Vol. 11 No. 35                                                                                                                         Friday April 13, 2012


Two views of Hong Kong International Airport Sky City, as dreams of bringing a real live Aerotropolis to Middle America continue.

Editor's Note: Just like the Blue Fairy once granted a wish upon a star in Walt Disney’s Pinocchio, Aerotropolis as deliverance to gateway greatness is still out there in the air.
     As we say in New York City, “If wishes were only knishes.”
     However you spin or slice it, wishing for Aerotropolis didn’t make a difference when St. Louis Lambert Field’s bid tanked big time late last year.
     But when major politicos and mega-money are on the table, what goes around comes around.
     Here, Michael Webber, who single-handedly took down the St. Louis project, brings us up to date with what else might be going on at some gateways in middle America as we move into Spring 2012.
     In terms of total disclosure, Missouri-based Michael does some consulting work for Chicago O’Hare International Airport.
     ORD, the last time we checked, was still the address of every important, all cargo flight outside of Memphis in heartland USA.

     In early April 2012, the St. Clair (Illinois) County Public Building Commission demanded that former Wall Street executive John Hewitt return a $250,000 taxpayer-funded incentive originally intended to facilitate development of what was to be a $6 million, 62,500 square-foot warehouse at MidAmerica St. Louis Airport (located in Mascoutah, Illinois). How the deal came to the point of collapse is a story of consistently failed accountability at the airport, county, and federal levels.
     The cancellation follows the County’s acceptance of a dramatically scaled back plan that reduced the warehouse to only 30,000 square-feet (no longer including a chiller) at a cost of about $2.5 million. In spite of reducing private investment by more than half, the revised deal retained the $250,000 public subsidy which the airport’s director, Tim Cantwell, still described as a good deal—satisfied that Hewitt had “proven that he has some partners, and he does have a user for the building.” Recent events have only illuminated Cantwell’s chronic deficiencies as a judge of proven partners and users. When Hewitt was first introduced as MidAmerica’s prospective developer, Cantwell’s characterization of the vetting process was “on this regard, we have researched this as much as we could. And we had him in front of the airport committee of the building commission on a number of personal reviews.” Yet Cantwell and his Board seemed blindsided when the Belleville News-Democrat reported in July 2011 that the Internal Revenue Service, joined by the state and city of New York, had filed more than $855,000 in tax liens against properties owned by Hewitt’s H-Trading for nonpayment of personal income taxes.
     Not for the first time, federal taxpayers have also been roped into subsidizing what miserably passes for oversight at MidAmerica. In March 2011, the Building Commission approved a doubling of MidAmerica’s cargo apron with 95 percent of the $2.24 million project coming from the FAA’s Airport Improvement Program. According to FAA spokeswoman Elizabeth Isham Cory, the timing of the larger grant for ramp expansion was precipitated by the County’s signing of a lease with a developer (Hewitt) to build a second warehouse at the airport. “The money’s being released because the airport has a signed lease showing that there is going to be a business coming in and that business will bring jobs,” said Cory.
     One wonders if the FAA’s staffers knew anything of MidAmerica’s history with the warehouse that Hewitt was to replace. In June 2008, the County agreed to spend $3.3 million to buy refrigeration units and other specialized equipment to accommodate Miami-based Teqflor Inc., which coordinated flights of flowers from South America to MidAmerica. From 2009 to 2010, county taxpayers spent $2.68 million subsidizing 32 Teqflor flower flights from South America—flights that ended in August 2010. The direct subsidy came to $83,750/flight and when the refrigeration is included, the subsidy rises to $186,875/flight. The county then spent an additional $3.5 million to convert that refrigerated warehouse into a Boeing assembly plant that employs 45 workers.
