Crunching Capacity.

COPYRIGHT 2001 Information Access CompanyBy Schapiro, Stephen A. With
American skies filling up, Caterpillar sees air freight traffic slowing
to a crawl The frustration from the worst year ever for flight delays in
the United
States is seeping from the passenger cabin into the bellies. As cries for
relief grow louder and the lines of passenger planes waiting for takeoff
clearance get longer, there is growing concern that the country's economic
future may be tied up on tarmacs. Gerald Shaheen, president of
Caterpillar, the world's largest manufacturer of
construction and mining equipment, told a recent business-led meeting on
the
nation's epidemic airport delays, "a crisis is at hand" for American
shippers. "Why is a tractor guy talking about air service?" Shaheen asked
the U.S.
Chamber of Commerce Aviation Summit last month. "We can't make things
possible
without quality, dependable air service to support our business." "We
tend to concentrate on the passenger side of the crisis," Shaheen said.
"But we need to look at heavylift capacity." Shaheen's warning was a rare
word from the shipping community in a debate
over aviation infrastructure and airline services that has grown more
heated
as lengthy delays have become familiar scenes at many airports and leading
U.S. carriers have spun toward each other in major consolidation
maneuvering. The Federal Aviation Administration says more than 450,000
flights were
delayed last year, about 28 percent of the total departures and a number
20
percent worse than 1999. Nearly a third of the delays were at a single
airport, New York's LaGuardia. Upper Decked Shippers and cargo carriers
have been largely silent on the congestion
crunch, but even the flexible networks of forwarders are starting to feel
the
pinch as the delays get longer and their alternate choices get sparser and
pricier. "There has been a disaster coming on for a long time," Airgroup
Express
President Bill Moultrie said. "It's very concerning the way it's going."
"I can tell you it's a very bad thing for the industry for a number of
reasons," said Mike Ellis of Expedite America. "First of all, it forces
the
forwarder to utilize freighter-only airlines and it hurts our margins
significantly." "We're looking at either charter operations or other
integrated carriers or
trucking alternatives," said Bob Cloud, president of Team Air Express.
Shippers have a clear interest in those choices and Shaheen stressed that
Caterpillar's interest is no small matter. Caterpillar moves more than 75
million pounds of air freight each year and ships $10 billion worth of
goods
annually for other companies through its logistics unit, he said. With a
48-hour guarantee on delivery of all replacement parts anywhere in the
world,
supply chain management is critical to maintaining the company's
competitive
edge. Shaheen criticized the combination carriers' moves to smaller
aircraft for
passenger efficiency, sacrificing cargo space. Shaheen also faulted the
hub
system for putting more people into fewer airports while leaving
"quasi-standard airports" in the regional markets. "In commercial
airlines, the capacity is less and less for forwarders," noted
Cloud. Striking Out There doesn't appear to be much relief in sight for
passengers or cargo
customers. The U.S. Postal Service agreement with Emery Worldwide ends in
April and FedEx won't start hauling mail under their huge contract until
August. That may add a windfall of space-eating mail to commercial
flights,
but several industry observers believe Emery will continue the postal
contract
under a 90-day extension. Labor unrest may not be easily shrugged aside,
however. The four largest U.S.
airlines may be spiraling toward strikes this spring and even the
increasing
potential for government intervention isn't easing the fears of cargo
shippers. "We're definitely making preparations just in case," said Dick
Morris, chief
operating officer of Pilot Air Freight. Longer-term solutions, of course,
include more runways and better air traffic
management. But the waiting period for new airport construction is getting
longer and environmental concerns have killed proposals for reliever
airports
in California and Florida. That means that air freight shipments that
don't
find new routes will have to wait right along with disgruntled passengers.
"What really is at stake isn't about being two hours or two days late to
Florida. It's about the ability of this country to maintain its
competitive
edge," Shaheen said. Express Earns There may be a slowdown in the U.S.
economy but the impact is hardly being
spread around equally among the express carriers. The slowdown was
evident in the fourth quarter financial report of United
Parcel Service, but the parcel giant still saw its net profit grow 9.5
percent
over last year, to $724 million as a 19.3 percent gain in UPS's growing
export
business helped offset lackluster 2.8 percent growth in domestic volume.
