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A R C H I V E S

No Time To Lose Emery

John Emery Sr./Jr. The visionary senior invented freight forwarding in the air. Talk about a tough act to follow. No one can doubt Sr.’s good intentions. John Jr. learned the business from the ground up, surrounded himself with the smartest people and took Emery way beyond what might have been expected. John also gave back to air cargo, sponsoring and leading IACA (today TIACA) during a period of time (1970s) when the organization might have disappeared altogether.      Now in his 80s, still looking pretty good despite a bout with cancer, John Emery has overcome every obstacle and has remained even cheerful despite the disgraceful way some hooligans at CF treated him after they bought the company. Thinking aloud, it’s hard to believe that the last active, Emery-led executive combination we saw (John Jr. and John Mahoney) would have let the Postal deal slip away.

     We been wondering about Menlo Worldwide Holdings’ plan to bury the name Emery Air Freight by the end of this year.
     Anybody who knows anything about this stuff can only be saddened by that news.
     Maybe Menlo doesn’t know what they have got?
     Menlo, by the way, seem to be nice people who in the public relations department at least, will tell you in a heartbeat that what they know by way of history about Emery, goes back to when they took over the company a couple years ago.
     Changing a name goes with rights of ownership. Nobody questions Menlo Worldwide’s right to call Emery anything they choose.
     So at the risk of sounding presumptuous (and even if we do) Air Cargo News will simply say that the name Emery Air Freight should be kept alive in air cargo for the same reason airports, roads and other places are called Lindbergh; why we celebrate the Centennial of Flight and The Wright Brothers this year in 2003; for the same reason that some place in memory as you watch a zillion cars pass on the road, you know that Ford was the car that brought infernal combustion engines over four wheels to the world at large.
     Emery invented air freight forwarding in the United States of America.
     Emery was the first certified air freight forwarder of the greatest country in the world.
     Emery Air Freight has certainly been through a lot, including a dominant presence at the creation of modern air cargo since John Emery, Sr., an officer in the Naval Air Transport Service and peacetime Railway Express manager, founded Emery Air Freight as a result of his wartime experiences. His son, John Emery, Jr. joined the company after his own release from Naval Service. John Jr. began his Emery career as a pick-up truck driver.
      John Jr. may have had to deflect the barb that he was born with a silver spoon in his mouth, but during his career at Emery he took what his Dad started and really accelerated Emery into the big time.
     John Jr. served as a street salesman, New York sales manager, district manager, regional manager, and vice president of sales, and executive vice president.
     But after that, Mr. Emery led Emery Airfreight from an $80,000,000 company to revenues of $1.2 billion dollars at his retirement.
     By the time John Jr. hung up his spurs, Emery operated 180 offices with 10,000 employees.
     While we are speaking of him, no single executive in modern time has done more to prosper the worldwide organization of air cargo than John Emery Jr. He single handedly carried IACA (now called TIACA) on his back for 15 years between the mid-1970s until the late 1980s when it moved to new affiliation and management.
     CF’s (which had purchased Emery Air Freight) later treatment of Mr. Emery was unprofessional, shameful and ultimately counterproductive in our view.
     John basically was locked out of any contact or respect from CF that this true air cargo pioneer and legend deserved.
     CF not only screwed John Jr., as it turns out, they screwed themselves out of advice and help that might have reversed their fortunes as CF-led Emery continued to slide prior to the Menlo takeover.
     When Emery lost its USPS Postal contract to FedEx to carry mail, they rolled over on a deal that grew out of John Jr.’s far-sighted plan of the late 1970s, to position the forwarder as a worldwide logistics provider.
     Maybe there were differences between the old and new management at Emery. But we can’t help wonder how could Emery Worldwide as the company was later named not have been helped by John Emery Jr.?
     Why wasn’t there some space created for the senior presence and advice of a visionary of modern air cargo?
     So for the past twenty years here has been John Emery Jr., the gentleman.
     A bit older and thinner now no doubt, but no less a unique and self-effacing, retired without acting retiring,top executive that you might ever meet. John Emery Jr. who never has indicated even a hint of a bad word about any of this, remains engaged and engaging about air cargo and freight forwarding that his family invented.
     Maybe Menlo should think about calling something that they do, Emery?
     How about something new and exciting for Emery, a name that in air cargo history carries with it, the definition “genuine original.”
     Is it possible that an air cargo company could believe that a pioneer effort is important enough to be preserved and perpetuated?
     If the answer is yes, then here at last without a trophy or after a rubber chicken dinner, is air cargo honoring itself.
     We could all use a little of that right now.