     MidAmerica’s expensive habit of wasting public money to determine the feasibility of its desires hasn’t always been limited to cargo. Only after having built a 50,000 square-foot passenger terminal with taxpayers’ money for four different (but never simultaneous) passenger carriers that entered and then left the market, MidAmerica’s leadership seemingly concluded that passenger service was not a good fit.
     Since opening in 1998, MidAmerica has been featured on NBC’s The Fleecing of America three times and in August, 2011, the airport was featured in a Wall Street Journal article noting that County taxpayers already cover more than $1 million per year in operating losses and were obligated for about $60 million in previously issued bonds - a relatively small piece of the $313 million in public money already wasted on this boondoggle.      An audit by J.W. Boyle & Co. found that MidAmerica had an operating loss of $11.9 million in 2010—a 4.3 percent improvement over the previous year.
     In a September 2011 piece, the Belleville News-Democrat reported that taxpayers had paid for MidAmerica to rack up more than $1.6 million on consultants fees, travel and lodging, as well as advertising and other marketing expenses just between January 2008 and July 2011. At the time, Rich Sauget Sr., chairman of the county Public Building Commission responsible for overseeing MidAmerica, predicted that a return on the county’s investment was imminent because “we are working with some very strong eventual clients, or partners or leasees for our airport.” While acknowledging the difficulty of quantifying consultants’ achievements so far, Sauget added, “I guarantee you this. If we weren’t using them, if we weren’t making this effort, we’d have zero chance of moving this facility.”
     In late February 2012, The St. Clair County Board approved—by a vote of 19 to 8—a plan for the county to issue $550 million in revenue bonds to jumpstart MidAmerica’s international cargo gateway efforts. As currently envisioned, bond proceeds would be used on behalf of a company called Strategic Air Cargo Inc. An internet search of “Strategic Air Cargo” leads to a Nigerian company, and while this airport has often seemed like an airport equivalent of the Nigerian fax and email scams that loot gullible Americans, MidAmerica’s Strategic Air Cargo partner is purportedly located in Chesterfield, Missouri, but so new that it had not even been incorporated yet.
     One might reasonably imagine that to justify such confidence, the principals of this startup must be seasoned air cargo veterans, but Strategic Air Cargo’s only visible member to date is Gary Andreas, a hotel consultant also based in Chesterfield. When the local Belleville News-Democrat attempted to identify the rest of the management team, Andreas only offered that “the last thing they want is their names in the press” before allowing that the team also includes a retired FAA executive turned academic. County Board member Charles Lee (R-Mascoutah) acknowledged not having much information but that didn’t prevent his supporting potentially the largest bond issue in county history.
     Also talking to the Belleville News-Democrat, MidAmerica Airport Director Tim Cantwell offered only that funds would be used for “probably warehouses, probably airplanes. Probably training … We’ll know more when they get their money.” Days later, the paper reported that the funds would finance an air cargo complex, including an office building and refrigerated warehouse, as well as finance a fleet of four 747s. The anonymity of the partners and Cantwell’s bravado can’t help but recall the thorough vetting claimed for the Hewitt fiasco, including the proof of partners and tenants that Cantwell claimed when that effort’s planned capacity and investment were cut by more than half.
     Proponents argue that the effort has no risk for the county because unlike common municipal bonds that obligate the issuer, conduit (private activity) bonds’ repayment is the responsibility of the private business or developer that received the proceeds. According to a 2011 article in the Los Angeles Times , conduit bonds account for only about 20 percent of the municipal bond market but about 70 percent of the defaults. Private borrowers are allowed to access the low-cost municipal bond market without providing as much financial disclosure as required in the taxable corporate bond market.
     Local governments are supposed to provide oversight but standards differ greatly between public entities, and because local governments earn fees without an immediate financial liability, they have an incentive to issue conduit bonds without concern for risk to investors. The Securities & Exchange Commission has been considering making financial reporting requirements more comparable to those of the private bond market to help investors make more informed judgments.
