Vol. 9 No. 124                                                  WE COVER THE WORLD                                 Monday November 15, 2010


     Neel Shah departed a promising career at United Cargo to take the top job as Vice President Cargo at Delta Air Lines a couple of years back. Almost before he could digest the change, he woke up one morning plus Northwest Airlines as chief cargo officer of the biggest airline in the world.
     If he is concerned about his place in air cargo history, he sure doesn’t show it; in fact, right now Neel Shah is all about the job and the monumental changes taking place at Delta Cargo.

     “They (Delta) came looking for me,” Neel says, “but everybody made it clear right away that the airline is deadly serious about building its cargo product.
     “Air cargo is a top down priority here, best exemplified when we went back to the USPS after Delta had quit mail some years back.
     “It was Richard Anderson and me at the U.S. Post Office, face to face up in Washington with Delta basically saying ‘we want your business back.’”
     “We presented ourselves and they said yes and the rest, as they say, is history.
     “Today, Delta is once again a top producer for the USPS and the numbers just keep getting better.”
     The return is significant.
     Back in 1975, another Delta Cargo chief, the great John Pogue, told this reporter, “Air mail and express is a major contributor to every Delta flight-especially at night,”
     Back in the day, the air cargo boss was situated above the handling facility in an office that featured a small window, which allowed John to peer out and watch the cargo move across the floor below.

