Exclusive From CNS Partnership Conference 2011 Phoenix Arizona—
Michael Vorwerk, the CNS President opened this year’s conference sounding a bit like the late comedian Rodney Dangerfield, who made a living saying that he got “no respect”.
     But in Michael’s world the words were directed as he put it at insufficient worldwide focus on logistics.
     Mr. Vorwerk now commanding his second annual CNS Partnership gathering added an early morning challenge for all the conferees at the gathering to strive for a better understanding of what the industry does and not only vis-à-vis regulators but also the public at large.
     “At issue are continued economic volatility driven especially by high fuel prices,” he said adding,” we need to increase business confidence which brings about growth in air cargo”.
     Mick Fountain, the CNS advisory board chairman added his welcome, citing some CNS achievements since last year’s meeting, including 10 new carriers participating in the CASS program, improved processes which resulted in reduced CASS re-billings and savings of $300,000 in CASS operations due to the implementation of a new system by CITI. He recognized Delta Cargo in particular for its efforts on Cargo2000.
The first keynote speaker, Steve Gunning, managing director International Airlines Groups comprised of BA and IB cargo emphasized the role and benefits of air cargo as a key enabler to world trade.
     At the same time he lamented the 4.9% drop in rates for cargo over the past 40 years, evidently a steady trend.
     Steve questioned whether the industry had the adequate infrastructure to handle the projected, albeit modest, cargo growth efficiently. Here e-freight and Cargo2000 were mentioned as needing a major collective push to rise beyond the paltry 1% growth.
     His recipe for success for the industry was to act jointly – where legal – a now perennial nod to the antitrust watchdogs, improve the industry’s profile, standardize processes and interact with regulators, agencies and governments with one voice through GACAG.

