(Luận văn) air cargo freight forwarding activities of delta international limited company at noi bai airport and solutions to improve delivery process

ACADEMY OF POLICY AND DEVELOPMENT INTERNATIONAL SCHOOL OF ECONOMICS AND FINANCE Hanoi, June 2020 2020 luan van tot nghiep download luanvanfull moi nhat z z @gmail.com Luan van thac si

ACADEMY OF POLICY AND DEVELOPMENT

INTERNATIONAL SCHOOL OF ECONOMICS AND FINANCE

Hanoi, June 2020

2020

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ACADEMY OF POLICY AND DEVELOPMENT

INTERNATIONAL SCHOOL OF ECONOMICS AND FINANCE

Hanoi, June 2020

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ACKNOWLEDGMENT

For over two months from January till March 2020, I did an internship at Delta international co., Ltd, a logistics company which serves a large number of customers and gains a high reputation both domestically and internationally This internship project is a part of my 4-year bachelor program which I conduct at Academy of Policy and Development

In Delta, I worked an assignment which responds for handling the import and export activities and this really suits for my major in external economics Through the assignment, I did not only gain a lot of knowledgement but more importantly, I also had a great chance to sharpen my skills in a professional working environment, and other benefits that are far beyond what I could learn in a normal project Not less important than the im-export operation that I have learnt is the communication skills that I have been trained and practiced through giving presentations, discussing with the supervisors, experts in the fields and other staffs within and outside the company

I am very appreciated to Ms Vo Thi Thai, my supervisor at Delta Co Ms Thai gave me very in-time valuable instructions and put me in contact with experts

in the field who gave me extensive guidance regarding many practical issues I also would like to express my gratitude to MA Pham Thanh Ha, professor at Foreign Trade University, for her permission to be my academic supervisor and advisor and more importantly for her enthusiastic encouragements and precious instructions to help me complete this thesis She gave me in-time feedback on my research and helped me to organize logical structure and even timetable Last but not least, I would like to thank Delta international co., Ltd and Academy of Policy and Development for giving me this great oppoturnity in which I have developed myself both academically, professionally and socially

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INTRODUCTION

1 The reasons to choose the topic

Foreign trade plays a very important role in the era of globalization of economies Participation in integration and expansion of international trade relations has been an indispensable trend of nations Imports allow the addition of products that cannot be produced domestically or inefficiently produced Exports help boost domestic production and increase foreign exchange earnings Implementing this activity, each country can expand, dominate the regional market and reach the world market Besides, Logistics is a business field that contributes greatly in import and export activities of each country With a series of current trade agreements, Vietnam faces many opportunities to export goods to the world,

so the development prospect of this industry is huge More specifically, Logistics contributes greatly to the growth of import and export business activities of enterprises Along with other economic sectors, the transportation industry in general and the aviation transport in particular have made great strides The domestic air transport network is covered, many international routes are expanded and upgraded As a result, the volume of import and export goods by air has increased significantly, trade turnover between Vietnam and other countries is increasing rapidly, the market is expanding, and international trade is growing Although import-export and forwarding of goods by air is very small, but due to the superiority of transport speed and safety, air transport plays a very important role…

Recognizing the importance of air freight forwarding for the development of the country's economy in general and in Delta in particular, through internship to learn the business of forwarding services by air at Delta, combined with the specialized knowledge accumulated during the study process at the Academy of

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Policy and Development, I have confidently chosen the topic “Aircargo international freight forwarding activities of Delta International Limited Company at Noi Bai airport and solutions to improve delivery process”

2 Research objectives and tasks

2.1 Research objectives

The project was conducted to evaluate the status as well as propose recommendations to improve the difficulties that the company is facing in air freight forwarding activities in Noi Bai of Delta International Co., Ltd

- Introduct about Delta International limited company

- Find out and assess the status of air freight forwarding activities of Delta Company in Noi Bai airport

- Proposing some recommendations to eliminate existing difficulties in air freight forwarding activities of Delta Company

3 Object and scope of the research

3.1 Object

Aircargo international freight forwarding activities of Delta International Limited Company at Noi Bai airport

3.2 Scope of the research

The study was conducted at Hanoi head office of Delta International Co., Ltd and Noi Bai International Airport from January 7 to March 15, 2020