     Today, Delta Air Cargo is energized and directed from an office complex inside a group of Georgia clay-colored, red brick buildings that serve as world headquarters for the carrier in Atlanta, Georgia.
     We are reminded that the airport this carrier has dominated ever since it was built, Hartsfield Jackson International Airport, is close by; aircraft can be seen coming and going 24/7 from the bright, spacious windows at company HQ.
     Neel Shah is not a big man.
     He is built compact, but his ideas fill the room to overflowing.
     Shah has his eyes on the prize and is determined to get Delta Cargo right and profitable.
     “When we made the decision to retire the freighters after the Northwest merger, it had to do with the fact that at the end of the day, it is not about top line revenue.
     “You have to make sure that cargo is contributing positive margin back to the company.
     “Generating one billion in top line and 1.3 in costs just doesn’t cut it.
     “Last year almost everybody found themselves upside down and the downturn was amplified in air cargo, as passenger yields did not fall 60 percent as air cargo did in some cases.
     “Delta is an airline that has been transformed since Richard Anderson came onboard.
     “Today, this company has a very clear vision and focus.
     “Richard does not bring the baggage of a pre-determined outcome either.
     “Delta has a very clear vision and focus to growing our collective enterprise in both passengers and cargo, while generating the highest operating margins in this industry.
     “We will show it as we move through the Q3, earning season. The impressive numbers are even more dramatic when it is recalled that in 2007 Delta was target of a hostile takeover by US Airways.
     “Today, we are the most profitable airline in the world.
     “Delta is a remarkable turnaround story.
     “We are going to do between $845 and $860 million in 2010.
     “My goal is for Delta Cargo to get to one billion dollars of revenue by the end of 2012 as a belly-only carrier, while driving a powerful amount of revenue back to the corporation.
     “How we get from here to a billion dollar air cargo business is not with a silver bullet, but rather the number is achieved by attention to several elements of our business, including focus on higher yielding products such as pharma, and high-val consignments, plus introduction of some new domestic products that will tag onto our Delta Dash services, offering highly specialized services to specific industries.
     “We are also continuing our ongoing efforts to tighten up our air cargo business, making sure that there is less and less revenue leakage.
     “We need to do a better job at collections due us, and also examining the process to make sure we are getting it right by bringing our focus down to something as simple as dimming and weighing freight.”
     One addition is an incentive system for the Delta Cargo sales force.
     “My belief is that you cannot have truly motivated sales without an incentive component.
     “Delta is comfortable putting our money where we are certain it will generate a return.
     “The next step is: how do I create an incentive program for our revenue and data management people who will lead our sales people toward securing higher yielding traffic?
     “We are investing in software that will optimize cargo usage of our aircraft based on fifteen different sources of data, which allow us to have much better forecasts as to how much freight we are able to carry.
     “Delta Cargo continues to build functionality onto our existing software; that helps take us to the next level to include hurtle rate pricing, etc.
     “Our march toward one billion includes laser-like focus on the operation, because we all realize full-well that at the end of the day, you can only sell effectively if you can move the freight.”
     “It is no secret that Delta is a carrier that traditionally was not focused on the air cargo business.
     “In terms of service, we are investing in the right people and the right technology that sets us up for success.
     “Air cargo is about moving the goods and providing the information, and we do not underestimate the importance of transparency.
     “We are going to provide more robust information to our shippers by investing in end to end scanning technologies and other applications.
     “That means full warehouse and planeside scanning that closes shipments out and tells us with a great degree of certainty where everything is in our system.
     “Applied to our Dash System, that is a multi-million dollar business with very sound margins, which carries (among other consignments) organ transplants and other vital shipments; this enhancement to our product is do or die to an entire segment of shippers that rely on total information.
     “Delta Cargo has 120 people involved in sales worldwide and I think they are the best anywhere.
     “Communication and basic support are key and we are ramping up data and information to empower everybody.
     “Everybody needs to know what to expect.”
     Neel Shah spent five years at United Cargo and the past three years in Atlanta as top cargo officer at Delta Cargo.
     Neel actually moved into air cargo from the passenger side at UAL, where he worked for the airline a total of ten years.
     Neel studied for his MBA at Columbia (NYC) where he mastered in finance and organizational strategy.
     “I moved into cargo by absolute circumstance—actually, I was at the part of UAL that was focused on “new ventures”—doing business development like Orbitz-Hotwire and other ventures.
     “Then 911 hit and guess what? All the big fancy ideas went out the window as everybody was suddenly battling for survival.
     “I was lucky to be directed by the then UAL CFO, Doug Hacker, into cargo, although at first I thought the business was a step down.
     “Doug said, ‘Cargo will be fun and offer lots of opportunities for you,’ and he was spot on right.
     “I knew nothing about cargo, but I tell you, I just fell in love with this business because unlike the passenger business, air cargo is a high concentration of repeat customers and relationships that are critical to success.
     “I was immediately blown away by the difference, but also by the opportunity.
     “A few years later, when I learned that I was on the short list to come to Delta Cargo, my first reaction as a United guy was:
     “‘I love selling against Delta Cargo.’
     “But I was convinced that under Richard Anderson, it was a new deal to reengineer Delta Cargo.
     “Now it’s three years later, and I consider being here the best decision I ever made.
     “When you are on the outside and hear about the ‘Delta Culture’ and the ‘Delta Difference’ you cannot appreciate what that means until you are inside the company and realize that this airline is something special.
     “Management here protects and enhances that culture that is about 80 years of history and all this company and its people have gone through.”
     We asked Neel Shah how the 100 percent screening of all belly cargo mandate of TSA has impacted Delta Cargo business?
     “Screening was to air cargo what Y2K was to the change of the century a decade ago.
     “Leading up to 100 percent, we spent a lot of time and trust me, a lot of money preparing for the change.
     “When the date (this past August 3) for 100 percent arrived, for me it was after a sleepless night wondering what would happen, because that is what most of us were programmed to wonder.
     “At the end of the day, the cargo is flowing very well throughout our system.
     “Sure, we have the occasional hiccup—a truck arrives without a security seal, things like that—but we have been working well through just about everything, with our forwarder partners right onboard with us.
     “There are still a number of challenges, not the least of which will be all the inbound screening that soon will have to be at 100 percent.
     “Some other issues, such as handling of human remains, still have to be worked out between the airlines and TSA
     “The evolution of technology is something we must also pay attention to, because the mandates will change.
     “Air cargo security is not a ‘one and done’ situation.
     “Our infrastructure is set up to handle screening, but we need to constantly update and be ready for change.
     “We have to continue to encourage forwarders and especially shippers to focus on the security mandates, and for shippers that means at the point of manufacture.”


