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A R C H I V E S

N E W S

Word that Cathay Pacific Cargo is ordering up to a half dozen A300-600 freighters that will allow the carrier to expand destinations served, comes on the heels of FedEx confirming, it’s Asian business has lifted profits once again. Maybe the USPS, which has partnered with FedEx to the chagrin of Emery and Amerijet and others, should have been a takeover by the USPS, just as Cathay Cargo was when the German postal service Deutsche Post bought 30% of Cathay. In any case, while this time of year is set aside for introspection and strategic planning for what may lie ahead in 2003, there can be no doubt that 9/11 ordered the business of most of the world during 2002 and lingering affects will continue into the new year. Jim Larsen, the old pro cargo marketing man at the Port Authority of New York & New Jersey has put in his papers for a retirement, that will cap a decade of service with the bi-state agency and provide Jim with a decent hereafter in what we sincerely hope is a long and continued life in air cargo. The Port Authority reshaping itself, in the 21st Century is not moving out of the air cargo business. But still it must be said. Jim Larsen is the finest, smartest, most down to earth airport and gateway cargo marketing manager in the history of the business. No one anywhere else in the world is better at understanding that all events are local. To support your local gateway and lift the people who are the bread and butter of the air cargo business— the small entrepreneur, is the thing always with Jim. Jim came out of Seaboard World Airways where he learned the business from the ramp up. When Jim Larsen put in his papers, we kept hearing the lyric of that 1950s tune: “You don’t know what you got until you lose it,” rattling around in our head. Once upon a time there were cargo marketing managers working for airports in Boston, New York, Baltimore, Miami and elsewhere. Less than ten years ago, there was even talk of a separate association for air cargo airports, a special interest group that would be comprised of these managers, who would go out and lobby and build special interest in their gateways, apart from any other industry trade group. The idea never jelled, as one by one, major gateways dumped their marketing managers due to budget cuts, politics and plutocracy. Cargo marketing managers are a good idea for airports, as important as runways, in our view. The fact is, the most dynamic growth ahead in the airline business is air cargo. What Jim Larsen and the small handful of people like him, excellent air cargo individuals, bring to the table, is the culture of air cargo which they work and develop while passing their knowledge onto the next generation. Air cargo needs all the Jim Larsens and Peter Cajigals and Frank Potters and Ernie Croners, Peter Spauldings and smart airport people who know something about this business that it can get. But we suspect, that Jim who loves the business, will continue in some air cargo endeavor. Best of luck and keep in touch old friend. Everybody else should stay tuned . . . That big half million plus square foot construction going up for air cargo along Rockaway Blvd., the main roadway bordering JFK International Airport in New York has been a tough sell since the project was announced. From wildlife preservationists, who have been screaming about loss of habitat and what might happen to any number of the thousands of bird species which still call at an area called Idlewild Park (Idlewild, for all you nimrods out there, was what JFK Airport was called until 1964), to local residents whose homes snuggle-up to high-powered, go-go, flat out cargo operations, developer International Airport Centers of Chicago (IAC) must wonder if building at JFK is worth it. Actually, the area situated along the north side of Rockaway Blvd., between 227 and 232 Street encompassing 24.5 acres will house four buildings employing up to 1,000 people in all manner of express and heavy cargo operations. The development fell to IAC after it purchased the land from New York City for $4.5 million after answering an advertisement seeking RFP’s (request for proposal). Recently the neighborhood mounted a successful campaign to have IAC put up $250,000 to build recreational facilities according to one report. Reponse from IAC occured, when several sports and environmental groups (lining up backing of local politicians and civic groups) decried the loss of what many had hoped would be parkland development. Best quote so far was from a public relations type for IAC who said in the best plain-speaking: “What do they want from us? We just responded to an advertised RFP?” Meanwhile surrounding neighborhoods from JFK to IAD seem to be getting madder and madder at aviation. On another side of JFK, the old Hilton Inn, which before that, was The Seaway Idlewild Hotel sits inside a gated compound, now a Salvation Army billet for homeless people. Only the great Salvation Army would even attempt to put up with the vitriolic behavior it is confronted with from its ‘neighbors.’ Commander of the Citadel is Barbara Joyce who has a face like an angel and is from heartland America, Columbus Ohio. After one particularly vocal meeting she lamented: “I’ve never seen or heard such carrying on. I thought when you reach out and help people there is appreciation.” Well, yes M’am, but not in our backyard. Currently there are 36,000 homeless people a night, seeking shelter in New York City. Something we can all think about as we gather to celebrate 2002 and add things up . . . Polar Air gets fifth-freedom, four new weekly frequencies through Hong Kong connecting its hub operations at Inchon and twice weekly Hong Kong/Manila as part of its initial service upgrade, the result of that new air agreement between the U.S. and China. Now able to pick up cargo at SAR, Polar will build the Inchon segment with better than two dozen weekly flights during the first half of 2003. Hong Kong desperately wants to hold onto business and build its future in a Mainland China, and world at large that is increasingly wondering, “Who Needs Hong Kong?” (see Archives). But give SAR credit. While local residents stand in endless queues at job fairs and are fleeing Hong Kong for places like Shanghai and Shenzen, and truckers squirm through the single road entry to the airport, Chek Lap Kok officials have initiated agreements of cooperation with other Chinese gateways while encouraging everything from private business to trade shows, and generally kept up a major image with lots of imagination and money . . . If you look at a map of Tennessee and Virginia, notice the point where the northwest part of Tennessee and the southwest part of Virginia overlap and you are in Bristol, Tenn. But in the time it takes to sneeze, you might discover that you are in Bristol, Va. in an eye blink. Little wonder that folks from two states got together and formed an airport commission including two other cities of Tennessee—Kingsport and Johnson City in the mix, calling the operation Tri County Airport Commission (TCR). Now you know about commissions. They meet and have lunch and big thoughts on just about everything. So at one meeting recently TCR decided that maybe they better step in and end disagreement over a group that they had formed at an earlier luncheon called Global Trade Alliance that was charged with developing cargo and a foreign trade zone at Tri-Cities Regional Airport. As the picture shows, there is plenty of room to do anything at this facility, including getting a major air cargo carrier to set up shop at Tri-Cities to compliment service from UPS, FedEx , Airborne and others. Building a solid revenue stream will be the job of the next cargo development manager, a position TCR is currently attempting to fill, while it completes work on a new multi-million dollar handling facility. Maybe the folks at Tri-County should start a choral group. It’s Christmas and a couple of turns at Jingle Bells is a great way to get everyone on the same page. Contact: (423) 325-6000. . . You may not be able to buy the seven hills of Rome, (although everything seems to be for sale these days), but a hefty portion of the airports of Rome, Fiumicinio and Ciampino will change hands as 44.7% goes to Macquarie Airports Luxembourg S.A.(MALSA) from Leonardo Holdings January 3, 2003 in a deal worth about $340 million. MALSA is part of the Australian conglomerate Macquaire that also operates Sydney International. Other MALSA operations in Europe include two airports in England—Bristol and Birmingham. The interesting thing here is the muscle that is being applied by the Australians to Italian airport officials who are being told to get their financial house in order before MALSA takes a 44.7% stake in Rome, the sixth largest airport in Europe. MALSA stock has shrunk recently, as other holdings including Sydney have experienced lackluster results and some negative publicity. But more about that later. Aeroporti di Roma is mulling whether to sell bonds or restructure debt amidst reports that MALSA threatened to scrap the deal because airport revenues in Italy have also sagged this year.As more airport operators fold to popular demand and privatize their gateway facilities to raise money and dump costs, expect increased hard-nose business edicts from third-party, asset-rich operators. In some cases these operators without really knowing all that much about airports, hire former airport executives to ‘run things’ then sit back with wads of cash pulling the strings. If you can’t get a decision from your airport operator you better look closely. You may be talking to Howdy Doody.If companies such as AMB, Airis, and others are any indication, third-party operators are currently deluged with “hey, look us over” requests from city governments and private holding companies everywhere. The point is, if an airport is central to the success of a city or regional development plan, than long term,who gets stuck with whom should be well researched. Just as it took over operating Sydney International Airport, Australia’s largest facility, Macquarie attempted to steam roll over Sir Richard Branson’s Virgin Blue by levying a per passenger charge as terms for Virgin Blue to utilize defunct Ansett Australian’s passenger terminal at Sydney. What Macquarie wanted, according to Virgin, was utilization of less than half the terminal but payment of better than 75% of the costs. As reported here, a couple weeks ago, the battle raged for some months before peace was made. But while it lasted, here was big bucks, banker-backed Macquarie getting key-holed by Richard Branson, the most exciting and high profile airline executive in the world. At one point Virgin Blue included painting a B737-800 with the words:“MACQUARIE, STOP THE SYDNEY AIRPORT RORT.” “Rort” is Aussie plain speaking for an underhanded arrangement to take advantage of a little guy. Aside from wondering, what would be fun to report about the airline business 2002, without wonderful Sir Richard on the scene, the heavy-handed Macquarie action here is something to think about before handing over an airport’s keys and possibly the future of your city. A company with an interest in one airport may be taking decisions because of its position around the corner or half way around the world at another gateway. Maybe Aeroporti di Roma should make MALSA an offer that they can’t refuse? . . . A group of executives met in Luxembourg, brought together by Robert Arendal. Actually the gathering was born earlier this summer at a well-attended perishables conference that was held in Spain.