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4 Research methods

- Practical research: in the research process, I choose the method of practical impact on the object of the study to clarify the nature from which to follow observations and make field trips to the cargo handling areas at NCTS and ALS warehouses to draw lessons as well as experience on the rules of the research problem

- Primary data collection: during the internship in the company by observing business activities and personal consultation, experience of employees with specific expertise in each field to collect more information to clarify the status of the delivery and delivery process at the company

- Secondary data collection: In addition to the method of observing business activities, I also collected documents available at the company (document room, accounting department, sales room, field room ) and other information sources Information on the company's website

- Methods of data analysis: The collecting data are analyzed and systematized by Excel software to calculate suitable criteria for the topic analysis

5 Thesis’s structure

This thesis consists of 4 main chapters:

CHAPTER I – OVERVIEW OF THEORETICAL BASIS OF FREIGHT FORWARDING ACTIVITIES IN GENERAL AND BY AIR IN PARTICULAR CHAPTER II - INTRODUCTION ABOUT DELTA INTERNATIONAL CO., LTD

CHAPTER III - CURRENT SITUATION OF INTERNATIONAL FREIGHT FORWARDING ACTIVITIES OF DELTA INTERNATIONAL CO., LTD AT NOI BAI DURING THE LAST 3 YEARS

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CHAPTER IV – GENERAL ASSESSMENT ABOUT INTERNATIONAL FREIGHT FORWARDING ACTIVITIES OF DELTA INTERNATIONAL CO., LTD AT NOI BAI DURING THE LAST 3 YEARS

CHAPTERV-PROPOSEDSOLUTIONS

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CHAPTER I – OVERVIEW OF THEORETICAL BASIS OF FREIGHT FORWARDING ACTIVITIES IN GENERAL AND BY AIR IN PARTICULAR

1.1 General overview of freight forwarding

1.1.1 Definition of forwarder and forwarder

1.1.1.1 Definition of delivery

In international trade, the movement of goods between countries has led to imports and exports being transported across borders Therefore, for the goods to reach the buyer, the goods have to go through a series of stages such as: import and export customs clearance, preparation of documents, hiring of means of transport, loading and unloading onto means All these jobs are called forwarding Freight forwarding service is a commercial activity whereby traders organize one or more jobs, including receipt of goods, transportation, warehousing, warehousing, customs clearance, other paperwork, and packaging, marking, delivery or other services related to the goods as agreed upon with the customer for remuneration (Article 233, Commercial Law 2005)

Previously, the delivery could have been done by the shipper (the exporter), the consignee (importer) or the carrier However, along with the development of international trade, the division of international labor with the increasing level and scope of specialization, forwarding has also gradually been specialized, by organizations and businesses Professional forwarding team conducted and forwarding has officially become a profession In short: "Forwarding service is a service related to the transport process to organize the transport of goods from the place of receipt to the place of delivery"

1.1.1.2 Definition of forwarder

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Forwarder is the person who performs forwarding services as entrusted by the customer or the carrier In other words, dealers of forwarding services are called forwarders The forwarder may be the owner of the goods (when he personally performs the forwarding of his goods), the ship owner (when the ship owner acts on behalf of the goods owner), loading company or warehouse or professional forwarder or any other person providing such services

According to Vietnamese Commercial Law article 164, freight forwarders are traders who have certificates of goods delivery service business registration (Article 164, Vietnamese Commercial Law 2005) According to the International Federation of International Freight Forwarders Association FIATA: “The forwarder is a person who takes care of the goods being carried under a consignment contract and acts in the interests of the consignor who is not the person himself carriage The forwarder also undertakes all the work related to the delivery contract such as preservation, transshipment storage, customs clearance, inspection”

1.1.2 Scope of forwarding services

Except for a number of cases where the shipper / consignee himself wants to participate in any of the procedures and documents on his own, normally, the forwarder on his behalf takes care of the process of transporting goods through the stages The forwarder can do the service directly or through the subcontractors or agents they hire, the forwarder also uses their agents abroad These services include:

1.1.2.1 On behalf of the shipper (exporter)

• Choose the appropriate route, mode of transport and carrier, save freight with the selected carrier

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• Receiving the goods and issuing appropriate documents such as the certificate of delivery of the forwarder, the certificate of carriage of the forwarder

