TAC Index has been recognized as one of the 20 Best Companies to Watch of 2021 by The Executive Headlines.

 

TAC Index Company has brought current pricing transparency to the air cargo industry for the first time since air cargo began. For a variety of reasons, air cargo was never indexed, leaving interested parties to enter pricing contracts with no real feel for the present market, and with no abilities to manage risk in such a volatile market. Very inefficient considering air cargo costs are over $100 billion annually and account for 35% of global trade.

 

We’ve had the pleasure to sit down with TAC Index, Managing Director, John Peyton Burnett, to know more about the company and services.

 

Founded in 2011 in Hong Kong, with additional offices now in London and Salt Lake City, Utah, TAC publishes weekly, transactionally based air cargo indices for major routes based on millions of actual transactions. With data supplied by major freight forwarders, and reflecting passage on over 400 airlines, TAC’s data has enabled for the 1st time ever bench marking for pricing, which in turn is now enabling floating rate air cargo contracts between shippers, forwarders and airlines. Following soon, physical hedging will also commence through the Baltic Exchange in the U.K. (a wholly owned subsidiary of the Singapore Stock Exchange).

 

The concept was the brainchild of Managing Director John Peyton Burnett, who has been in the air cargo industry for over 25 years. Originally from the UK, Mr. Burnett had always realized that price indexation would be hugely beneficial for the industry. But legacy computer systems, cultural resistance and other factors prevented the development of indices. Keeping a close eye on the industry however, Mr. Burnett realized in 2010 that industry technology had caught up to data requirements to formulate indices, and he decided to start a journey towards developing current average pricing for the major trade lanes.

 

Teaming up firstly with Chief Financial Officer Mr. Cameron Honarvar of the U.S., and then with accomplished Data Scientist Dr. James Notaras of the U.K., Mr. Burnett led his team through the long and arduous process of convincing freight forwarders that industry transparency would be in everyone’s interest. Critical mass was finally achieved in 2016 when TAC began publishing its first indices, which were subsequently picked up by Bloomberg and Reuters, and then eventually by logistics equity analysts at quality research firms such as Stifel and Susquehanna.

 

Other firms published air cargo data that was weeks or months old, or only declaratory in nature, but TAC was able to generate weekly data from actual transactions, thus creating a tool that had great value on a week-to-week basis for everyone involved in air cargo.

 

In 2020 TAC entered into a joint branding agreement with the Baltic Exchange and began publishing the Baltic Air Indices (‘BAI’), which were regional routes quite suitable for risk management tools such as derivatives and the like. TAC became the calculating agent for these routes, and Baltic the benchmark administrator – meaning that in addition to the timeliness of the indices they now became fully IOSCO compliant and audited under PwC. The BAI indices are now encouraging adoption by shippers of floating rate air cargo contracts, which will in due course lead to the creation of OTC risk management options, and finally full exchange clearing for air cargo derivatives.

 

While still in its early stages, TAC has established a consensus position as the leading publisher of current air cargo data. Mr. Burnett is now looking forward in the next year to publishing all targeted air cargo routes, and to also launching a complimentary cargo utilization tracker in cooperation with Spire Aviation, a recently SPAC-listed company out of San Francisco. TAC Space  will offer a fuller picture to industry parties of how busy various trade lanes are in terms of cargo capacity, which along with TAC’s Freight indices will offer a high degree of clarity as to the state of affairs for all parties.

 

Mr. Burnett believes that the potential market for the company’s data products  is very, very large, with virtually any company spending more than US$10 million per year on air cargo standing to save very substantial amounts of funds annually through careful assessment of current industry pricing and utilization data. Subscriptions for data will also be complimented by a participation in OTC and ultimately exchange clearing of air cargo hedging instruments – a market that could potentially be worth hundreds of billions of dollars in time.

 

In getting to this stage and beyond, Mr. Burnett’s philosophy was to maintain control of his venture, as the way to ensure very focused and unwavering direction for the company. To help achieve these ends, along with Mr. Honarvar, an extended angel investment approach was developed, whereby the company did a number of periodic rounds with individual, as opposed to institutional investors. Mr. Honarvar’s thoughts were that individuals had longer time horizons and fewer constraints, and the company’s capital requirements were not off-the-charts, as the company was only publishing data. So presently, the company has quality individual investors from most major continents, who share a sense of mission with the company to bring transparency to this industry.  Dr. Notaras further supported this philosophy and efforts by establishing a lean but highly efficient data department based in London. 

 

The company’s founders have placed an emphasis on low costs and sweat equity from the beginning and are now emerging from early stages with a strong business model, a low cost base and a growing number of Fortune 500 subscribers to ensure stability and profitable growth going forward. 

 

Finally, with respect to advice and recommendations for budding entrepreneurs and younger aspiring executives, Mr. Burnett and his team had the following advice to offer:

 

• Focus on a potentially large market, where your concept will bring unique value propositions;
• Keep costs low to make sure you manage according to what’s best for the long-term business as opposed to what may be financially expedient;
• Work with people who have longer time horizons; and
• Make sure equity rewards are offered for all key players.

 

Contact: Cameron Honarvar

Designation: Chief Financial Officer

Email: chh@pacificbabyworld.com

Tel: +1 (385) 227 7720