, it may not be loaded onto the aircraft due to various reasons (such as damaged ULDs, operational accidents, etc.), causing delays in shipment.
Unitex's Fixed Block Space Agreement in International Air Freight:
Unitex has established deep relationships with major airlines and holds fixed block space agreements on many routes, providing stable space and international rates to help customers efficiently and frequently complete international transportation of goods.