• Study the terms of the letter of credit and all government regulations that apply to deliveries in the exporting country, the importing country as well as in any transit country and prepare the necessary documents…

• Packaging of goods (unless this is done by the shipper before delivery) taking into account the route, mode of transport, the nature of the goods and the applicable laws, in the exporting country, transit country and destination country

• Storage of goods (if needed) - Measuring goods

• Note that the shipper needs to buy insurance and if the shipper requests, buy insurance for the goods

• Transporting goods to ports, handling customs declaration, handling related documents and delivering goods to the carrier

• Receiving the bill of lading signed by the carrier, delivered to the shipper

• Arrange transport on the road (if necessary)

• Supervise the transport of goods on the way to the consignee via the carrier's agent and agent's contacts abroad

• Noting the loss of goods if any, helping shipper to make a claim against the carrier about the damage of the goods (if any)

1.1.2.2 On behalf of consignee (importer)

• On behalf of the consignee overseeing the transport of goods since the consignee takes care of transporting the goods

• Receive and check all documents relating to the transport of goods

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• Receive goods from the carrier and pay freight (if necessary)

• Arranging the customs declaration to pay final fees and other expenses to the customs office, other authorities, arranging the warehousing in transit (if necessary), delivery of customs clearance for the recipient line

• If needing to assist the consignee to make a claim against the carrier for any loss of cargo, assist the consignee in storage and distribution (if necessary)

1.1.3 The role of logistics for trade development

In the current trend of internationalization of social life, as well as the expansion of trade and cooperation among countries, the forwarding has played an increasingly important role reflected in the following aspects:

- Forwarding contributes to facilitate the faster circulation of goods Help transport and perform a number of operations in freight forwarding and is an important bridge between the shipper and the consignee

- Forwarding contributes to help goods flow quickly, safely and economically without the presence of the sender as well as the recipient in the operation

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- Delivery helps the carrier accelerate the rotation speed of the transport means, make the most and effective use of the capacity and payload of the transport means, as well as the support facilities other

- Forwarding helps reduce the cost of import and export goods, saving costs

At the same time, forwarding also helps importers and exporters reduce unnecessary expenses such as the cost of building warehouses and yards of the forwarder or the freight forwarder, reducing labor training costs

1.1.4 Legal basis

1.1.4.1 Vietnamese laws on air transport

The aviation market of Vietnam has made significant progress in the past 5 years with an average annual growth of 15% The Ministry of Transport and Aviation Administration of Vietnam have made efforts to focus investment in infrastructure upgrading projects, procurement of equipment and facilities, human training, and simplification of procedures for exploitation airport efficiency and aviation service provision, in parallel with that, the law is one of the equally important factors in freight forwarding The Vietnam Civil Aviation Law of 2006 (Law HKDDVN) was passed by the National Assembly on June 29, 2006 and takes effect from January 1, 2007 By separating the function of state management and production and business activities, the Law marked a breakthrough in state management as well as creating a legal framework for activities in civil aviation industry The Vietnam Airlines Law of 2006 is an important legal document to comprehensively regulate civil aviation activities in Vietnam, inheriting and developing the non-conforming provisions of the Vietnam Airlines Law of 1991 and 1995, and the Law of Vietnam Airlines 2006 abolished regulations which are

no longer suitable to the reality and trends of development and integration of the aviation industry, ensuring equal participation of all economic sectors, healthy

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competition and protection of interests legal of consumers, improve service quality The 2006 Law HKDDVN was amended and supplemented by the National Assembly on November 21, 2014, taking effect from July 1, 2015, the law consists

of 10 chapters and 202 articles Provisions on carriage of goods are cited in Chapter 6, Section 3, from 128 -> 142

1.1.4.2 International treaties on air transport

Besides the national law, international law also plays an important role in regulating the forwarding of import and export goods by air In the international transport environment, the freight forwarder often deals with foreign partners, freight forwarding in the territory of other countries so understanding the international treaties is effective in reducing disputes desire and promote international trade development Some sources of international law:

- 1929 Warsaw Convention: International air transport is governed mainly

by the International Convention to agree on some rules of international air transport signed in Warsaw on October 12, 1929 for short Vacsava 1929

