Over 500 International Air Transport Association (IATA)-authorised agents in India are in a fix over the payment of air cargo handling charges to global airlines routed through IATA’s payment platform. While agents want an extension of the remittance date amid the lockdown, IATA has given a grace period of just nine days, asking that the deposits be made by April 9. This is a rather tall order, say agents.
Nearly $2 billion annually is routed through the IATA’s Cargo Account Settlement System (CASS), which facilitates the billing and settling of accounts between airlines and freight forwarders through CASSlink, a web-enabled e-billing solution.
Export/import units, export promotion zones, export manufacturing houses, importers and exporters buying houses are all shut at present. All payments from clients are blocked, said Sunil Arora, President, Air Cargo Agents Association of India (ACAAI). “Our member community is not in a position to meet the CASS calendar for freight payment to airlines. We will start making the payment as per each due fortnight after 21 days, once the lockdown is withdrawn,” he said.
21 days additional grace period
“We request you to immediately advise IATA CASS to give 21 days’ additional grace period from the due date of all the fortnightly CASS payments from March 16, for all ACAAI members, until the Covid-19 crisis is brought under control,” Arora wrote to IATA India.
“We are not seeking a waiver of the remittance but only an extension of the date, considering that our members are facing difficulty in getting payment from clients and in turn remit with IATA,” Arora told BusinessLine. “We have taken up the issue at all levels, including the Prime Minister’s Office. The Centre should intervene and ask IATA to give an extension,” he added.
An agent gets an ‘irregularity notice’, if the remittance is not paid within the next 10 days. The agent is declared ‘in default’ with CASS, and airlines may not work with him/her again. Three irregularities in a year is automatic default, Arora said.
However, IATA said the lockdown does not apply to banks and that the electronic payment grid is open. Agents are requested to use electronic payment methods. The remittance date stays unchanged.
“Please be reassured that we will do what we can to avoid agents being penalised for failure to comply with the reporting and remittance obligations under their Cargo Agency Agreement in view of the force majeure situation in the country and around the world,” IATA said.
Struggling for liquidity
Airlines across the world are struggling for liquidity and survival. The lockdown and measures adopted globally will further impair their liquidity. “We would ask that you kindly consider these circumstances in making your decision for the benefit and sustenance of the entire air cargo value chain,” IATA said.
B Govindarajan, COO of Tirwin Management Services, a city-based aviation consultancy firm, said historically air cargo followed the system of cash and carry. The fortnight billing schedule is to facilitate accounting and to be treated as an accounting period only as detailed in the IATA Cargo Agency framework.
However, the accounting period was misunderstood as a credit period and every agent believed in offering generous credit periods as a selling strategy. Agents became financiers for their customers and, now, their business model has boomeranged on them because of the high cost of capital with wafer-thin margins.
The lockdown has opened an opportunity for the air cargo community to look at its current business practices and initiate corrective actions, he said.
