OCR 2880 (ACE) - Charging for Cargo

One important aspect of the OCR 2880 case study (ACE) is the revenue generated for the airport by cargo.  So how does an airport charge for cargo flights?

The airline actually carrying the cargo charges its customer based on the total weight flown.  The customer will typically be a “freight forwarder” - in effect a middleman that arranges airfreight for its own customers, consolidating various freight requests into a smaller number of consignments to load onto the aircraft.

For the airport, cargo revenue is generated based on the total weight of the aircraft landing and taking off.  That total weight includes both the aircraft AND the freight on board.

So how is the weight priced?  The case study airport ACE is based on East Midlands Airport, so let’s look at how they charge for cargo.  There are three key elements:

A standard “runway charge” -of £1.75 per tonne; paid by all cargo aircraft.  That is the minimum price.

In addition, the airport charges a supplement for cargo aircraft that want to arrive or depart at certain times:

Daytime - Shoulder Supplement £1.55 per tonne (levied on arrivals and/or departures between 0601-0700 or 2101-2329 local time)

Nightime supplement - £2.33 - £2.85 (depending on noise band of aircraft), levied on arrivals and/or departures between 2330-0600 local time

Fo flying cargo into and out of ACE during the night would be approximately three times the price that is charged for a daytime operation.

Revision Presentation - Marketing Mix: Introduction to Pricing [17 May 2012]
Cut price cup cake deal goes wrong…... [22 Nov 2011]
An end to outsourcing? [18 May 2011]
Revision games - Marketing Basics (True / False) [16 Feb 2011]
Q&A - Distinguish between price and cost [2 Jan 2011]
Q&A - Should a business use a “loss leader” as part of its pricing tactics? [31 Dec 2010]
Segmentation & Pricing - the Ice-Cream Price Pyramid [17 Nov 2010]
Cash flow Clue-doh! The Mystery is Revealed… [2 Nov 2010]
Making the FT Brand Sweat! [19 Oct 2010]
Pricing Strategy - Mobile Data Networks [14 Sep 2010]
Lessons from the business model of King & Allen [13 Jul 2010]
Taking Demand-based Pricing To Extremes [8 Feb 2010]
Video case study - substitute goods benefiting from the recession [1 Feb 2010]
What business students can learn from how businesses have handled the recession [1 Feb 2010]
Product, pricing and profitability in a changing market [20 Jan 2010]
Revision Presentation - Revenues and Demand [30 Dec 2009]
Q&A - When is it appropriate for a firm to use penetration pricing? [21 Dec 2009]
Q&A - Explain price skimming [21 Dec 2009]
Q&A - What is the difference between pricing strategies & tactics? [21 Dec 2009]
Q&A - Explain what is meant by price positioning [21 Dec 2009]
Q&A - What factors should a business consider when setting its prices? [19 Dec 2009]
Q&A - How does pricing link to the objectives of a business? [19 Dec 2009]
Q&A - What is price and why is it so important in the marketing mix? [19 Dec 2009]
A tale of two bakers [16 Nov 2009]
Emerging markets drive demand for oil [16 Nov 2009]
Santa goes back to basics in attempt to reduce the cost of Christmas [29 Oct 2009]
Q&A - How are businesses affected by unemployment? [27 Oct 2009]
Pricing strategies and tactics under investigation [15 Oct 2009]
Dyson launches a new premium product [14 Oct 2009]
Ukraine 1 England 0 - A match to remember? [12 Oct 2009]
Napster - Trying to compete, or getting desperate? [9 Oct 2009]
V-Water - from start up to exit [4 Oct 2009]
The lights go out for the nightclub market [26 Sep 2009]
Sony cuts the PS3 price to extend its life cycle [30 Aug 2009]
More trouble in the skies [27 Aug 2009]
Sainsbury’s and Diageo pitch in to battle [17 Aug 2009]
Own label brands profit from the recession [4 Aug 2009]
Demand and supply in action - tea prices surge [4 Aug 2009]
The Death of Newspapers - to be replaced by Nichepapers? [2 Aug 2009]
Instore Takes a Pounding [6 Jul 2009]