Robert Arendal

Robert Arendal is a great man and thinker about things who happens to be in air cargo. Since the day he left Cargolux some years ago, for our money, the airline hasn’t been the same. It’s kind of funny, this almost invisible layer that separates people like Bob Arendal, Rudy Auslander, Ram Menen, Robert J. Aaronson, Guenter Rohrmann, Peter Yap, Bill DeCota, Robert Kennedy, and before that Jacques Ancher, Peter Hees, the late Tim Peirce, the great LaGuardia Airport manager, plus a few others, from the rest of us. But the truth be told, given the opportunity, you are lucky for a chance to walk down the street with any of them. In Luxembourg, last week Ram Menen was there, of course. Something vital to the future success of many air cargo businesses was on the line. So just as always, Mr. Menen answers the call: “For years, airlines and other modes of transportation have treated perishables as low-yield, filler type cargo.” he said. “But now with the global demand for all manner of fresh goods year round, the perishables business is getting attention it needs and deserves. During a conference this past summer at a panel that I was chairing, it became evident that there has been ongoing a major disconnect amongst various elements of the cool chain. Robert Arendal, who organized the conference was tasked with setting up a framework in which an organization dedicated to perishables might function. During the past few months Robert and a few others among us have worked to create a framework and game plan for an association. Last week as this all-volunteer group gathered, the idea turned to reality and Robert agreed to serve as the first chairman of the “Perishables Association. Now small groups have been created which at this point are examining the process of creating the association. Under Robert’s experienced hand and leadership I believe we will begin a new era of redefining the perishables industry.” We keep thinking how little acorns some day become mighty oak trees, now that it is almost winter and the small nuts are scattered on the ground all over North America. We ask Ram how do you get an association out of chairing a trade show meeting? “At one point I asked the panel and audience should there be an association dedicated to bettering the entire perishables business by bringing together various elements of the cool chain process? The answer was an overwhelming ‘yes.’ The idea took off from that moment.” What Mr. Menen doesn’t point to is the time, effort, travel and expense of a very hard-working, dedicated to get this air cargo thing right group of executives. There are some great people among us . . . The United Airlines mechanics who said no thanks-giving others at the carrier a giant case of indigestion last Thursday will not prevail. United will finally line everybody up, get some U.S. government loan guarantees and slowly return as the great world airline that was always there in the first place. But what a wrenching, debilitating public display of obstinacy on the part of that labor . . . Cargolux gets a new chief operating officer January 2003 in the form of 43-year old Ulrich Ogiermann. Mr. Ogiermann joined Cargolux in 1998 from Lufthansa Cargo . . . All About Asia— There may only be one-way traffic for Taiwan carriers when cross-straits permission comes for Lunar New Year flights (before mid- December) between Shanghai and Taipei, but look for everybody to enter the market at once. What that means is an instant fare-war, something brand new air markets seldom experience. But rarely have so many carriers decided to fly to the same place at once. Everybody wants in on the historic moment, as holiday charters mark the first direct air link from China to Taiwan. So here come a half-dozen carriers ready to fill a wild blue yonder that has been closed since 1949. Long-term winners, when real two-way air service commences, are mainland carriers who will be able to puddle-jump their local population (only a handful have ever been permitted to fly) the short journey across the great divide to Taiwan. Elsewhere the newly formed association of Mainland Chinese airports called A5 including Hong Kong, Macau, Guangzhau, Shenzhen and Zhuhai, met for the third time in Macau on Friday, November 29th, signing their first official cooperation document. The paper detailing A5 agreement, handling each other’s flight diversions and emergencies, was backdrop to the real topic of conversation amongst Macau attendees who chatted up the anticipated Lunar New Yerar cross-straits flights. As long-term schedules open up in maybe two years, Hong Kong predicts an 8% drop in passenger activity. Hong Kong airport authorities say, long-term the connection will benefit business. Some people think that SAR maybe putting on face. Come to think of it what else can they