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A R C H I V E S

LARSEN AT LARGE

NEW YEAR OPPORTUNITIES

     2003 marks the 100th anniversary of the Wright Brothers first flight, in a heavier than air machine, at Kitty Hawk, North Carolina. That event is considered the birth of aviation as we know it today.
     However aviation may suffer one of the biggest setbacks in itís 100 year history in the same year that it celebrates this milestone.
     Two of the largest carriers in the U.S., United Airlines and U.S.Airways, after recently taking shelter in Chapter 11 filings, are drowning in debt .
     Meantime a third, American Airlines appears to be struggling to keep its head above water.
     In 2001 the nation’s airlines lost a combined $7 billion.
     These same carriers are expected to report losses close to $9 billion for 2002 .
     The New Year, 2003, opened with stocks in the three big U.S. carriers at all time lows: United Airlines $1.30, U.S. Airways $0.28 and American Airlines, although much healthier, closing at $6.72 per share in the first week of trading.
     The numbers tell us what we already know clearly displaying the public’s lack of confidence in aviation.
     With the previous two years disappointment , what can air cargo expect and just as importantly do about 2003?
     Certainly the industry is in for some retrenching. History has shown that times of great turmoil, financial and otherwise, in the airline business also means casualties! Certainly, there will emerge a stronger leaner United/U.S Airways through possibly a merger of the two companies.
     While few would like to address the unthinkable, at worst, one of the two might cease to exist.
     It’s happened before and there is no reason to believe it can’t happen again.
     There is ample reason to immediately stop cold any doomsday scenario.
     In other words, the overwhelming challenges to US Airways and United should not be allowed to continue without some attempt to change the playing field in favor of the beleaguered carriers.
     For example, help could come in the form of allowing foreign investment in U.S. carriers rather than sporadic handouts by the Government.
     Protectionism, in this case, doesn’t apply anymore. In this age of globalization, the thought of compromising the nation’s security, by allowing foreign investors to prop up our ailing airlines, does not make sense.
     During the Gulf War for example, foreign carriers were used to carry cargo to the war zone.
     The U.S. Post Office which, in the past would move mail only on U.S. carriers, now uses foreign carriers all over the place as well.
     Should the government deem it necessary to restrict the movements of U.S. carriers during time of conflict they can easily take over the operations of those carriers and their personnel at any time they wish to do so.
     It’s time for the industry to get up and say:
     “Government, either get into the business of aviation or stay the hell out.”
     These occasional governmental, albeit political forays into the airline business in sum total have never done much good.
     The main reason is, that beyond coming to the rescue with the media mills blaring, government historically, pays little attention long-term to the airline business.
     Take the case of the U.S. flag carrier and pioneer carrier Trans World Airlines. TWA that went out of business before 9/11 only to end up on a list to get an economic bailout because of 9/11.
     Clearly, somebody had their head screwed on backwards on that one.
     But back to where we started. How are we looking for 2003? Using no crystal balls, no models, just gut feel, the industry will continue to struggle through another year of mediocre performance not only because of sluggish economics but also because of the monetary damage that’s already been done to the carriers, both on the passenger and the cargo side. Add to this the cost of security again for both passenger and cargo operations and the picture worsens.
     Don’t believe for one minute that the government is going to pick up the tab for the TSA or for the development of the new technology to be used for screening of passengers and cargo. Also don’t believe that the traveling public or the shippers of cargo are prepared to shell out more than they presently do for these added services.
     Either up front, or through the back door, the industry will get stuck with the bill, an expense the size of which has never been seen before.
     The airline business will wake up one day, like the poor slob, who is presented with a dinner tab large enough to choke a horse, after his date has left the restaurant with another guy, leaving him sitting at the table alone.
     Consider for a moment, a future vision of surviving carriers like Jet Blue or Southwest Airlines.
     Now on final approach into Pisa, Italy with a load of happy vacationers who have munched on blue potato chips during their trip, all the way across the Atlantic from New York.
     Across the ramp in the cargo area, those same passengers get a good look at the new integrated carrier, DHL, which has gladly used every advantage, and the might of the German Post Office’s deep pockets to take the lead in the transportation of international express packages from their rivals, FedEx and UPS.
     Maybe, 2003 will not be such a great year for business. But we must not think for one New York moment that any of us gets a pass to sleep through the next twelve months.
     To all of you out there in cargo land, Happy New Year.