Comments on Cargo Rates Rates decline with range Much of indirect operating cost is independent of range Cargo handling sales costs dont depend on range So indirect cost per mile is less at greater ranges Ships are much less expensive than airplanes Ships are very efficient: L/D-400 Ships indirect costs are much less than airplane's arge containers, mechanized loading Trend curves can be approximated by a simple formula Rate= cost/ton -nm cost/ton Cost/nm can be thought of as DOC Fixed cost can be thought of as IOC Scatter in rates due to two factors Asymmetrical demand (east versus west for instance) Airplane main deck pays full rate, belly cargo rides for -lOCComments on Cargo Rates • Rates decline with range – Much of indirect operating cost is independent of range • Cargo handling, sales costs don’t depend on range – So indirect cost per mile is less at greater ranges • Ships are much less expensive than airplanes – Ships are very efficient: L/D ~400 – Ships indirect costs are much less than airplane’s • Large containers, mechanized loading • Trend curves can be approximated by a simple formula – Rate = cost/ton-nm + cost/ton • Cost/nm can be thought of as DOC • Fixed cost can be thought of as IOC • Scatter in rates due to two factors – Asymmetrical demand (east versus west for instance) – Airplane main deck pays full rate, belly cargo rides for ~IOC