do? Air cargo issues such as road access in and out of the airport could move air services elsewhere in a liberalized environment including Taiwan. A5 is an interesting group. Four of the airports serve mostly domestic routes. They want what Hong Kong has already got, international flights. The A5 cooperation in the best case will work to ease emergence of several dynamic regional and city economies to growing air services. Eventually when places such as Guangzhau Baiyun get their own international flights, the need to cooperate with the others, especially Hong Kong will lessen. But the framework and history of A5 which all hope rings positive, will still be at work for everyone . . . Cathay Pacific took delivery of its first A300-600 which paves the way for the carrier to launch services non-stop from Hong Kong to New York next April, The aircraft with super long-range is specifically built for long thin routes delivering payloads both in cargo and passenger. When Richard Branson took delivery of the first aircraft of this type last July, somebody noted that the A340-600 had the longest tube of any aircraft currently in service, after which Virgin Atlantic media-meisters had the words ‘mine is bigger than yours’ painted on the aircraft. None of that funny stuff for Cathay, but when the airline gets a couple more of these long-range birds, what with the new aviation agreement between the U.S. and China, look for new destinations in the U.S., including Chicago . . . Even though Qantas is a member of Star Alliance and Air New Zealand alliance tie in is One World, the lure of flat out monopoly and fear of the future have thrust forward $277 million from Qantas for a stake in Air New Zealand and a bid to lock up air coverage, down under, once and for all. Now with Ansett out of business and Virgin Blue holding about 18% of the domestic Australian market, the new playing field should keep any potential competitors pretty well bottled up. As example Virgin had planned start-up to New Zealand, but with a well-heeled Air New Zealand, first bailed out by the government after 911, and now backed by Qantas, the hill may be too steep for anybody including Virgin Blue to climb. The proposal and money on the table, this deal is even more tantalizing because of the synergies and big savings which will be worked up between the new partners. But regulators are not turning a blind eye to what could be an uproar of protest against Qantas/Air New Zealand. Expect lamps to turn up and magnifying glasses galore, before this deal is final . . . Air Asia Profits— That new carrier operating along the aerial highway of Peninsular and Eastern Malaysia with the Southwest Airlines model, joins other copycats such as Ryanair and Jet Blue as new stars in the sky. Air Asia is small right now but unlike its big brothers, Air Asia is in the black, flying about three quarters full all the time with only one variety of aircraft, five leased B737s. But with its eye on an equity offering, having locked in on one million passengers during its first year of operation, the carrier says that it will expand destinations via maybe a dozen aircraft which it hopes to have in schedules by the end of 2003 . . . Here come around the-world-cargo — That ‘Interim’ DOT decision that granted FedEx, UPS, Northwest, Polar Air part of the big package of weekly all-cargo slots into SAR, and United, new passenger connections all with Fifth-Freedom rights to come and go from anywhere, is the result of new agreement between the U.S. and China. With flights carrying U.S. flags allowable by China, right now at 19 up from 8, UPS which had none and now gets six a week, looks like the big winner. FedEx and UPS both of whom spend ka-zillions lobby bucks also are able to now serve their respective Philippine Pacific hubs at Subic Bay and Clark Field via SAR. At the same time the door opens to serve Hong Kong from the integrators’ European hubs as well, which brings us about as close as it gets to around the world air cargo. Everybody in this recent package said that they plan to commence new services in January 2003. Kalitta and others are awaiting the DOT nod to start more SAR service, which if fully realized would total up to 64 frequencies a week by U.S. carriers . . . Meantime Australian Airlines, which operates Hong Kong/Cairns, Australia flights, taking advantage of that destination being one of the few that Mainland Chinese are permitted free travel, said it will commence Shanghai/Cairns flights by mid 2003. Right now the start-up carrier owned by Qantas operates flights to Nagoya, Osaka, Fukodaka, Singapore, Taipei and between Cairns and the Gold Coast with four Boeing 767-300 aircraft. Australian plans to go to 12 aircraft within two years, adding service to Malaysia and India and possibly taking over Qantas service