By Julian Keeling, President & CEO, Consolidators International Inc.

Airlines Need Attitude Not Altitude For Air Cargo

     U.S. airlines contain an almost hidden treasure. Yet, through indifference, disinterest and even disdain, the treasure never will reveal its true worth unless and until senior airline management undergoes a genuine revelation. That revelation is the airlines' freight operations.
      Yes, the passenger side of the airline industry is doing comparatively well five years after 9/11. Packed airplanes. Higher fares. But it's still tough to make a decent profit with jet fuel prices close to or at record levels. The cargo business has been far less in the public eye. Yet, rather than building on the potential strength of both domestic and international cargo, U.S. carriers seem almost oblivious to a vital source of hundreds of millions of dollars in profitable revenues.
      Much of senior airline management (and in combination carriers they all come from the passenger side) still consider air cargo as somehow a dirty and messy business. To be assigned a cargo position at many domestic airlines is considered akin to being sent to Siberia. Exacerbating the situation is the tangled relationship between airline and forwarder. This relationship is a key factor in any future prosperity of air cargo. Unfortunately, it still is far from ideal.
      Unlike the great majority of international carriers who promote air cargo with men, money and marketing, freight, in the immortal words of Rodney Dangerfield, gets no respect at most domestic airlines. Contrast the United Air Lines passenger terminal at SFO with its freight facilities. Despite United having recently emerged from bankruptcy and after four years of ruthless cost cutting, passengers are delivered to the carrier's gates on moving walkways in almost a cathedral-like setting as they pass exhibits of museum quality. In stark contrast, United's freight facilities at the same airport are housed in leaky, drafty sheds, many of which were built when the airport opened in the 1950s.
      After 9/11, with the downturn in passenger business, the majority of domestic carriers slashed expenses across the board. Despite the cargo business holding up very well, cargo staffs were reduced and freight offices were closed. Some carriers appointed outside General Service Agents rather than in-house staffs to handle their cargo business. Speaking personally, I haven't seen a domestic sales representative in almost two years although my office is less than a mile from LAX.
      Yes, the potential for increased domestic cargo volume remains largely unfulfilled. After fifty years as an industry, air freight generates only about 2 per cent of all intercity domestic traffic. Even more distressing than the tiny percentage of cargo volume is the low yield on existing business. Forwarders are fortunate if they earn 3 per cent net profit on domestic volume. While truckers' rates are going up, airlines' rates are going down.
      Air freight is a premium business and should demand a premium price. Airlines should proffer fair, compensatory rates--and stick to them. No last minute "spot" rates that throw havoc into forwarders' own rate structures and often are actually less than surface transportation. Carriers created a monster when early on, they decided the passenger side of the business should absorb almost all the costs of operating an airplane with freight merely adding minor, "incremental" expenses. That monster should be exorcised forthwith with rates rising to reflect cargo's true expense structure.
      We also need less of the airlines' tricks that often make forwarders’ lives one of chaos--and more importantly inhibit our selling efforts. Like:

* Airlines pretending they still have wide-bodied aircraft to key domestic destinations when they actually are flying narrow-bodied aircraft. Example; Continental used to fly wide-bodied MD-11s between the key markets of San Francisco/Los Angeles and Newark/New York. Now they fly much smaller 737s to keep passenger load factors at close to 100 per cent capacity--but with far less cargo capacity. Thus, cargo does not move as intended. The carrier then comes back and tells the forwarder if he really wants to move that cargo, express rates will have to be paid which often are 200 per cent above the standard tariff.
* Changing rates quickly, often without warning. We forwarders are left holding the bag with our customers, often with non-compensatory rates being charged.
* Eliminating flights that often are critical to forwarders' commitments to customers because the passenger load factor is too low or its hubs cannot support the current volume of flights.
Domestic carriers, unlike their international sisters, often forget who is their best friend. It is the forwarder. Almost 70 per cent of all domestic "hard" freight, i.e., more than 50 lbs., is originated by freight forwarders.
Too often, our friends at the domestic carriers have a collective loss of memory. They might ask themselves:
* Who has an army of sales people covering every nook and cranny of the U.S. searching for cargo business? With every pound of that business carried on an airplane.
* Who has a single-minded devotion to cargo, undistracted by passenger considerations?
* Who has created new systems of deliveries, attractive price and service packages to attract both new customers and to convince current shippers by air to use more of this method.
      A striking example of how airlines can improve their cargo operations is in the area they constantly boast about--the technology sector. Carriers complain we forwarders don't use their on-line booking systems often enough. That we either are Luddites or just plain stupid. Neither. The fact is their booking systems are half baked. Most airlines' cargo booking systems don't provide enough information. Example: their web sites might indicate a shipment flew as booked when in fact only two of the five pieces of freight commited to the carrier were actually placed on the flight.
      While U.S. carriers must make a greater commitment to air freight than ever before to stop the erosion in domestic cargo volume, we forwarders also have to do our share. We require complete candor and honesty on both sides. Let's not make commitments to the airlines that we cannot fulfill or promise delivery schedules to our customers that we know will not occur.
      We live in an increasingly complicated world. The day of the simple tariff structure is history. The time when a single, overnight service satisfied the shipper belongs to a simpler past. Unless both airline and forwarder adapt to this new environment, domestic air freight never will realize its enormous potential even though it should be the transport method of choice in our hurry-up world.