Uli Readies Price Fix Battle

    We asked John Johnston, CEO of CHAMP CargoSystems, what he thinks of the recent spate of prosecutions by U.S. DOJ against air cargo executives like Uli Ogiermann, who became the former CEO of Cargolux on Friday, November 12, 2010.
     "I’m horrified by it,” said Mr. Johnston at AMS during TIACA.
     Cargolux apparently felt somewhat the same way, posting a tender, albeit definite, statement on its website appointing Frank Reimen as President and CEO.
     Mr. Reimen is a top career transportation type who has served as First Government Adviser to the Department of Transport at the Luxembourg Ministry of Sustainable Development and Infrastructure.
     Ulrich Ogiermann does not take the pipe in all of this; he becomes a Special Advisor, although Cargolux moved quickly to name David Arendt Executive Vice President and CFO on an interim basis, with the aforementioned Mr. Reimen taking up CEO reigns starting January 1, 2011.
     "Mr. Ogiermann will now have more time to prepare his defense while Cargolux can continue to benefit from his knowledge and expertise," said the Cargolux Board.
     One can only wonder where all of these charges and counter charges and wrecked air cargo careers will      end?
Perhaps even more puzzling is why air cargo everywhere, which was supposedly talking to itself illegally, didn't have just one more conversation and decide to stand up to DOJ/EU and anybody else with a beef, and draft a defense, to say something like:
     “Sorry but that's the way business has always been done,” adding, “we won't do business that way anymore.”
     Earlier last week, despite record fines being handed out to cargo airlines by EU Commission in Brussels, it came down to two simple facts.
     Firstly, the ‘fines announcement' was actually held for at least a year to allow airlines to recover from the lousy and tepid business climate, and secondly, the EU was not able to fine a single Euro because of price fixing against 11 air carriers who were also put under the microscope, but came up clean.
     EU cited "lack of any evidence.”
     You can add lack of common sense to all of this.
     In our book, Uli Ogiermann is a good guy who did business as usual and earned and deserved a better deal.
     Uli carried a lot on his shoulders for the past three years, both as Cargolux CEO and also as Chairman of TIACA, where he picked up a lame organization and tried his damndest to resuscitate it.
     The humiliation of not even being able to attend TIACA AMS earlier this month as its outgoing chairman was made even more maddening by a curiously timed DOJ announcement of his indictment a couple of days before the event.
     There may be a positive sign that the airlines have finally had enough rolling over and paying fines; AF/KLM said they plan to file an appeal to their €339 million EU fine.


Getting Down To Business

     Indian Prime Minister Dr. Manmohan Singh and US President Barack Obama, at the Joint Press Conference, in New Delhi on November 8, 2010.

     The kind of importance that U.S. President Barack Obama gave to India during his visit to this country reflects a changed perspective. India today is on the top of all U.S. lists beginning, of course, with business.
     The business deals do not directly connect with air cargo but they are important in the larger context of aviation. To begin with, there is the $5-billion 10 C-17 Globemaster deal. To quote the President: "The major trade deals that were signed in Mumbai are an important step forward in elevating India to one of America's top trading partners." At the press conference with Indian Prime Minister Dr. Manmohan Singh, President Obama pointed out: “I'm pleased to welcome India's preliminary agreement to purchase 10 C-17 cargo planes, which will enhance Indian capabilities and support 22,000 jobs back in the United States."
     Reacting to that, Boeing Spokesman Jerry Drelling mentioned that his company welcomed President Obama's and Prime Minister Singh's announcement that a preliminary agreement has been reached to purchase 10 C-17s. "We are excited about the opportunity to work with India on this great program and look forward to the deal being completed," said Drelling.
     In addition, the U.S. went in fast-forward mode to push civil aviation cooperation. While there has not been much give-and-take in the sector between U.S. and India other than the purchase of airplanes and related equipment, on this visit, the U.S. made special efforts to promote its prowess in civil aviation. The aim is to garner the huge opportunities that will arise now that India is going ahead with ramping up aviation infrastructure. A number of airports are being expanded and developed.
     The move to bring about more civil aviation tie-ups between India and the U.S. is being spearheaded by the Indian-born Mr. Suresh Kumar, Assistant Commerce Secretary and Director General of the U.S. Foreign Commercial Service. According to sources in the civil aviation ministry, American companies have shown a lot of interest and more so after the two countries decided to go for the Bilateral Aviation Safety Agreement (BASA) that would lead to the acceptance of aeronautical products/parts developed in any of the countries.
     Reports from the Directorate General of Civil Aviation (DGCA) mention that even before BASA is signed, significant work has been done: first, a ‘Technical Assessment’ of the DGCA by the FAA was completed in some areas, and second, a shadow certification project by the DGCA was looked at by the FAA in detail.
     At around the beginning of this year, a Joint Working Group comprising members of the U.S. Transportation Security Administration (TSA), India’s Ministry of Civil Aviation and the Bureau of Civil Aviation Security (BCAS) met to discuss issues important for both governments. One of the major issues was the establishment of an aviation security force that will be able to handle X-ray Baggage Inspection, very important in today’s aviation scenario.
Thirankar Ghosh/Flossie