     The nearest geographic rival, St. Louis Lambert (38 miles west) failed spectacularly last year to maintain international cargo service beyond a few initial flights in an effort reminiscent of MidAmerica’s—including having some of the same operatives among well-connected real estate developers and regional economic developers.
     Updating a story reported extensively in FlyingTypers last year, the chairman of the Midwest China Hub Commission told St. Louis radio station KMOX that St. Louis had likely already missed its opportunity, blaming Missouri lawmakers for not passing a $360 million incentive package. The Commission’s vice chairman Dan Mehan (president and CEO of the Missouri Chamber of Commerce and Industry) quickly countered that the group would continue its effort. In a St. Louis Business Journal article , Mehan stated “I think there’s no doubt flights would be landing weekly at Lambert at this point if not for what happened in Jefferson City this past fall.”
     To the astonishment of the Missouri Chamber and their cronies in and around St. Louis, enough of the Missouri legislature took advantage of a second chance to perform due diligence and having recognized the project’s obvious faults, rejected the Aerotropolis Trade Incentive and Tax Credit Act. Hub commission chairman Mike Jones suggested the cost to date had been $4 million dollars—much of it public. Jones commented to St. Louis’ CBS affiliate KMOX radio “How can Illinois do that when they’re broke? They may be broke, but in Missouri, we’re cheap. When you’re broke sometimes that makes you able to come up with a plan. But when you’re cheap, when you’re trying to get something for nothing, then you usually come out a loser.”
     Labeling as “cheap” the waste of $4 million dollars of public money spent on first-class travel and consulting fees for the likes of ex-Senator Kit Bond’s former staffers is illuminating both in characterizing the entitlement mentality of politicians and cronies living large on public money and in explaining why such efforts never properly die. Some of the same legislation language is being reintroduced in the form of the $60 million freight forwarder incentives package intended to narrow the gap between shipping costs at Chicago O’Hare and Lambert. In early April 2012, the St. Louis County Council approved acceptance of a $3 million state grant that replaces local casino tax money intended for a flood control project, allowing those funds to be redirected to subsidize international shipping costs. The Council Chair sought assurance that the money would not go to administrative costs or consultants—a seeming acknowledgment of the excesses of this same effort in the recent past. To past critics, it is illuminating that Mehan and others who once declared $360 million inadequate are now trawling for $3 million.
     Having already been vanquished by Chicago O’Hare in their pursuit of long-term China cargo flights, Lambert’s proponents now seem about to repeat their futility by taking on Miami’s dominance in Latin America. After 25 years of focused effort, airport operators in international gateways Atlanta, Dallas/Ft. Worth, Houston, and even Chicago, Los Angeles, and New York have taken relatively little market share from Miami. Hard data on the subject is irrefutable and so is the folly of believing Lambert might break out where gateways with incomparable resources have enjoyed relatively little success.
     In last year’s Wall Street Journal piece, MidAmerica Airport Director Cantwell told the WSJ’s excellent transportation writer Susan Carey “If you want a graveyard, you’ve got the wrong guy.” The cemetery is a fitting reference in that Cantwell’s consultants and other cronies have made a proverbial killing. MidAmerica’s champions are now demanding return of their $250,000 advance for private developer John Hewitt’s lack of performance, but who represents taxpayers whose hundreds of millions have been wasted at MidAmerica? St. Louis Lambert’s proponents’ bid for $360 million in corporate welfare from the State of Missouri was thwarted, yet proponents are concocting new shell games to divert state funds while characterizing as chump change the $4 million of mostly public money they’ve already squandered. Playing with nothing but ‘house money’ courtesy of multiple layers of taxpayers, leaders of both efforts are long on bravado but sadly short on accountability.
Michael Webber

