Big Security Chill At CNS

     http://www.expeditors.com/pdf/TSA_Certified_Cargo_Screening_Program.pdf
     Maybe the first thing to do here is click the above address that takes you to a U.S. Transportation Security Administration (TSA) web page that explains what is expected ahead in USA as expansive new security rules and regulations are right around the corner.
     Assuming that many in air cargo would not quite get the gravity of mandated security demands, TSA during March and April held meetings about the changes in several American cities.
     At CNS Partnership Conference in Palm Beach, Florida USA once again the TSA security road show was in town, this time in front of 450 high line air cargo professionals, entrepreneurs and on the street cargo people.
     For some reason, the meeting hall that morning was cold like somebody had decided to make everyone sit up and pay attention by lowering the temperature in the place.
     They needn’t have bothered.
     Everybody was up for the moment. Driven by being together and really juiced on the subject, attendees en-masse really let TSA have it in spades, telling the agency in no uncertain terms that while supporting security and accepting responsibility for a safer air cargo environment all along the distribution chain, the air cargo industry beset with competition, fuel costs, financial uncertainty and even over the top intrusion from US DOJ and EEU investigators, does not like the TSA presentation one bit.
     In case the TSA had not realized it and whether they cared or not, many CNS Partners, as one attendee put it are:      “Frustrated and mad as hell that TSA seems to want to dump all responsibility for compliance to a sweeping and outrageously expensive new technology on the doorstep of the industry.”
     Worth noting is that here was an air cargo industry at a conference the way it ought to be.
     You sometimes think as you look around the room full of people like this that maybe nothing will really happen or change; that people will listen, maybe take some notes, even talk a little amongst themselves, have a coffee break and come back for some more of the same before lunch or cocktails.
     This session was different.
     As the TSA guy rattled on, a collective gasp rose up in the room like everybody was sucking in the icebox air to blow the poor TSA suit off the stage.
     The TSA/air cargo encounter at CNS last week was a great moment in air cargo trade shows and worth the trip from anywhere to be part of the discussion.
     Where TSA may have been able to insist and cajole and poke people in smaller groups at the aforementioned road show venues, here at CNS were top USA and some other world air cargo leaders who let the presenter Tom Friedman know in one felled swoop that air cargo thinks the TSA plan is flawed to the point of being unrealistic and unworkable.
     Words flew fast and furious:
     “The TSA and USA government is generating this predicament.
     “That TSA “Call To Action” by Ed Kelly who went “missing in action” at the CNS Conference left the “poor soul” subordinate Tom Friedman to convey the bad news which was unfortunate because we wanted to tell Ed what we think.”
     Mr. Friedman offered an overview of what the TSA has implemented thus far (educational and test sites at several airports around USA).
     Mr. Friedman then ended his presentation saying something to the effect:
     “So that is what the U.S. Congress has mandated, phase one cargo screening must be met by industry compliance at a 50% level by February 2009 and phase two or the final phase of 100% compliance by August 2010.
     “We pass it to you all for action and to take care of meeting these requirements.”
     After those words the place just went nuts.
     “I have never seen such a group of executive professionals blurt out their feelings that vigorously at what they just heard,” was one comment.
     “Plenty of well known Anglo Saxon words of disgust and derision,” was another.
     Here are some other reactions we gathered.
     “The government is not funding this program CCSP, other than education meetings on the topic.”
     “The air cargo industry although has not defined who will have to bear the costs and where and how.
     “That’s just crazy!”
     “So what TSA is saying is we have this problem and mandated law so you guys go spend whatever it takes and fix it?”
     “The screening equipment that needs to be TSA certified is not off the shelf, in fact systems are still under review as we speak.
     “But no timelines are given as to when and who gets the approval.”
     “Suffice to say that there are perhaps in excess of 70 pieces of scanning equipment submissions with the TSA for review.
     “But the TSA review team charged with evaluating security equipment that might find widespread use in air cargo, we understand includes only 3-4 persons.
     “How will they ever be able to conclude their tests to approve an accepted, effective cost efficient system that can then be built and put into use in such a short period of time?”
     “The cost range of the scanning equipment under review is from $35K through $1.2M.
     “Who will pay those costs and accept the ownership in the supply chain to meet U.S. Congress mandates for screening— will it be shipper, trucker, forwarder, trucker, GSA handlers or airline?”
     Worth noting is that TSA during the CNS Q & A continued it’s “not my problem – you go figure it” line of reason that further infuriated the gathering.
     Representatives from both the NCBFAA and AFFA got a big ovation at CNS for underlining the tremendous costs involved, and how unrealistic, politically-driven security compliance demands threaten to wipe out medium and small freight forwarder companies in air cargo altogether.
     “How could the U.S. Government dump a huge international security problem on the air cargo industry?” was the reaction as voices were raised in approval of that comment around the room.
     One forwarder put it this way:
     “Security like fuel seems to be a runaway cost.
     “In UK as example, Cathay Pacific Cargo is offering free transportation on their Monday freighter service to DXB and HKG ex LHR as long as forwarder pays the (fuel) FSC and (security) SSC.
     “Elsewhere during May both of those costs are continuing their never ending upward spiral.”
     In an industry where often it is hoped and even said that the best is yet to come, increasingly now for a host of reasons many fear the worst.
     But in affording a venue for this dialogue CNS delivered on its promise.
     Whatever the outcome here, “The Partnership,” worked.
Geoffrey