     Industry consolidation continues, and here the BA/IB and UA/CO examples were brought up, with resulting benefits to customers and the offering of greater networks.
     The BA/IB cargo exceutive echoed Michael’s emphasis on standardization and the need to modernize processes.
     In response to a question regarding the BA/IB cargo link up, as to what surprised him, Steve mentioned the quality of IB IT and yields higher than BA as well as the lack of a common off the shelf revenue management solution for the two airlines.
     The forwarder perspective was delivered by Michael Schaecher, DHL’s head of global airfreight.
     Picking up on the opening theme, Mr. Schaecher highlighted the need to raise the awareness of air cargo stressing the value it brings the consumer.
     The executive noted that airlines can do more to educate the public through ubiquitous in-flight magazines by including information about cargo and its positive contribution, such as disaster relief.
     Conferees learned that the rallying cry based on the DHL experience focuses on quality management rather than airline specific.
     Redundant messaging added cost and it’s a common occurrence.  Information was processed late and there’s a need to integrate data in operational systems. XML ought to be adopted as the messaging standard, together with RFID and a push for regulations to allow its deployment in aircraft. IATA in general and CASS in particular were accused of being “ignorant of local markets and people” because of centralized operations.
     External factors in terms of both challenges and opportunities exist because of globalization. Europe sees a big push for carbon efficiency with targets as ambitious as a 10% reduction by 2012 and 30% by 2020 were points touched by the DHL executive.
     As the day moved on U.S. trade implications was the title of Kevin Sterling’s speech.
     Mr. Sterling is an equity research analyst, transportation services with BB&T, a financial institution.
     Some of the highlights from a blizzard of of statistics in this presentation addressed the impact of 6.4% of all U.S. imports coming from Japan in the aftermath of the recent catastrophic earthquake and tsunami. 35% of industry capacity was carried using narrow body aircraft. Mr. Sterling noted that the aircraft conversion market most recently has seen almost no activity.
     Hong Kong surpassed Memphis as the largest cargo airport.
     Airfreight growth depended on heavy industrial production rather than GDP.
     The second keynote of the morning featured William Flynn, president and CEO of Atlas Air Worldwide Holdings, in this position since 2006.
     Looking at global trends, the ACMI executive noted that the 10 year cargo forecast was an increase of 4.5% per annum, with Asia set to double in the course of 2010 to 2019.
     Going green, was raised by Mr. Flynn, as he pointed out that an example of fresh produce from Africa to the UK alone which supported the livelihood of 1.5 million people while producing less CO2 than similar produce grown in the UK, despite the cost of transportation was an illustration of "airfreight being a key factor in efficient access to markets, a catalyst to international trade which drives competition and innovation.”
     Another factoid to drive this point home was that driving 6.5 miles for shopping emits more carbon than flying a pack of beans from Kenya to the UK.
     “The path to sustainable air cargo as practiced at Atlas is to balance the cost and benefits through a thoughtful approach and engagement at multiple levels.”
     Lunch was sponsored by American Airlines Cargo and just before breaking for lunch, a short video drove home the increasing role of social media for businesses.
     The afternoon program continued with a departure from the norm, and a first for CNS in the form of a presentation by Otto Schacht, (right) head of global seafreigtht, Kuehne & Nagel and Gene Seroka, (left) president the Americas, NOL Group, a steamship line.
     Seafreight shares some of the problems with airfreight, with some historical differences – from 1980 where steamship lines had a 90% share and forwarders 10% market share to 2010, where the carriers had 60% and forwarders the remainder.
     A major achievement and successful streamlining for seafreight was the carrier-owned portal INTTRA for EDI.
     However, airfreight with CASS was ahead of seafreight where payments are still largely manual.
     Statistics for the number of containers by trade lane pointed to a fivefold increase in the Asia to Europe traffic over a period of about 30 years. Carbon footprint was an issue both from an environmental perspective but also as a result of high fuel prices.
     We learned that steamship lines resorted to “slow steaming” a reduction in speed of up to 50% and this would continue for the foreseeable future.
     The CCWG, a joint shipper and carrier group works on clean cargo initiatives.
     Gene Seroka addressed the fact that “slow steaming” causes a shortage of containers because of longer transit times.
     On the bright side new cargo liners were being built by companies such as Maersk that reduce emissions by 50%.
     The see-saw effect of pricing which determined when and whether freight moved from air to ocean and vice-versa and capacity issues were among additional similarities.
     David Hoppin, supply chain strategist analyst gave the industry outlook using a variety of data sources, including IATA and Boeing.
     The data indicated that contrary to popular belief, price/speed trade-offs have not changed significantly over the past 20 years.
     What was changing was the shipper’s ability to plan, reduce the number of emergencies to account for an estimated 50% of airfreight. Although there are signs of recovery, whether the industry can resume historical growth rates remains an unanswered question.
     Sustained higher energy prices however are driving changed sourcing patterns and these stand to influence how and where growth will occur.
     The closing session at this most end-to-end session day at CNS Phoenix dealt with Air Cargo Security after Yemen by Todd Owen, executive director, cargo & conveyance security, U.S. Customs and Border Protection. This session covered essentially developments we reported after the CNS mini conference in Washington last February; the express carriers’ program which boasted in excess of 635,000 shipments successfully processed for advance cargo data.
     Conferees learned that the forwarder/passenger airline combination was being worked on next, to be followed by work on solutions for mail. Hard timelines were not in place at this stage with continued focus on global cargo programs for more effective overseas screening, avoiding redundant screening, “trusted shipper” programs and a commitment to improve scanning technologies so that screening is commensurate with the risk.
     The close joint work of CBP and TSA was seen as a positive accomplishment which has benefited the industry.
Ted Braun

Why CNS 2011?

Oliver Evans
Chief Cargo Officer
Swiss WorldCargo

For a short while after last year's CNS there was a kerfuffle about a possible CNS worldwide.
“     I chimed in to state that nobody in this industry needs another platform; there are plenty of good ones, we just need to make better use of them and above all to connect them into what I called ‘The Cargo Worldwide Web.’
    Now in spring 2011 (and what a wonderful sunny spring for most of us in North America or Europe!), we are seeing the dawn of this air cargo worldwide web:
     At the IATA symposium in Istanbul, where I saw far more forwarders than at past events, and even had a chance to meet the DHS in person, and at last week's TIACA executive summit and board meeting last week, which confirmed record attendance and record number of members of TIACA as the overarching association for all stakeholders in the industry.
      In fact, airlines are now only the 3rd largest class of members. The advisory group formed by forwarders, shippers and airlines in November (GACAG) is through the preliminary stages and working groups are now going to meet imminently to draw up the agendas, specific actions and goals in the agreed areas of priority (security, e-commerce, customs and trade facilitation, and sustainability).
      Besides this great progress, I also see evidence that governments (yes, including the U.S. government!) Are engaging with industry and looking for leadership from us. In short, we are living a unique window of opportunity for the industry, in which GACAG and all of us will play a crucial role, and I am going to CNS (and the week after to Munich) to make sure through my personal networking and dealings with customers, partners and others that we grab it with both hands. And yes, I will be saying simply thank you to our customers, who gave us a great year in 2010 and have given us a great start in 2011.