     Finnair adds a fifth MD-11 aircraft to the fleet this week.The aircraft obtained from City Bird is the last MD-11 ever manufactured.
     As these things go AY must be credited with the distinction of operating the very first MD-11 taking the very first delivery, when the type was introduced, and now the very last production MD-11.
     Finnair MD11s are high, wide and handsome super fliers connecting the Northern Europe gateway with destinations worldwide.
     Finnair reported a hefty increase in earnings for 2002.
     Utilizing capacity adjustments, cost-cutting and being in the right place at the right time (China) helped net income of eur36.8 million ($39.5 million), up from income of eur7.1 million the year before.
     Revenues rose from eur1.63 billion to eur1.64 billion. Operating profit went from eur13.3 million to eur60 million. Pre-tax earnings increased from eur8.9 million to eur54.4 million.
     “The airline industry is contending with bleak conditions. Tense anticipation of war continues, demand is falling and the heated market situation is weakening earnings prospects [for 2003],” President and CEO Keijo Suila said. “Viewed in this light, our 2002 results can be considered reasonable.”
     Finnair Group has no net debt. The group had liquid cash reserves of eur300 million at the close of the financial year.
     Finnair launches three-weekly flights this September between Helsinki and Shanghai.
     Beijing frequencies grow from five to six in June and go daily from September.
     Hong Kong is an AY address three times weekly.
     Speaking of Hong Kong, cargo carrier’s additional fuel surcharge commenced this week.
     Surcharge adds HK$1.20 a kilo on long-haul. Short-haul goes up $60 cents added to regular shipping costs. Impact on business is expected to be minimal, primarily because larger shippers cover spike in fuel costs as part of their contract negotiations, and also because right now most carriers rates have dipped as much as 5 to 15% as business slows during Lunar New Year.

ARROW AIR GOES AIR GLOBAL

Richard Haberly

Arrow Air President and CEO Richard L. Haberly announced that Arrow Air Holdings has reached agreement to acquire assets of Air Global International (AGI) and absorb key management from its former competitor. “This agreement will rapidly expand Arrow’s and AGI’s coverage and market dominance in the Americas,” Haberly said.
     Arrow is the leading all-cargo carrier for Central American and Caribbean service, while AGI holds a commanding market share in Latin America’s “deep South,” including Brazil, Chile, Colombia and Ecuador.
     Coordinating the carriers’ schedules and sharing certain facilities and functions will significantly reduce operating costs and better utilize aircraft capacity, according to Haberly.
     “This agreement will reduce backroom costs and allow for better use of the fleet,” said Bill Betts, Arrow’s CFO. “This will result in a more efficient and effective delivery system for the freight forwarder community.”
     Arrow Air is the oldest FAA-certified all-cargo airline in the United States, providing service to a broad area of the Americas with DC8, DC10 and L1011 freighters. Arrow Air also owns and operates the largest and most sophisticated perishable handling facility at Miami International Airport. Because perishable cargo, including seafood, fresh-cut flowers, fruits and vegetables, represents the vast majority of import cargo from Central and South America, this handling facility provides a tremendous advantage to clients utilizing Arrow’s and AGI’s transport services.
     Air Global International provides B747 all-cargo service to Brazil, Chile, Colombia and Ecuador, as well as scheduled service to Buenos Aires through an exclusive agreement with Aerolineas Argentinas. The transaction includes AGI’s long-term contract for two B747 freighters, which will be added to Arrow’s service offering.
     “We will maintain both Arrow and AGI brands in the market and allow the customer to realize the value of these two great companies joining forces,” said Haberly. “We believe AGI has established itself as one of the largest quality service providers in the region. Along with the added capacity of the B747 and expanded market presence, we look to AGI to bring a fresh focus and new leadership to our platform.”
     Richard L. Haberly 305-526-0902