     I was listening to Bob Lekites, Vice President, UPS Airlines’ presentation at CNS and found myself thinking there were a few surprises:
     UPS Airlines is not an all-cargo airline.
     There were no questions whatsoever at the conclusion of the talk.
     For the last twenty years the IATA airlines in particular have recognized the “integrators” as their fiercest competitors whose share of the traditional cargo market has been growing - first inching into and then galloping over time.
     Yet no one seems to talk about fighting them anymore – rather emulating their processes has become the norm.
     I consider Cargo2000 to be a result of that trend, as is e-freight.
     Airlines and forwarders aim at jointly providing services competing with or on par with the integrators on the latter’s terms – delivering service oriented measures that encompass tracking, visibility and ease of doing business with and using technology.
     The lines of the typical forwarder/airline product have been further blurred with the acquisition by and integration of Fritz and Menlo into UPS.
     It must be a shipper’s dream come true – or is it?
     I suspect those who really know aren’t saying!
     Coming back to the UPS Airline president’s speech at CNS, I wonder – have the definitions and categorizations we had in this industry for years given place to a shifting paradigm? I am not sure what to make of it when UPS Airlines isn’t an all-cargo airline; its fleet carries a mix of envelopes, small packages and cargo on every flight, obviously in a much different ratio and particularly revenue mix than any combination carrier or all-cargo airline that carry cargo and mail.
     The speaker sounded like an airline executive when it came to listing the types and number of aircraft in the fleet and the challenges UPS Airlines face, as does every other carrier today, with exploding fuel prices and the various steps taken to reduce consumption whenever and wherever possible.
     When Bob Lekites then indicated that the fuel saving measures for his airline are expected to result in a reduction of 250,000 gallon a year, I thought either few people were paying attention, were text-messaging or couldn’t be bothered to do the math.
     Even assuming $4 a gallon for fuel (IATA listed $2.585 in its May 2, Jet Fuel Price Monitor), that’s one million dollars a year; every penny saved is important, but against the backdrop of its revenue it amounts to a very, very small figure for a fleet of 260 plus aircraft.
     I point this out only to illustrate the limited options carriers have when it comes to combating these stratospheric fuel prices effectively.
     If that’s the most UPS Airlines with their vast resources can do, one wonders what the industry is really in for and how realistic a solution rearranging the chairs on the deck of the Titanic may turn out to be.
Ted Braun
www.tedbraun.com

After McCaffrey What's Next?

     We all now know that Bruce McCaffrey who served Qantas Cargo as that carrier’s top USA executive for more than 27 years, in fact since the time when George Stark quit the airline and went into trucking up in San Francisco, has been fined USD$20,000 and given an eight month jail sentence by the USA Department of Justice reportedly for conspiring to fix prices.
     What we don’t know is how Bruce was snared by law enforcement, although there are a few clues.
     In the first place, cops for all the uniforms and drum beats, most always need informants to catch someone.
     Although I am not sure of the statistics, it appears that everything from a world full of cameras and unidentified sources is the greatest help to police and other gangbusters when trying to solve crime at any level.
     How those gangbusters are approaching air cargo price fixing seemed at the onset a couple years ago to be by offering some kind of immunity to companies that are willing to pay a fine and then cooperate by revealing all they know about how air cargo rates and deals are made.
     But Bruce having served his company in an exacting and certain manner of doing business, as said for more than 27 years, appears to have been just thrown under the bus by Qantas.
     First, it just doesn’t wash that Qantas had no idea how the air cargo business works.
     What can only wonder what lies ahead for what could be scores of other air cargo sales and marketing types if this throw down by law enforcement continues.
     “Law enforcement is demanding diaries and appointment books,” a source said.
     “In the case of McCaffrey who do you think he might end up, like it or not, turning over?
     “You can think that some of the best known, most familiar names in air cargo right now feel like they are out there twisting in the wind.”
     Another source we talked to said this.
     “If you want to talk about collusion and anti-trust price fixing and back room deals how about the US DOJ and EEU law enforcement going after OPEC and the oil companies that have turned the world upside down during the past few months?”
     “We now have eight or nine carriers down in USA and maybe a like number hanging on for dear life as oil costs ramp up.
     “If this thing continues and by mid year oil is at USD$150 a barrel it might be curtains all around, at a level unseen in aviation history.”
     So what lies ahead?
     “It’s (the investigations) all about business,” another source said.
     “In the end some companies will emerge and in fact a few may have positioned themselves to gobble up huge market share.”
     In the meantime the highest profile, air cargo executive ever to take a fall must wonder what hit him, as Bruce McCaffrey wakes up each day.
     First he led Qantas Freight to third party cargo handling in 1980.
     An idea, long before its time was embraced or thought about by others, and took hold quietly at Qantas, and later was copied by the entire industry.
     Then Bruce masterminded Qantas Freight into creating a modern steel and glass air cargo transfer facility at LAX that was built upon removal of the dilapidated remains of his former employer, Pan Am Clipper Cargo.
     Bruce McCaffrey, the old cargo pro who served in the business at Florida-based National Airlines as regional manager at JFK, in fact was the very first management employee hired from National, when PAA acquired that carrier.
     Bruce McCaffrey, a Villanova University finance major graduate said of the renovation and building of Qantas cargo LAX in 2004:
     "We delivered this space at about 25% of the comparable cost of similar construction at LAX."
     McCaffrey, an easy going former helicopter pilot (he once piloted a HU-1 (Huey) for the army reserve based in Atlanta, Georgia) relished the thought of building a great air cargo resource and operating his USA freight centers with class and distinction.
     "Qantas is the reliable airline that is among the world's most profitable," he said in 2004.
     That comment bears close examination especially now, because for twenty five or thereabouts of the twenty-seven years under Mr. McCaffrey, the North American cargo operation met or exceeded its financial target.
     Bruce McCaffrey operated in a zone where he knew about everything, including the steel arms holding the LAX cargo building up.
     Now with all of that over, others can only wait and wonder what’s next?
Geoffrey