Bumped into our good friend and public relations counsel extraordinaire, the great Bernd Maresch of Hansmars, who advises that today at CNS several press briefings will be conducted up close and personal.

At 10:00 a.m.—Lufthansa, featuring newly named CEO Karl Ulrich Garnadt and a cast of characters from Lufthansa Cargo Group will be ready, willing and able to take all questions.

At 2:00 p.m.—Bernd and the always interesting and well-spoken Oliver Evans, Chief Cargo Officer, Swiss WorldCargo will conduct what has become a CNS tradition, a roundtable to meet the press. Oliver Evans, who speaks as well as he writes, is someone who we could just listen to for hours. Put another way it doesn't matter what he has to say, we just love hearing him say it.

Doug Brittin
Head Of Air Cargo
Transportation Security Administration

Q   Please offer an up-close and personal assessment of mandated security performance in March 2011?
A    TSA is pleased with industry response to the 9/11 mandate in the U.S. I think the success of the Certified Cargo Screening Program (CCSP) reflects how positive results can be achieved through close cooperation between the public and private sectors. International inbound poses a somewhat different challenge, since we cannot create a “CCSP-like” solution. So, the burden of attaining 100% on inbound will ultimately fall on carriers if we collectively cannot gain more support for other country participation in the National Cargo Security Program (NCSP), whereby we can review those programs, and hopefully accept them as being commensurate with the requirements we are obligated to meet under the 9/11 Act.
Q   What positives and negatives have been encountered and what have you done about that?
A    As I noted above, I think the unprecedented participation of carriers, forwarders and shippers was absolutely essential to getting 100% accomplished last August. I think we will continue to see that kind of support through those same groups as we tackle the challenges of the “post-Yemen” environment.
     While we have been able to qualify 78 pieces of technology since we began the process in 2008, we have yet to find a product that can screen ULD’s. We know that the industry needs a device to accomplish this. We fully support it and it is disappointing that we have yet to see anything prove itself in that area. We continue our efforts, though.
Q   What is next in terms of security and TSA?
A   The National Cargo Security Program (NCSP) will allow passenger air carriers to follow the air cargo security programs of specific countries in lieu of standard security programs if their National Program has been deemed commensurate with TSA requirements via a system-to-system comparison.
     The National Postal Security Program (NPSP), which is similar to NCSP, will allow all air carriers to accept cargo from foreign postal operations that we have reviewed and approved without further security requirements.
     We are encouraged by the early results of the Air Cargo Automated System (ACAS). If successful it could be a valuable tool to provide DHS (via collaborative efforts between TSA and the U.S. Customs and Border Protection) the ability to analyze shipment data prior to uplift and identify those which might warrant additional screening measures prior to loading on the aircraft or at the last point of departure.
Q   We note that you speak or are in evidence at several industry functions yearly. (A) What are the benefits?(B) Can you suggest some things that might change to make understanding and getting points across easier?
A    The benefits that are gained from the exchange between industry and TSA are immeasurable. Therefore, if I cannot attend a speaking engagement, I always ensure that someone from my senior leadership team is available to share an air cargo presentation and to obtain feedback from the industry attendees.
      The air cargo industry experts and personnel play a vital role in the development and implementation of air cargo security measures. They serve as the front line of operational and financial impacts of air cargo programs. When the air cargo industry has a sound understanding of why and how we are developing and implementing programs, they offer suggestions about how we can make security enhancements for the industry as a whole. When this process of information exchange and evaluation is demonstrated successfully, the overall outcome is less daunting for everyone involved.
      We have and will continue to work in unison with the industry. Our goal is to ensure that the industry and the public are aware that there is a real threat to aviation security through air cargo. Everyone should expect to see evidence of TSA working more closely with all aspects of the air cargo supply chain to make sure that our programs add a security value to the industry’s day to day processes. One of my goals is to publish more straight forward security programs.
Q   What do you say to somebody who says “I Hate the TSA,”?