Lee Sandler

Lufthansa Cargo rates go up 3.5% on a differentiated basis in individual markets effective April 1. Additionally, changes are planned in long-term capacity agreements. This summer, rates also will rise on cargo to most LH high-frequency destinations.      Also, effective April 1, td.Pro bookings currently subject to a charge if given by phone or fax or e-mail will not be charged if booked by online booking services including Lufthansa Cargo, GF-X or EDI/ Traxon Internet. E for free is already offered on LHC td.Flash express service. More info: www.lhcargo.com

      Air Transport World (ATW) held its 29th Annual Industry Achievement Awards in Washington D.C., February 12.
     The event featured a grand reception and dinner at the Capitol Hilton attended by aviation executives from around the world.
     For Emirates, the ATW soiree was actually a double dip.
     The “2003 Passenger Service Airline Of The Year” award came as little surprise, as the high-flying, Dubai-based airline company has blazed a new trail across the sky, lifting not only the Middle East but also an entire industry with aggressive expansion of services, new aircraft orders and a “can do” attitude about everything it does.
     Emirates SkyCargo garnered the 2003 Silver Award in the Corporate Advertising Category for its unique advertising program. Whether it be in print, on the Internet or on a billboard, any place in the growing world of Emirates, creative media and graphics that tell the story of Emirates, are top notch.
     Cargo Marketing Manager Prakash Nair pictured accepting the award for Emirates SkyCargo, noted that the people of Emirates appreciate and are greatly honored for the accolade.
     “Everyone at Emirates SkyCargo thanks ATW for this great honor. We are even more dedicated to excellence and expansion of our services in the years ahead. Next April we will spread our wings connecting Dubai to New York City with A340-500 non-stop flights into John F. Kennedy Airport.”
     Cargo Airline of the Year was Korean Air. The Seoul-based airline has affected a remarkable turn around during the past few years.
     According to ATW, today Korean Air “has put together all the pieces needed to be a world-class operation.”

. . . So far this year, fuel has been a real wild card in an otherwise predictable Asian market. Business has been good but fuel, driven by uncertainty of war, is cutting deeply into everyone’s margin of profit. Asian carriers are particularly sensitive to high fuel costs as most profitable routes are long and thin. UPS launched daily B767F flights between HKG and Philippines (Clark) as prescribed in new bi-laterals between USA and China. The accord adds service frequencies and beyond rights to both country’s carriers . . . Hartsfield Atlanta International Airport keeps title of world’s busiest airport after racking up 76.8 million passengers in 2002. Manager Ben De Costa who landed at Hartsfield from Newark International a few years ago was jubilant. “Four years in a row and no sign of slowing up,” beamed Gentle Ben.
     U.S. Department of Defense goes to Stage One of its mandate to call up America’s Civil Reserve Air Fleet (CRAF) enjoining U.S. flags to turn over 78 aircraft for military transport duties. The mix includes 47 passenger and 31 cargo aircraft from 22 airlines. Initially only the passenger planes are activated. NewsFlash learned that American Airlines is making two B767-300s and three B777s and crews available for the CRAF call up. We wonder if CRAF aircraft will be culled from the more than 2,000 airplanes currently parked in the desert since the business downturn, but could not get confirmation on that one . . . British Airways helped by an 11.4% spike in air cargo business posted a third quarter pre-tax profit of 25 million pounds ($21 million) versus a 160 million pound loss for the same period last year. But January figures were flat to negative around the carrier’s worldwide system and particularly weak across Asia/Pacific. Cargo in January rose an anemic .05%. BA is very worried about the impact of another Gulf War (who isn’t?). British Airways President Rod Eddington is confident that his management and plan are solid. BA Chairman Lord Marshall predicted no growth this year. The carrier continues to ground aircraft, cut routes, and shed jobs (9,209 so far; 13,000 by March 2004) in an attempt to slash more than 5.2 billion pounds in debt . . . www.flyglobespan.com is the new low-cost, Edinburgh-based airline that commences operation via the aforementioned plus Prestwick and Glasgow to ‘sun spots’ not currently served by other low-costers like Ryanair, Buzz or Easy-Jet. Available beginning March 8 via B737-300s from Scotland’s first “no-frills” airline, are Palma, Malaga, Barcelona, Nice and Rome. But “no frills” doesn’t mean no-thrills, as flyglobespan.com plans service to North America in about a year . . .