     At Intermodal South America this week Emirates SkyCargo builds strength upon strength, having moved more than 25,000 tons in just the past 12 months from the South American market to destinations around the world.
     "With five years' experience of operating in South America we understand the market as our ever-expanding network and reliable fleet, becomes stronger and we take delivery of the 230-plus aircraft we have on order, Ram Menen Sky Cargo Divisional Senior Vice President declares.
     Pictured with Mr. Menen (center) in an Emirates Sky Cargo team photo at ISA this week are (l) Ralf Aasmann, Area Manager Brazil, Robert Siegel, Regional Manager Cargo Commercial, Europe & Americas, Ram Menen, Dener Souza, Emirates’ Cargo Manager South America & the great Prakash Nair, Manager Network Cargo Sales Development.
     “Our team here is first rate, including Dener who leads the charge, really making it happen,” Ram added.


Get On Board Air Cargo News FlyingTypers
For A Free Subscription
Click Here To Subscribe


RE: Freight & Post

Dear Geoffrey,

     As a reader of FlyingTypers I was very pleased to meet you in person, as I admire your dedication and effectiveness in keeping the air cargo world well informed on a large range of subjects.
     I often thought if I get to meet “him” I have to tell him about the importance of Mail for the air cargo industry, as Air Mail and post-carrier integration is my dedication.
     I was happy you asked the question about misperception of mail in the cargo world. I told you the biggest misperception is that some people associate mail with social correspondence with others— the gift parcel from Granma Ann to her grandson. Mail is considered old fashioned, not technologically advanced, and mail is a dying business in the world of internet and e-mail communication.
     But whereas the cargo systems currently still have not gone beyond MAWB and HAWB level tracking and managing of cargo consignments, the mail consignments are being managed and tracked at the piece ID level as each piece of mail consignment (receptacles such as bags and trays) are uniquely identified and the EDI messaging between post and carriers are set up to get event status information on each mail bag in transport from origin to delivery.
     The misperception of a dying business is the worst though. Whereas single piece letter item-volumes are dropping, the overall mail volumes (in KG and m3) are showing double-digit growth year by year.
     E-commerce drives this growth, as mail provides competitive rates compared to express operators, and for the lower value shipments ordered on the Internet, the mail service provides a cheap, reliable delivery alternative. Posts deliver to each and every household in every country and are well placed to take advantage of the growing revenue potential of e-commerce. Yet posts and air carriers have to integrate their processes and systems to be truly fit for the purpose. That is why the International Post Corporation (IPC) launched an initiative some years ago with executives from the main mail-carrying airlines (e.g Dave Brooks AA, Jack Boisen CO at the time) to integrate mail and cargo processes and systems for posts to become lower cost customers, providing air carriers the opportunity to become high quality suppliers at lower operating costs. The vision is that in the long term, mail would be managed in cargo systems and maintaining specific mail systems (needed to ensure piece level tracking) would no longer be required.
     The biggest achievements so far is that between the group of 10+ posts and 10+ air carriers involved, the paper consignment documents have been fully replaced by EDI for over 40 percent of the airmail volumes exchanged between participants or, in other words, 40 percent paper-free transport.
     Traditionally, mail is not booked, as it was expected that it be carried with priority by convention, yet it is not realistic to expect air carriers to upload anything presented without space allocation arrangements. IPC developed with the post and air carriers concerned a mail space allocation process and developed a tool to pilot test the building of allotment templates for a seasonal allocation arrangement, which is another important milestone. Booking mail will be the next.
     My presentation at World Cargo Symposium at the technology track was on effective data capturing and data sharing between posts and carriers to produce an electronic Proof of acceptance and Proof of Delivery at piece ID level, without the need for air carriers and their handlers to scan each piece at the moment of handover, using nesting, de-nesting, and data sharing between stakeholders.
    My details are attached. Hope this info is useful.
    Again it was a pleasure to meet you in person . . .

Kind regards,
Jörgen van Mook
Manager Operations Planning, International Post Corporation

Jörgen is available to share his postal expertise. He can be emailed at jorgen.vanmook@ipc.be or telephoned: +32 (0)2 724 72 64


If You Missed Any Of The Previous 3 Issues Of FlyingTypers
Click On Image Below To Access