Exclusive—Indonesia has been in the news recently with horrendous volcanic eruptions, earthquakes and the tsunami, and then the visit of President Obama to his boyhood neighborhood in Jakarta, the Indonesian capital. His popularity seems to be much higher there than it is back home in the wake of another seismic eruption – the Republican recapture of the U.S. House.
      After many years of accidents and poor safety reports, Indonesia has made great strides in improving its aviation sector, which was banned by the EU in 2007; however, the prohibition has now been lifted. Flag carrier Garuda is improving its product and renovating its fleet and plans to float an IPO next year.
      The real sleeper in Indonesia is Lion Air, privately held by the Kirana brothers, which launched in 2000 and has quietly captured 40 percent of the Indonesian domestic market. And what a market that is! With 245 million in population, it is ranked as the 4th largest nation in the world in terms of population. Most Indonesians do not fly, but those who do favor Lion Air because of their new fleet, good service and rock-bottom fares. In 2010, the carrier expects to carry over 20 million passengers on its fleet of 60 aircraft.
      It was the launch customer for the Boeing 737-900ER and now has 178 either in its fleet (42) or on order (136). The carrier is one of Asia’s top LCC’s, but it is a hybrid as it offers a small business class section of 10 seats while packing in 195 seats in economy on the 737-900s, 90 percent of which are filled on average.
      Cargo is very important to Lion Air as the country is spread over 17,500 islands and ground and train logistics are challenging. The carrier serves most of Indonesia’s key cities and with its subsidiary, Wings Air, provides connecting service to outlying points all over the nation. A majority of the cargo being transported is garments and textiles and consumer goods, which require the speed of airlift versus sea shipping. The airline flies many live fish and marine products and perishable seafood. And the Komodo dragon? Not yet, but the staff at Lion Air seem to be up to any challenge and cargo will continue to be a high priority with this fast growing company, which has targeted to capture 60 percent of the domestic Indonesian market by 2012.


Business as usual is unusual at FedEx Sanaa these days as Yemeni security are posted outside a branch of the package delivery company.

     Now that integrators are revealed to be somewhat security challenged—a condition heretofore thought the exclusive domain of all the rest of us—expect U.S. politicians to jump all over new regulations ideas wherein speed will surely give way to safety.
     But the battle will be interesting to witness, as UPS, FedEx and others put their very expensive and high-powered Washington lobbyists at work to do whatever they can to soften the blow that is sure to come in one form or another.
     So far, TSA is mum about what steps might be taken.
     Our sources expect some kind of physical inspection demand for certain cargo on freighter flights.
     There also seems to be movement toward drafting some kind of regulation demanding more notice about the contents on cargo flights bound for the United States.


Click To Read
35th Anniversary Issue

At Tiaca Up Close & Personal


Discover European Low Lands

     In our world, there are all kinds of emails.
     There are emails from friends and family, organizations and spammers.
     There are emails that are part of a chain, starting somewhere far away and probably spanning continents only to end up in your spam folder.
     It is our sincere hope that this issue of Air Cargo News FlyingTypers, which is repeated in your email 140 times yearly, is always welcome.
     We think emails that are sensitive and smart and actually beautiful are worth passing along.
     Our good friend Jos van der Woensel (right) has been fighting a "never die" battle with cancer, but despite his intense burden he always seems to find something that lifts everyone around him.
     We recently received a note and a link that reminded us that, even though we had just spent a week in Amsterdam, the extent of our discovery outside the Air Cargo Forum was limited to daily walks through Beatrixpark on the way to RAI where the show was taking place, and also a nightly cab ride to various restaurants, "highly recommended.”
     Here, Jos unlocks beautiful Holland in a manner that is complete and just plain wonderful.
     We send this along to you in case you spent some days in AMS and missed as much as we did.

     "It’s in Dutch," Jos writes, "but for the true explorer, this is a marvelous touristic game.
     "Double click the pictures and places and discover, sometimes in HD and with 360 degree views, the fascinating Low Lands.
     Keep clicking—Keep Discovering and Keep The Sound On!”

Warm Regards,
Jos van der Woensel


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