China may be the place that everybody wants to do business with, but don’t ask airlines to buy their Jet- A there. Right now a B747 fill up anywhere on the mainland will take an already expensive situation and price it up astronomically, as much as 50% more than elsewhere. China runs a state monopoly on Jet-A, thus the higher prices. The situation has gotten so bad that according to one report, even home-grown airlines like China Southern and China Eastern are topping off their tanks, buying as much as a third of their fuel outside of China to save money. Since this is Happy New Year of the Goat let’s expand our language and how things work, understanding, by asking how many readers understand Chinese guanxi culture? Guanxi is the Chinese word for relationships. Good business guanxi means that if you are in air cargo and have guanxi all along the logistics trail, then in simple terms, your goods will get to where you want them to, in most cases, quicker and cheaper. Nothing builds guanxi like smiling face and money applied at the right time in the right place. Be it consolidator, trucker or warehouseman, applying guanxi works in developing places like Shenzhen or Guangdong where the streamlined, pre-cleared squeaky clean world of companies operating via Hong Kong must soon compete against new airports and facilities. HACTL is doing something about insuring its future by attempting to take advantage of the liberalized business climate in China, establishing expensive consolidation operations in Guangdong and Shenzhen. But down the road, with new airports, and building international services direct into these and other gateways, even if Hong Kong is successful in creating free zones buffers around their super service consolidation operations, enticing companies to ship via HKG, instead of their local gateway, which mode will win out? Don’t bet against the guanxi culture. A little western plain speaking: Shippers don’t give a damn how goods get to where they are bound for, as long as they arrive in good shape, on time, and for less money. Here endeth today’s lesson . . . “Kill The Messenger” Dept.: U.S. Department of Labor with an annual budget of $58 billion found a way to save $6.6 million annually. DOL is not going to tell us every month how many people lost their jobs. You may have noticed that those layoff statistics that come out every month telling Americans how many people in groups of fifty or more lost their jobs are no longer in the news. DOL discontinued jobs figures in December. Last numbers for October of 172,000 people out of work from 1997 mass layoffs, was followed by November 240,000 jobs gone in 2150 layoffs. Then the numbers stopped. Last time government clamed up on jobs like this, was 1992 during first Bush Administration “jobless recovery.” President Clinton resumed the job figures release in 1995. Debate is rising that counts be resumed. Senator Edward Kennedy (D) Massachusetts has introduced a bill to have the monthly numbers release, restored. “It’s nothing more than a cover up,” one union leader said . . . More than one way to skin a cat. Swire Company makes no bones about wanting its carrier Cathay Pacific to gain a plethora of Mainland China destinations. Never mind that once upon a time the airline okayed the idea that Dragonair would be domestic and Cathay would be international. So while a public and very vocal, at times vicious court battle is on a one-month hiatus, before going back to loggerheads unless there is a behind the scenes settlement, Swire the omnificient overlord has hatched a scheme to operate mainland China Airports in partnership with China Southern Airlines called Shanghai Eastern Airlines Swire. The new company that is funded (or will be) with $30 million halved betwixt the new partners takes advantage of the relaxed attitude of allowing development of China infrastructure. If anybody ever tells you that the Chinese are great capitalists—believe it. Anyway airport development is another indication that sooner or later Cathay will gain service connections to Xiamen, Shanghai, and Beijing . . . Just you watch—Sinotrans, the biggest freight forwarder in China set up originally in 1950 as a monopoly cruised through an initial public offering (IPO) on the Hong Kong stock market hotter than a pistol with shares trading at thirteen times earnings. The IPO came in at 20 times subscribed, for a total of $HK 3.5 billion. Shares at $HK 2.19 have been termed “fair price” for a company that in 2001 had 270 subsidiary companies and 40% of the China international market. “China is the manufacturer to the world right now,” a source reported. “That role will continue to grow as will the number