to Bali that was torpedoed by the terrorist bombing . . . Elsewhere Beijing Capital International Airport gets serious funding from China Development Bank to the tune of 12.5 billion Yuan. How much is that in U.S. dollars? Look it up on your currency converter! Beijing Airport is getting ready for the 2008 Olympics at which point in time the airport will be handling more than 60 million passengers annually up from current-day 24 million. What will be built? Everything . . . Anybody remember when nothing ever went seriously wrong in Singapore except maybe the decision to clean up the red light district? Lately the question seems to be when will anything go right? The tiny island nation that has fielded one of the great airlines in the world seems stuck in some kind of malaise. Economy not predicted to grow much near term, manufacturing moving away entirely to China and now even some of the vaunted shipping companies are beating it to other ports and airports. Now on the scene is this entrepreneurial genius from of all places, Malaysia who is out to steal the cargo thunder from Changi, Singapore’s go-go aerial gateway. If Syed Mohktar Albukhaz has his way, Senai International Airport located just across the water between Malaysia and Singapore called the Johor Strait on the southern most coast of the Malay Peninsula will be the next Asian ‘must address’ for the world’s air cargo carriers. Mr. Mohktar is no wild-eyed dreamer either, but a doer whose port handling company in Malaysia near the airport already has swiped Denmark’s Maersk Line and Taiwan’s Evergreen Marine from Singapore ports and waters. It may be hubris, or perhaps there was just too much business, but Singapore knows that it cannot allow Mr. Mohktar to march in and do the same thing again with his new airport venture. For his part, Mr. Mohktar is supremely confident that once people get to know the advantages of Senai that they will want to grow with a privately-held airport which has the flexibility and desire to build exactly what the customer wants. “We will do passenger business too. Air Asia, the exciting new low-cost carrier is serving Senai right now.” As to what the cargo enterprise will be called, the name has got to drive Singapore nuts all at once. The cargo operation at Senai is called SATS. Sound familiar? It should, because the letters that to Malaysians means Senai Airport Terminal Services also stand for Singapore Airport Terminal Services. So it’s SATS and SATS, depending where you are. The last time the two countries shared an aviation name, was when there was only one airline flying, we recall, an Airspeed Consul, with the name Malayan Airlines painted on the side. But when you think about it, maybe Mr. Mohktar, his steam ship success in hand, might some day discover that he might have been better off leaving his rivals up north sleeping? . . . Members of the world’s biggest combination of airlines, The Star Alliance meeting in Brazil recently came up with all kinds of help for United, including maybe even an equity stake by Lufthansa in United of up to 25% bringing needed cash to the airline. No question, UAL CEO Glenn Tilton must be wondering what time will the locusts arrive when he gets up in the morning and pulls his pants up one leg at a time. But LH CEO Jürgen Weber saying: “If you have a friend who comes into problems, it’s only natural to try to help.” Speaking of friends, leaving no stone unturned, UAL officials are talking to all of its other partners in Star Alliance as well . . . Working in an airport is not going to be the same. That immigration bust Thursday 11/21 which netted 63 workers at DFW and similar action on Tuesday 11/19 grabbing 118 employees at New York city airports will continue as security lockdown of all U.S. Airports heightens. But the raids expose a dirty little secret of American business, the acceptance of illegal workers in the U.S. marketplace. Most of the Latinos busted had phony social security numbers and other papers but were peacefully doing their jobs, working long hours for short pay when the INS swooped down. We wonder if the INS spent as much time last week watching the borders to Mexico. The arrests are a kind of last hurrah for INS, which recently admitted that it can’t find more than half of the 1,400 resident aliens, the authorities wanted to talk to after 9/11. INS will be one agency, only make better by inclusion into the new Homeland Security Department okayed this week by President Bush . . . All Nippon Airways lost 66,000,000 in the first half, Japan’s second largest airline halved its losses during the same period a year ago. ANA blamed slump in travel post 9/11 and fierce competition from Japan Airlines System, the combination of domestic and international Japan Air Lines . . . You know that the business world is upside down