For the full year, UPS posted $2.8 billion in net profit. International
traffic grew 13.8 percent, triple the rate of domestic growth. But
Airborne Express fell into the red with an $11.9 million net loss in the
fourth quarter amid growing evidence that the country's No. 3 express
carrier
is losing ground to its larger competitors. Airborne is stepping up its
effort
to reverse the financial slide by moving to zone-based pricing, raising
rates
and adding new charges, but the persistent problems have renewed
speculation
that Airborne's best chance of getting out of its hole will be through a
buyout, or at least new cash from a big investor. Airborne's depressed
share price jumped some 30 percent within a week on
rumors of a possible sale, but Wall Street analysts said the UPS and FedEx
challenge to DHL's U.S. citizenship had likely put aside any moves by the
most
likely suitors — Deutsche Post World Net and TNT Post Group — for now.
The good news for Airborne was that its airborne@home service, a hybrid
delivery offering in which the Postal Service completes the last leg, was
getting more popular, averaging about 87,000 shipments a day in the fourth
quarter. That may help Airborne as it ramps up a badly-needed ground
delivery service
this spring, but analysts remain skeptical that the efforts will turn the
carrier around. Ed Wolfe of the Bear Stearns investment firm noted the
business-to-customer service "is not yet profitable and its rapid growth
has
exacerbated (Airborne's) poor financial performance." Briefly American
Airlines will increase its cargo rates April 1. … Atlanta-based
Surfair, a largely domestic forwarder with between $70 million and $100
million in gross revenue, shut down Jan. 25. Several of the 31 stations,
most
of them franchises, sought partnerships with other companies such as CF
AirFreight. … Forwarder Air will fold its LogTech subsidiary into its
sales
organization after the technology business lost $500,000 on $309,000 in
the
fourth quarter. Overall, the air freight trucker's revenue grew 16 percent
in
the quarter, to $57.7 million, and 26 percent to $214.9 million for the
full
year as the company posted a $23.4 million net profit. … Cargo traffic
increased 5 percent at Los Angeles International Airport in 2000, to 2.24
million tons. … Ohio-based Airnet Systems, a specialized urgent-delivery
carrier, saw its net profit nearly double to $7.3 million in 2000 on a 5.2
percent gain in net revenue, to $135 million. … FedEx lowered the
profile of
its logistics division by placing the newl y-christened FedEx Supply Chain
Services within a catch-all sales and marketing division called FedEx
Services. … Led by a 1.3 percent decline in international freight
traffic,
cargo at Miami International Airport slipped 0.5 percent in 2000, although
that international business soared 11.6 percent in December. … Forwarder
Target Logistics lost $151,249 in its quarter ending Dec. 31, on a slim
decline in gross revenue, to $24.7 million. … C.H. Robinson's net profit
grew 34 percent last year to $71.2 million on a 43 percent gain in net
revenue, to $419.3, although the slim portion of the logistics giant's
revenue
from air cargo service declined 13.4 percent in the fourth quarter. …
Virgin
Atlantic Cargo opened an office in Puerto Rico at LMM International
Airport.
… FedEx offered later drop-off times in key markets in the United
States,
Europe and in Toronto and will charge extra for what it calls FedEx Extra
Hours. … Cargo traffic at Ontario International Airport in Southern
California grew 4.5 pe rcent last year. … California's Stockton
Metropolitan
Airport is in talks with a developer to build an air cargo facility. …
New
landing procedures were approved to minimize noise at Sacramento Mather
Airport, a converted military base pressing for more cargo flights. …
Forwarder Phoenix International moved into expanded facilities in
Minneapolis
that include a bonded container station. … Boston's Logan International
Airport saw more than a million pounds of total cargo in 2000, a 6 percent
increase over 1999 traffic. … Cargo traffic at Austin-Bergstrom
International Airport grew 30 percent in 2000, to 357 million pounds. Page
20;Volume 91;Issue 3 THIS IS THE FULL TEXT: COPYRIGHT 2001 Journal of
Commerce, Inc. COPYRIGHT 2001 Gale GroupAIR CARGO WORLD, 01st