- Chicago Convention 1944: The Convention was signed in Chicago on December 7, 1944 with the aim of preserving the friendship, mutual understanding among peoples of the world, ensuring common security, creating conditions for the industry International civil aviation develops safely and order on the basis of equality and mutual benefits

- The Hague Protocol 1955: Protocol to amend the Warsaw Convention was signed at the Hague on September 28, 1955

- The Guadalazala Convention 1961: Supplement to the Warsaw Convention was signed in Guadalazala on September 18, 1961

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- Montreal Agreement 1966: Agreement concerning the limitations of the Warsaw Convention and the Hague Protocol This agreement was adopted in Montreal on 13 May 1966

- Guatemala Protocol 1971: Protocol to amend the Warsaw Convention of October 12, 1929, amended by the Hague Protocol on September 28, 1995, to unify some rules regarding international air transport This Decree was signed in Guatemala City on March 8, 1971

- Protocol to amend the 1929 Warsaw Convention: This Protocol was concluded in Montreal on September 25, 1975, and should be referred to as the

1975 Montreal Protocol No 1,2,3,4

Conventions, agreements, protocols mainly amend and supplement limits of liability of the carrier for damage to passengers, damage to goods, luggage and time limits notify loss, claim the carrier

1.2 General overview of freight forwarding by air

1.2.1 Concept of air freight forwarding

Air freight forwarding is a collection of operations related to the air transport process to carry out the movement of goods from the place of delivery to the place

of receipt of goods Air freight forwarding is essentially an organization of the transport process and resolving procedures related to the process of transporting goods by air Currently air freight forwarding is usually provided by air freight agents and freight forwarders

Air cargo agent is an intermediary between a carrier (airlines) and a cargo owner (exporter or importer) When it comes to air freight agents, it is often called FIATA agent because this is the most standard agent FIATA Freight Agent is a

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forwarding agent registered by the International Air Transport Association, appointed and authorized by airlines that are members of FIATA

Air freight forwarder: Is a person who provides air freight forwarding services The freight forwarder may not be a FIATA agent or not a FIATA agent, the service that the consignee usually does is mainly the consolidation service

1.2.2 Characteristics of air transport

Air transport routes are mostly straight lines connecting two transport points

- The speed of air transport is quite high, the speed of operation is high, the transportation time is fast, 27 times higher than sea freight, 10 times more than car transport and 8 times train transport

- Air transport is safer than other means of transport, suitable for high-value, perishable goods and rare and precious goods

- Air transport always requires the use of high technology, perfect technical equipment, transport facilities such as airports, radio control stations, meteorology, etc elements constituting air freight rates

- Air transport provides more standard services than other modes of transport

- Air transport simplifies procedures and documents compared to other modes of transport

Besides the above advantages, air transport also has the following limitations:

- Air freight is high

- Air transport is not suitable for transporting bulky goods, goods with large volume or low value

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- Air transport requires large investment in technical facilities as well as training of human resources

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CHAPTER II - INTRODUCTION ABOUT DELTA INTERNATIONAL CO., LTD

2.1 General information

Delta International Co., Ltd was officially put into operation on June 30,

2004 with the legal representative, Mr Tran Duc Nghia, whose head office is located at No 1, Lane 49, Lane Thinh Hao 1, Ton Duc Thang Street, Hang Bot Ward, Dong Da District, Hanoi City, tax code 0101502542 The head office of the company currently is situated in 14th Floor, IDMC My Dinh Building, 15 Pham Hung, My Dinh 2 Ward, Nam Tu Liem District, Hanoi

The company's business activities are very diverse such as customs clearance, warehousing, inland and international transportation, refrigerated cargo, project cargo the main activities of which are customs clearance and Inland transport The company has established its own fleet of trucks as well as operating and managing the warehouse With reasonable investment in human resources as well as finance, it has gradually met the diversified logistics service requirements

of its customers

Working on important projects and serving large clients in a wide range of fields has enabled Delta to have experienced staffs to provide good service and accurate advice, providing the company’s clients appropriate solutions according

to their requirements Delta has partnerships with large and reputable companies in the country and abroad, capable of providing full package logistics services to its customers

Delta International Co., Ltd.'s vision is to become the leading logistics service provider in Vietnam

The company's mission is to create true value for its customers by providing solutions tailored to the specific needs of its customers