George Soros

of logistics-based companies serving the market that will in turn drive the costs of transportation down. As foreign competition and know-how continue to come on line, Sinotrans with high costs albeit giant market share, will have to compete in a whole new world.” One thing that reportedly helped Sinotrans are companies such as UPS, DHL, and others who have spoken of investing in China transportation. Recently George Soros was able to announce that money he invested in 1995 in Hainan Airlines (at $.25 a share, now worth $70 million) will be allowed to be repatriated. If there is one beef that you hear about from executives doing business in China, it is the hard time companies encounter, getting out of town with their money. That, government clearance for the old capitalist stalking horse Soros, who ends up with an avalanche of profits, surely acted to coax others to invest in Sinotrans. Now Sinotrans company must streamline itself to create real value (not to mention better transparency amongst 270 subsidiaries) in the slam-bang open cargo market. Stay tuned . . . News that Europe plans to come together around a centralized air traffic control system by 2005 bodes well for delays being minimized while profits always under attack can widen due to savings of Jet-A. All fifteen nations of EU are on board for the change that will also include non-EU members Switzerland and Norway. The idea is to consolidate 40 ATC operations into half that amount. By comparison the U.S. has twice the traffic of Europe with half as many traffic centers. European Parliament must OK accord but that is seen as little more than a rubber stamp. Yet to be nailed down for certain, are controllers who fear for their jobs and yet may raise a beef. Last year as the prospect became reality, controllers in France, Italy, Greece and Hungary showed their displeasure by slowing down considerably. Another area that bears watching is the measure which scales up and down to give compensation for travelers that are bumped from European flights. Compensation for delay to passengers range upward in terms of flight stage length. Refunding in this manner was opposed by Ryanair and other low-cost operators . . . Air France found a petite profit, like a mint on a pillow, of a couple a million for 2002, as compared to 161 million losses (Euros) for 2001 . . . Somewhere elsewhere are the ATW awards for advertising. Our pick for this or any year are the fictitious airline ads here from the very funny www.SatireWire.com. “Fly Goddamnit!” campaign was created for United Airlines by the ad agency Leo Burnett Worldwide. Although the ads did not work as well as UAL might have hoped, scenes of touchy, feely employee stories of how much this or that person’s airline job means at UAL, were tagged with Fly Goddamnit. SatireWire has a made up Burnett ad executive pondering whether perhaps the ad copy should have read: “Fly you Timorous Bastards!” U.S. airlines have taken the gloves off as they work to build traffic back to an acceptable level once again. SatireWire creates: Southwest Airlines’ popular “What Are Ya, Yellow?” campaign (McCann-Erickson), and Delta’s “Not on My Watch” campaign (TBWA/Chiat/Day), with a smiling pilot stroking what has to be a concealed pistol in his waistband, while greeting passengers saying, “not to worry.” What we are thinking is, would any one of these ad campaigns really work? Your move . .