The Traxon cargo automation system is now well established, but some significant technical and political
obstacles remain. Mark Lyon reports.
Air cargo doesn't achieve its potential for most airlines. Industry critics want carriers to work more closely with air freight forwarders so these two partners can offer better services to the shippers who actually pay for air freight. Better automation and communication would certainly benefit the entire air freight industry, particularly those manufacturers involved in just-in-time and time-definite delivery. And it would bring carriers more revenue. That is the theory behind Traxon, the airline industry's most notable cargo automation project. To date it has achieved many of its founders' aims, but it faces important hurdles in the future. The system originated when Lufthansa, which had begun work on its Mosaik cargo system in 1988, saw an opportunity to transform Mosaik into a worldwide network. In April 1990 it formed Global Logistics Systems (GLS), in partnership with Air France, Cathay Pacific and Japan Airlines.
Two years later Lufthansa and Air France invested DM20 million (US$12.8 million) to form GLS-Europe, based in Frankfurt. Cathay and JAL invested $8 million to create GLS-Asia, headquartered in Tokyo. More recently, Korean Airlines bought a partnership in the Asian group. At about the same time, the company began to use the name Traxon.
In 1993, connections to the network became available in North America through Canada's Transportation Data Network Interchange (TDNI) and Teledyne Brown Engineering's TIE-Net (formerly AVEX). About 230 North American forwarders now access Traxon through these two services.
Last year, the Traxon network added hubs in India, South Africa and Australia. Elsewhere in Asia, there are new connections developing in Korea, the Philippines, Singapore, and Taiwan. And in Europe, agents may also connect through any of eight separate cargo community systems.
Single connection
Traxon now has 15 member airlines linked with 1,370 forwarders around the
world. Traxon management reports that forwarders connected in Germany represent 60 per cent of total cargo sales in the country. The figure is 55 per cent in France, 95 per cent in Hong Kong and 40 per cent in Japan, but data is not available for North America. Traxon management estimates that 40 per cent of its worldwide message traffic originates in Europe, 30 per cent in Asia, and 30 per cent in North America. Traffic is expected to equalise between Asia and Europe later this year after Korean Airlines becomes fully operational with Traxon-Asia.
The network appeals to international freight forwarders because it gives them a single connection to communicate with the in-house cargo systems of the 15 Traxon member airlines, which between them carry more than half the world's air freight each year.
Forwarders want to access airline cargo systems so they can book air freight shipments, track them through the transport chain, receive automatic updates of any change in their shipment's status, exchange air waybill information, and check flight availability.
From Europe, they can also transmit house air waybill information via Traxon for pre-arrival clearances to customs authorities, using systems such as the US Customs Automated Manifest System.
Traxon has solved many of the technical hurdles of a global EDI system. Further, it has defined high business and technical standards for this emerging industry. Traxon has developed translation facilities between the Cargo Imp message format used by airlines and the United Nations Edifact format used by forwarders. And, thanks to pressure from freight forwarders, Traxon has evolved from an airline profit centre, as first envisioned by Lufthansa, into a neutral message switching system of genuine benefit to the air freight industry.
In 1994 Traxon's message traffic increased by 80 per cent in Europe and 40 per cent in Asia. As the Traxon installed base grows larger, the growth rate may decrease. But a couple of factors are working to counter this trend. Only a small number of air waybills are automated so far, indicating a potential for even greater message traffic. And manufacturers are sending smaller shipments more frequently, thus increasing the total number of air waybills.
Rapid growth
Traxon believes that it will sustain a 30 per cent annual worldwide growth rate through the end of the decade, representing two to three times the expected annual increase in air freight tonnage. Every month, agents sign up for new services or add branch offices to existing service, according to Hans-Peter Treibel, managing director for marketing and sales of Traxon-Europe.
The number of airline connections is growing as well. Finnair was expected to go online by March 1995, becoming the 15th carrier. South African Airways and Qantas are presently undergoing a test phase. Northwest is reportedly in the wings.
On the financial side, Traxon-Europe has invested DM20 million and expects to break even in 1996. Traxon-Asia lost $3.8 million in four years and expects the Hong Kong market to break even in 1995 and the Japan market to break even in 1996. Financial performance is on track, Treibel says. These early losses are not out of line for a startup company that is breaking new ground in the world of international commerce.
Airlines pay 80 per cent of Traxon's operating costs and forwarders 20 per cent, though both parties will eventually share the benefits equally. This system was devised to provide an incentive for forwarders to use the system. Nevertheless, some carriers and forwarders complain that the cost is too high and that cargo community systems (CCSs) offer the same services for less money. Treibel acknowledges that a small forwarder needing 10 electronic messages per month would indeed find the total of Traxon's subscription and transaction fees to be higher than the subscription fees at its local CCS. 'But if he has, for example, 2,000 transactions, we are cheaper,' he says. 'If you take the average forwarder's message volume and compare, you find our fees are below the average of the CCSs.'
