Inside this issue

Document Sample
Inside this issue Powered By Docstoc
					                                                                                           Inside this issue
                                                                                           A Bronx Cheer for the New Year!!             1
                                                                                           Atlas, Delaying the Inevitable?              1
                                                                                           Homeland Security is back on Red             2
                                                                                           For Boeing, its Now or Never                 2
                                                                                           Fed Ex Air Operations Keep Stalling         2,3
                                                                                           United Cargo Falling Deeper into Irrelevance 3
                                                                                           Jet Blue Vis. United, Delta, and American   3.
                                                                                           The World’s Greatest Philanthropist—Ever 3,4
                                                                                           New Year’s Greeting!!!!!!                   4.
A Bronx Cheer For The New Year!
                                                        component that looms above all else--             eagerness to get shippers to sign on the
 Every year, an organization known as the               price. Indeed, price has become so                dotted line, we have given away the
 International Logistics Quality Institute conducts a
                                                        important, freight forwarding is in               store. Too many of us agree to rates
 survey of international shippers in regard to
                                                        danger of becoming a commodity.                   that we know are below our costs,
 service by freight forwarders. And every year, as
                                                        All other factors; customer service,              irrationally hoping to make up the
 regularly as the
                                                        network coverage, transit time,                   difference some time in the future.
 tides, the most important quality shippers claim
                                                        technical and administrative services             Unfortunately, that future never seems
 for their forwarders is "service reliability." Price
                                                        are being thrown out of the window                to come. Let's not sell one dollar for
 always comes in a distant second in these surveys.
                                                        because of shippers' obsession with               ninety cents. Let's never forget that
 Let me give a Keeling Bronx cheer for the new
                                                        rates.                                            airfreight remains a premium service,
 year to these results. Shippers may tell the
                                                        To be fair, we forwarders must share              and never a commodity. We should
 Logistics Institute what they want to hear, but
                                                        in the rush to the bottom of the barrel           charge what our efforts are worth.
 when customers sit down with forwarders across
                                                        rates that economists euphemistically
 the table to negotiate new contracts, there is one
                                                        call "non competitive." In our

Atlas Delays Bankruptcy Filing But Is End Inevitable:
                                                        division as well as its own 747                   entries has the route structure and
 Atlas Air, the company that seems to have              aircraft, Atlas has provided                      number of aircraft as Polar.
 more lives than the proverbial cat, has again          substantial international lift for                    Let's hope that Atlas, despite
 postponed a bankruptcy filing until February 1         forwarders. Despite old aircraft and              hitting tremendous turbulence in the
 from its earlier date of December 15. Atlas is a       spotty service, Polar has been a major            aircraft market, can survive with a
 classic example of a company whose time has            factor in moving forwarders' cargo--              pre-packaged bankruptcy plan in not
 come--and gone. Its core business of                   particularly to the increasingly                  only providing massive lift, but in
 outsourced, so-called ACMI (aircraft, crew,            important Asian market. We all                    keeping rates low. Perhaps if
 maintenance and insurance) freighters flying           would be in a tough spot if the Atlas             founder and supreme salesman
 primarily for foreign airlines has collapsed           threat of ceasing operations and                  Michael Chowdry had not died in a
 together with the boom in orders for new               selling all of its assets actually                plane crash two years ago, Atlas
 aircraft. At the height of the aircraft recession a    becomes a reality. A few obscure                  would not be in its present state. We
 year ago, Atlas couldn't give their planes away.       cargo airlines have started up in the             never will know.
     But Atlas' story doesn't end with a decrepit,      past 24 months, but none of these
 all red ink balance sheet. In its Polar cargo