A    While it would be great to hear the public say, “We Love the TSA,” the people who work here did not choose their career with the intention of winning a popularity contest. TSA employees are responsible for using federal funding to protect the Nation’s transportation systems by applying specific skills and knowledge to assess behavior, evaluate processes, develop programs, implement policy and/or enforce regulations. It is an all encompassing career that is coupled with a significant amount of scrutiny, oversight and publicity. In this line of business, everyone is watching and everyone is participating as programs are recommended, developed and published. Sometimes publicity has an adverse impact and other times, it is in our favor. However, the people who work here are dedicated to improving the security of transportation. So, I can also say “try it for a while.”
Q   Describe any outreach or educational programs TSA has initiated for air cargo users and suppliers?
A   We have issued air cargo training modules for the Indirect Air Carrier Program and the Certified Cargo Screening Program. Additionally, our subject matter experts participate in more than 50 industry meetings, forums, and conferences annually.
      Thinking for a moment of the continued development of air cargo security in terms of a timeline—where and when do you expect air cargo to be in three to five years and what will have to happen to meet those expectations?
     In accordance with the 9/11 Act requirements, TSA will still require industry to screen 100% of all cargo loaded on passenger aircraft inbound to the United States. Within the next 3 to 5 years, the TSA and CBP hope to continue to partner with the private sector in the express carriers, passenger, and heavy all-cargo environment through a multi-phased pilot focused on testing the feasibility of baseline threshold targeting in a pre-departure environment.
     The Pilot will allow for the refinement of targeting methodologies and the establishment of appropriate communication systems to enable advance air cargo data collection, evaluation and exchange. This could lead to a “universal trusted shipper/trusted shipment” program that makes it easier for industry to apply focused security measures based on risk.
Q   How well is the rest of the world cooperating with U.S. efforts toward better air cargo security? Have the complaints diminished about USA not understanding or getting it about the way other countries (especially European) operate. Or has there been a gradual coming together around a common goal?
A   We are working diligently to strengthen relationships with foreign governments and the process is happening incrementally, yet thoroughly. TSA’s regulatory authority extends only to air carriers operating from the last point of departure (LPD) to the United States. Currently, TSA requires air carriers to implement specific air cargo security requirements at the LPD into the U.S. through Standard Security Programs (SSPs).
     Requiring airlines to meet the requirements of the 9/11 Act through only the SSPs for international inbound air cargo, may lead to significant economic impacts which could include backlogs at airports at last points of departure, decreased cargo volumes for passenger aircraft, and unknown diplomatic challenges. That is far from ideal and is not our goal.
     We recognize that many countries have National Cargo Security Programs (NCSP), which also may enable cargo to be screened prior to receipt by airlines. Through the NCSP recognition process, we are working with countries that have commensurate (or similar) air cargo security programs in order to establish agreements that will allow air carriers flying directly into the United States to follow the national air cargo programs of the host government, in lieu of following TSA’s SSPs. The challenge remains that despite our efforts, most countries have opted not to engage in this process.
Q   In all this process since you were named as the second top air cargo executive to head TSA-what has surprised you?
A   The passion and willingness of everyone to offer support and guidance has surprised me most. After the events of Yemen the support to TSA from the air cargo industry was overwhelming, and it was in a very volatile and challenging time. I am also appreciative of the dedication and support from my team here at TSA and colleagues throughout the Department of Homeland Security.
Q   A little about Doug—what do you to relax? Hobbies-relaxation with family? If you had to choose a career outside of transportation what would it be? Name a favorite movie. What flavor of ice cream? Favorite place to vacation?
A   My hobbies include playing tennis, golf, skiing and hiking. I also enjoy reading a good history novel, trying new restaurants, trivia games and barbecuing in the back yard with my family.
      I would go back to teaching. I enjoyed teaching when I was young because it gave me an opportunity to work with young, eager minds and, it taught me to become more patient, self disciplined and determined.
Geoffrey

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