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The core value that helps the company grow during the past 16 years is first and foremost professionalism which is to create genuine value for customers, build sustainable development for the company through mutually beneficial cooperation and respect for the common interests of the company and partners The second value is integrity, honesty in conduct as well as in all transactions The third value

is the seriousness in compliance with laws, regulations, policies and regulations of the company

2.2 History of formation and development

During 16 years of operation, the company has experienced respectively important milestones in the history of establishment and development:

- On June 14, 2004, the Company was established in Hanoi with 4 employees, providing services for aviation cargo at Noi Bai airport

- In February 2005, a representative office was established in Hai Phong port By October 2010, upgraded to a branch

- In December 2006, the Company was recognized as an official member of Vietnam Freight Forwarders Association (VIF-FAS), now Vietnam Logistics Service Business Association (VLA)

- In February 2007, the Company was recognized as an official member of the International Forwarding Association (FIATA)

- January 2007, establishing a branch in Ho Chi Minh City

- February 2008, establishing representative office in Binh Duong By January 20,

- In October 2012, Delta Transport Company Limited was established with the goal of managing transport activities as an independent service

- October 2012, establishing a representative office in Hai Duong

- January 2013, established a transaction office at Noi Bai airport

- August 2015, establishing the first automobile repair workshop in Que Vo, Bac Ninh

- In April 2016, start using refrigerated trucks to transport pharmaceuticals

- July 2016, established the first trucking hub at 1023 Nguyen Binh Khiem, Hai Phong City Transportation activities are concentrated here, including parking lots, second car repair workshops, oil supply stations and offices

- December 2017, establishing a distribution warehouse in Binh Duong

- February 2018, established Delta Velox Co., Ltd., preparing to provide courier services

- July 2018, establishing a distribution warehouse in Hanoi

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2.3 Organizational structure

2.3.1 Organizational diagram

Delta Transportation Company Limited

Functional Department

T Hai Duong Office Bac Ninh Office

2.3.2 Key membership

- Tran Duc Nghia, Director

 Executive MBA, University of Hawai’i

 25 years of experience in the field of transportation and freight forwarding

- Duong Lac An, Vice-director

 Executive MBA, Asian Institute of Technology

 15 years of experience in the field of transportation and freight forwarding

- Dinh Pham Tri, Vice-director

 MBA, Northern Arizona University

 23 years of experience in the field of transportation and freight forwarding

2.3.3 Functions and duties of each department

Director: Has the right to make decisions for all activities of the company such as investment, business strategy, personnel structure, Besides, the Director

is also the representative of the whole company in contracting, signing contracts with partners, customers as well as establishing good relationships with the banks and related state agencies in the process of carrying out the company's business activities

Vice-director: A person who co-operate with director managing the general affairs of the company, in addition to being in charge of the field and transportation department

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Customer Service Department: The division is responsible for drafting contracts, quotes, service introduction to customers Customer Service Department will work with customers on issues such as freight rates, issues occuring during freight forwarding process, and elucidate questions from business and private customers

Professional Division: The department is in charge of performing the freight forwarding tasks such as preparing documents of goods, customs procedures at airports, warehouses, and some other procedures from receipt of goods to delivery to the customer Moreover, the professional department also has to contact regularly with carriers, airports, to know the situation of transporting shipments and notify shippers and consignees It can be said that the professional division is the direct department to carry out the activities to complete the delivery contract of the company with customers

Administration Department: is the department responsible for the timekeeping, organization of the company's activities on the internal rules and policies of the company The human resources department also has the task of researching and putting personnel plans in line with the company's development strategy

Accounting Department: is the division in charge of the revenues and expenditures of the entire operation of the company, making financial statements The accounting department also plans and implements the company's financial strategies, makes tax reports, calculates insurance, depreciation, salaries for employees The whole accounting department also handles debt collection and accounting

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Sales and marketing department: is the division representing the company to contact and deal with customers The department is responsible for finding new customers, customer care The Sales Department is also responsible for organizing advertising and marketing to find new customers In addition, the Sales Department also participated in proposing ideas for the company appropriate solutions to improve service quality

Information Technology Division: is the department responsible for granting accounts, skype, outlooking for new personnel, and also the founder of the company's internal software Also responsible for repairing software when something goes wrong