Traxon must cover its transaction and communication costs and make money for future development. 'If airlines and forwarders can find a cheaper way, it means we are not working efficiently and we will have to improve our service,' says Tony Sham, director and general manager for Traxon-Asia in Hong Kong.
Cargo community systems are suitable for local markets, Sham adds. But CCS participants pay high telecommunication costs to send messages internationally, so their total cost may be higher than with Traxon, which includes telecommunication costs in its fees.
The CCSs do not pose a commercial threat to Traxon in the short term. For one thing most of them receive fees from Traxon to distribute messages. For another, Traxon has shown itself to be very adaptable to market needs. When pricing becomes a wide scale issue, Traxon will resolve it.
Traxon has already signed up most of the big forwarders who form the bulk of its potential customer base. But there are some notable exceptions. Agents in Japan are signing up slowly, because air freight from Japan tends to move on schedule so forwarders there don't feel they need automated tracking. And large firms like AEI, Burlington and Schenker have their own internal global telecommunication networks. Small forwarders don't consider Traxon to be cost effective, even with a modestly priced connection via personal computer.
However, Traxon's market hurdles are not so much commercial as they are technical and political. Poor telephone signal quality in India and the Philippines does not permit reliable data transmission in those nations. Improvements will be expensive and may outweigh the benefits. Elsewhere, proud nations want their own networks and computers to do the job proposed by outsiders like Traxon, regardless of their ability to accomplish the task themselves, and in spite of the cost implications.
Cheap labour
In countries where labour is cheap, many agents and airlines forego expensive investments in automation and simply hire extra people to communicate via telephone and fax.
In its first tests with agents in Taiwan, high telecommunication costs soaked up a significant portion of Traxon's revenue. One way round this is to lower message unit costs by increasing message transaction volume.
'We are looking at different ways to link with other regions,' Sham says. 'Traxon is the gateway between airline cargo systems and forwarders. We will maintain close cooperation with airlines, forwarders and cargo community systems. But by enlarging our network coverage and increasing the message volume, we can provide better service to our customers at lower cost.'
To help build its network appeal to the forwarding community, Traxon-Asia has unveiled message translation software that will save agents the expense of developing these programmes for their host-to-host computer connections.
Worldwide, Traxon also wants to convince forwarders to communicate directly with each other. For example, consider an agent in Germany sending house air waybill information to an agent in Los Angeles so he can collect a shipment arriving at LAX. The German agent now faxes these details and the Los Angeles forwarder must key them into his computer system. Traxon will send the same information in its electronic format for less than the cost of the fax, eliminating the need to reenter the data in Los Angeles. Treibel believes that agent-to-agent business represents a huge market.
In Taiwan, Traxon-Asia is working with Tradevan to help develop an automated customs manifest system for that country, similar to the AMS in the US. 'We have the airline information and can work as a hub for the customs system,' says Sage Sakabe, general manager of administration for Traxon-Asia in Tokyo.
In Hong Kong, Traxon-Asia has invested in the Transportation Community Network (TCN), a company that will handle surface shipment information, not only for forwarders, shippers and consignees, but also for financial institutions. This signals a possible future path of Traxon development. Competition from EDI services will be a serious concern for cargo information systems in the not so distant future.
Many EDI service companies are now forming in Asia, says Traxon's Sham in Hong Kong. These companies plan to provide EDI for banks, customs, shippers, consignees and traders. 'They are mainly working on sea cargo and many also want to get into the air cargo business,' Sham says. 'We are in different market segments today, but we must keep an eye on their moves and see what their interest in air cargo is.'
Forwarders would prefer to be able to make a single connection to a network that will give them access to banking, sea, air, and customs clearance information. Traxon is moving in that direction, and hoping to get there first.
This could save considerable sums of money by keeping their inventories in transit rather than in warehouses. This meant they needed to know the locations and delivery schedules of their en route shipments. These manufacturers adapted their automated logistics systems for this purpose and demanded that freight agents feed real-time tracking and delivery information into these computers.
Forwarders had computers to manage their own traffic. But to send tracking information to shippers they first needed to receive it from the airlines. Some carriers had automated their freight activities but few could communicate electronically with forwarders.
Meanwhile, Federal Express was becoming the manufacturing industry's one-stop shop for delivery and information and UPS was spending $5 billion on automation. The combination airlines feared they would lose their heavy freight revenue to the integrators with their high-tech services. Airlines desperately needed to counter this threat and sought an automated system that could exchange information about air freight shipments with forwarders and shippers.
This meant developing a computer that could translate between the Cargo Imp message formats used by airlines, the United Nations Edifact formats used by forwarders, and a variety of electronic formats used by shippers.
On top of this, many of the participants believed that whoever developed a successful global cargo system would control the technical standard and could eventually exert the same influence on freight bookings that owners of passenger computer reservations systems did on passenger ticket sales.
The cargo systems in operation today have solved many but not all of these technical hurdles and are considered reasonably unbiased, thanks to the pressure exerted by freight forwarders as these systems came onto the market.
Source: Airline Business