Swimsuit malfunction - a failure of quality or just the wrong size? [2 Jul 2009]
U2 on Tour - Investment appraisal and capacity utilisation rolled into one! [2 Jul 2009]
Q&A - Outline the main costs and benefits of inflation [1 Jul 2009]
Q&A - Explain the causes of inflation [1 Jul 2009]
Q&A - What is inflation and how is it measured? [1 Jul 2009]
East Coast Rail Line is Nationalised [1 Jul 2009]
Recession Bites - new food shopping habits [29 Jun 2009]
Budget Hotel Chain Now Feeling the Squeeze [17 Jun 2009]
Milk co-operative turns sour [4 Jun 2009]
How to improve a profit margin through a hidden price increase - the Snickers way [4 Jun 2009]
Video case study - football shirt sponsorship under pressure [25 May 2009]
BA posts a record loss [22 May 2009]
Video case study - the effect of deflation on businesses [19 May 2009]
Motivating employees - the end of the mobile phone sales shark? [17 May 2009]
AQA AS Business Unit 1 - Possible Evaluation Questions [17 May 2009]
A booming rental market – for car parking spaces [12 May 2009]
Q&A - What is the link between product differentiation and a USP? [1 May 2009]
Q&A - How do changes in commodity prices affect businesses? [1 May 2009]
Q&A - What are commodities and how are their prices determined? [1 May 2009]
Q&A - What is market supply [1 May 2009]
Q&A - What is market demand? [1 May 2009]
Q&A - What are the implications for UK businesses if the pound strengthens? [1 May 2009]
Q&A - What causes an exchange rate to change? [1 May 2009]
Q&A - What is an exchange rate? [1 May 2009]
Q&A - How are businesses affected by changes in interest rates? [1 May 2009]
Q&A - What goes into the “marketing mix”? [1 May 2009]
How can the same product be cheaper to buy new than second-hand? [16 Apr 2009]
OCR 2880 (ACE) - regional airports suffer from the downturn [13 Apr 2009]
OCR 2880 (ACE) - the Air Executive proposal [13 Apr 2009]
OCR 2880 (ACE) - Calculating the Traffic Growth [12 Apr 2009]
OCR 2880 (ACE) - Air cargo and the economic slump [12 Apr 2009]
OCR 2880 (ACE) - Exam-style Questions [12 Apr 2009]
OCR 2880 (ACE) - Revenues by Activity [11 Apr 2009]
Demand and supply in action - oil [11 Apr 2009]
Viability of wind farms poses a “sources of finance” challenge [9 Apr 2009]
Price war looms for music downloads [8 Apr 2009]
Are we motoring towards electric avenue? [5 Apr 2009]
Video case study - biofuel farmers feel the pressure [4 Apr 2009]
Customer Service and Capacity Utilsation: Stenna Line versus Ryanair [3 Apr 2009]
The never-ending sales promotion proves a winner [28 Mar 2009]
Flight to value at Waitrose [15 Mar 2009]
Hotels feel the squeeze from low capacity utilisation and pricing [9 Mar 2009]
CelebAir - Price Elasticity of Demand Exercise [7 Mar 2009]
Revision Quiz - Price Elasticity of Demand [7 Mar 2009]
If you’ve got it, flaunt it! [4 Mar 2009]
Q&A - What are variable costs? [1 Mar 2009]
Q&A - Why do start-ups find it difficult to estimate revenues? [1 Mar 2009]
Q&A - What factors affect the demand for a product? [1 Mar 2009]
Q&A - What is demand? [1 Mar 2009]
Q&A - What is revenue? [1 Mar 2009]
Q&A - What is meant by adding value [1 Mar 2009]
A new pricing tactic - pay what you think it is worth [16 Feb 2009]
Price war on the way - with chocolate as the winner [13 Feb 2009]
Video case study - supply and demand in action (tea) [12 Feb 2009]
Q&A - What determines price elasticity of demand? [2 Feb 2009]
Q&A - What is a brand name and what are the advantages of having a strong brand? [1 Feb 2009]
Video case study - pricing tactics for lunchtime luxury [29 Jan 2009]
Starbucks closures - global economy or other factors to blame? [29 Jan 2009]
Video Case Study - Premium Price for Conspicuous Luxury [16 Jan 2009]
Psychological pricing in action - the power of £0.01 [12 Jan 2009]

BUSINESS TEACHER RESOURCE NEWSLETTER
Get first news of business teaching resources, ideas and other materials from tutor2u. Over 9,400 business teachers from the UK and around the world receive our regular teacher email newsletters. Sign up for free here!