in 2002, when you discover that Swiss, the airline put together from the remnants of Swissair, Crossair, and a ton of government money is on the ropes again. Swiss said that it would lay off people, cut routes and ground some aircraft in an attempt to get profitable in 2003. But IATA at the same time said that it expects worldwide that the airline industry will lose between five and seven billion dollars during calendar 2002. So maybe the most ambitious, best laid plans of mice and men these days have to be viewed through a long lens (or the bottom of a shot glass) . . . Airbus is nothing if not smart. How else could the consortium end up with the biggest portfolio—some 1,500 aircraft orders, in such a short time? But Airbus leadership in thinking about how to get the best and give some back at the same time was apparent recently at a signing between Russian Foreign Minister Mikhail Kassianov and French Foreign Minister Jean-Pierre Raffarin at the Airbus factory at Toulouse, France. Aeroflot had just agreed to buy 18 A319-320 aircraft, with delivery of the first, an A319, scheduled for 2004. But the intriguing thing here is the decision by Airbus to create the Airbus-Kaskol Engineering Center in Moscow. Kaskol is the largest privately held holding company in Russia with aerospace focus. Together, employing about 100 of the best and the brightest by 2004, the Moscow operation will develop long-term programs. The Center will open in Spring 2003. The thing that sticks out, here, is that Russian aviation has been the outstanding, if not commercially successful legacy of nearly seventy years of the former Soviet Union. Russia and CIS air pioneers even date back before 1917. Igor Sikorsky, whose aircraft first spanned the Atlantic and Pacific Oceans as commercial passenger planes for Pan Am World Airways, whose pioneering of helicopters has resulted in a company based in New Haven, Connecticut producing helicopters that are the standard of the world, migrated to the USA from Russia. Today, at airports and tarmacs all over Russia and CIS with its many countries and cultures, are aircraft of every description and type churned out by a highly competitive and prolific aviation industry lead by design bureaus such as Illyushin and Antonov and others. Hundreds of little known (in the west) aircraft variants and experimental airplanes are there to be seen by even the casual observer. In many cases, truly unique and even in some manner, advanced aircraft ended up without possibility of commercial sale, as one of kind conversation pieces. Today examples of the past fifty years of aviation development in the Soviet Union sit alone and mostly forgotten at industrial parks and outside airport passenger terminals. How smart is Airbus to recognize and sponsor aggressively this overlooked at best, and underestimated at worst, aviation mind of Russia and CIS? Maybe right now Russian/CIS aerospace is only building a wing or a sub structure for the western manufacturers. But to read into this latest move, Airbus must be thinking of what shape aircraft will take after the largest bird ever, the A380 takes flight and maybe even to help get the big bird airborne. Who knows what aerospace genius will emerge from Russia/CIS? We do know that, from four engine jet-powered flying boats to the largest aircraft in the world—cargo lifters at that, unique and advanced aircraft throughout history have emerged from minds in that part of the world. Airbus Industrie unlocking the door is a brilliant move . . . The latest plan in the U.K. to keep England atop the international aviation world in the 21st Century, includes development of an airport atop a bird sanctuary at Cliffe in Kent on the Thames River estuary. People are mad as hell and are not going to take it any more, but not for what might happen to the birds. Seems that SAGSI or Strategic Aviation Special Interest Group has fastened their lamps on the site for a new international airport that fills the bill (no pun intended) saying that Kent better get on board ‘a once in a lifetime’ opportunity. SAGSI represents 74 local councils which are comprised of about half of the population of England. But Kent officials claim that SAGSI must not have heard them right when they told everybody what they thought of the airport idea. “We are barking mad,” one reporter heard a Kent official say. Richard Worrall chairman of SAGSI was quoted saying: “The vision to leave Britain equipped to be a major aviation player of the 21st Century is on the line.” Meanwhile Heathrow is stuck as basically a two-runway operation, facing a possible night-time curfew shut down because a coalition of its neighbors recently won a European Commission victory on the complaint that noise and activity at the airport was seriously impacting quality of life around the field . . .