Operations and registry: This is the department with the largest number of employees in the company because they have to handle a lot of different jobs They have to go to the shipping lines to get delivery orders, booking for shipments, going down to the ports to check the goods for those shipments if required, pick up and deliver to customers at port, do the procedures with the registry for imported car shipments

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CHAPTER III – CURRENT SITUATION OF INTERNATIONAL FREIGHT FORWARDING ACTIVITIES OF DELTA INTERNATIONAL CO., LTD

AT NOI BAI DURING THE LAST 3 YEARS

3.1 Result of freight forwarding activities

3.1.1 Types of goods are transported

Not all goods are allowed to be transported by air Goods transported by air are obliged to comply with the regulations on air transport of countries, places of origin and destination as well as the general rules and regulations of national aviation organizations and associations like IATA, FIATA, ICAO, but in general, freight forwarding by air has the following characteristics:

- Usually high value goods, common goods;

- Request fast shipping time;

- Need high safety during transportation;

- Not bulky, easy to load/unload;

- Goods are packed in accordance with the standard of air transport;

- Goods must be labeled fully, clearly and appropriately;

- Goods with valid documents attached (if required)

Delta's major and longtime customers are Zara and CT Wearnes, so most of the delivered goods are fashion and automotive components and parcels with

service packages:

- Door to door (receive from the sender and deliver to the recipient)

- Door to airport (receive from the sender and deliver to airport of destination)

- Airport to airport (normal delivery)

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3.1.2 Volume of export and import goods

Table 3.1 The volume growth of goods transported by air at Noi Bai airport over the last 3 years

(Source: adjusted from data provided by exploring section, Delta Company)

In order to have a clearer examination, I converted the table 2.1 into the following chart:

Graph 3.1 Volume growth of goods transported by air at Noi Bai airport over the last 3 years

From the chart, it can be seen clearly that there is an upward trend of goods transported by the air over the last 3 years in both weight and number of packages

In detail, the number of packages rose steadily during the period, about 9.8% and 7.7% from 2017-2018 and 2018-2019 respectively The figure of the weight increased slightly from 2017 to 2018 by 63 tons before having a sharp increase from 2018 to 2019 by 186 tons These growths implied that the demand of aircargo

Weight (ton) Number of package

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transport at Noi Bai was getting higher and higher and the company’s forwarding activities were also being promoted

3.1.3 Revenue and profit growth

Table 3.2 Growth of revenue and profit from freight forwarding activities of air cargo over the years

(Source: adjusted from the accounting division’s report, Delta Company)

Graph 3.2 Growth of revenue and profit from freight forwarding activities of air cargo over the years

The company's revenue growth is proportional to the increase in the amount

of goods it has imported/exported over the years Looking at either the table or graph, the highlight is that the revenue in 2019 is much higher than the number in

0 500,000,000 1,000,000,000 1,500,000,000 2,000,000,000 2,500,000,000 3,000,000,000

Revenue Profit

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2018 while the total cost has not changed much, showing that Delta has tried to expand its business and find looking for cost reduction solutions Delta International Co., Ltd is currently the agency that has signed contracts to transport goods by air in Vietnam of many airlines Because of the priority policy on prices, routes and other preferential policies, Delta has always set itself a plan to allocate

on airlines over the years In order to maintain its position and establish an increasingly close relationship with partners on mutually beneficial basis, Delta is constantly exploiting both nominated and self-exploiting cargos to provide enough cargo on the main routes of airlines This is very essential in the context of the freight forwarding market is becomingmore and more competitive today

3.1.4 Freight policy

3.1.4.1 Basis of freight

Air freight is calculated on a weight basis, if it is a heavy cargo If it is light, bulky goods, then calculated by volume But if it is a rare commodity, the freight basis is the value of the goods Rates depend on: frequency of carriage, competition between airlines, type and weight of freight, value of goods, requirements for loading and unloading facilities

Delta charging formula:

Freight in air transport is stipulated in the unified tariff International Air Transport Association (IATA) has regulations on rules, ways of charging

The charge calculation formula is as follows:

Air freight = Unit price x Chargeable weight

Unit price and surcharges apply depending on the airline regulations Chargeable weight equals actual weight if actual weight is greater than volumetric/dimensional

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