Posted in Operations and Supply Chain Terms, Total Reads: 161
Definition: Density Rate
Density rate is the rate which is charged based on the density (weight/volume) of the cargo. Cargo density becomes a very important factor in air transport. For example, a flight carrying a large shipment of flowers may fill all the usable space on the aircraft before it is about to reach the maximum allowable payload weight.
On the other hand, an aircraft carrying a shipment of gold bars may depart at the maximum gross weight, though it may still have considerable cargo space remaining which goes unused.
For this reason, it is very important for an airline to take into account the density of the cargo before it finalises the freight rate.
Air cargo is highly affected by peaking of demand of certain commodities during certain periods of the year. The prime reason for this is that while passengers make round trips between two locations, flow of cargo is unidirectional. Trading patterns also tend to affect the directional flows.
For example, the amount of cargo shipped from Asia to North America is twice of what is shipped from North America to Asia. This tends to create a shortfall of cargo on eastbound flights from North America.
Also, demand for certain commodities is highly seasonal. For example, flowers on Valentine’s Day, Mother’s Day and gold & electronics goods during festivals like Christmas, Diwali, etc. Airline operators usually adjust their peak and non-peak rates to take into account these variations in flow of cargo.
Pricing of a shipment of cargo is negotiable. This is mainly because of routing flexibility and since pricing of cargo is less regulated as compared to passenger fares.