              Volume 8 Issue 1                                             1
Tom Ridge & Homeland Security Places U.S. Back On Red Alert
                                                            Capitol is directly impacting air cargo           passengers in that our industry
  Those alert announcements remind me of a                  security. I can understand how our                would fall victim to any changes in
  child's toy, the yo-yo. They keep bouncing back           politicians want to leave no stone                the law. Unlike passengers,
  from yellow to orange to red and back again. As           unturned, no missed opportunity to clamp          however, who may be
  far as I'm concerned, most of us know where               down on terrorism. They want all the              inconvenienced for an extra hour or
  terrorist threats are coming from. We all are             missing gaps filled. But we have a                so, many of us could be put out of
  aware of the origins of the people involved. Let's        business to run. And our business directly        business if new rules made it
  concentrate on weeding out those bogus                    affects the health of the U.S. economy. If        impossible to deliver cargo when
  "students" who invade our shores under our still          trade is stifled in the name of increased         and where promised. What form of
  liberal standards. Many of them certainly are             security, we would have won the battle            transportation would benefit if
  not in America to learn about capitalism or               and lost the war. Our government must             security rules become too onerous?
  wanting to become U.S. citizens. If we                    be very, very careful in issuing security         Why, our old friends, the shipping
  concentrated on people like these, our homeland           rules and regulations that could impede           companies. Ocean freight is just
  security would eradicate most of the internal             the free flow of exports.                         about one-tenth the cost of air cargo
  threat that exists. Two nations in Europe with               I am convinced our industry is well            and delays of a day or so does not
  liberal immigration laws; the U.K. and                    aware of its obligations towards homeland         mean nearly as much in a two week
  Germany, also are hotbeds for transplanted                security. Overwhelmingly, the U.S.                ocean voyage as a 48-hour delivery
  Middle East radicals. If the U.S., Great Britain          transport industry acts responsibly and is        schedule.
  and Germany worked together more effectively,             accountable to the government for cargo
  put political correctness aside and faced reality,        security. But airfreight is built on speed.
  we could remove these cancerous cells forever.            Airlines and forwarders do not have the
      This greater talk about security in the               luxury of time and space to hold cargo for
  corridors of the Executive Branch and the                 security purposes. We are like air

For Boeing, It’s Now Or Never
                                                         suffer. "Let's just build stuff for the           heavy competition from Airbus; and it
Boeing, which until a few years ago, totally             government," they say.                            must have faith in its engineers to build
dominated the world civil aircraft market, is                But the aviation industry is all about        it within cost estimates. In short,
falling on hard times. Airbus is eating its              visions of the future. The most widely sold       Boeing must believe in itself all over
lunch. Its CEO has resigned under fire. Its              piston-engined airliner, the DC-3, was            again,
767-tanker lease program for the U.S. Air                started with a phone call from C.R. Smith,        The launch of the 7E7 will mean no
Force is under severe scrutiny. And to                   President of American Airlines to Donald          less than Boeing remaining in the civil
heighten the turbulence surrounding the                  Douglas back in 1932. "Build me 20 of             aircraft business. It is an investment in
aircraft maker, Boeing now is in the throes of           these new planes," said Smith and the             the company's commercial future. The
pondering whether to launch the 7E7, the                 modern age of civil aviation was born. If         7E7 also will prove that one of
company's first new commercial program in 13             Boeing loses that vision, it is finished no       America's greatest examples of
years. Projected cost; $7 billion. Some timid            matter how much assorted equipment it sells       industrial power will remain a great
members of Boeing's Board of Directors have              to the military. The company does face            international company in spite of fierce
said the company should not go ahead with                serious obstacles. It must start developing       competition from Europe and Asia.
building the 7E7. "Shareholder value" would              an expensive aircraft in a very soft market; it
be impacted and short-term earnings would                must trust its sales staff to sell it against

Fed Ex Air Operations Keep Stalling
                                                           For if truth be told, FedEx has gone            package market become a
What has happened to FedEx, the company                nowhere in the past few years,                      "mature" business where
that was considered the pinnacle of American           particularly in its air operations The              growth is possible only by
capitalism, the symbol of what America could           company's last quarter showed a decline             stealing business from rivals
do as a bastion of free enterprise? Fred Smith         in air shipments and only a 1 per cent rise         like UPS and DHL? The
and his minions have disappointed all of their         in its ground business. Profits followed            answer probably is a
self appointed cheer leaders including those on        shipment decline, dropping almost 65                combination of both. It is
Wall Street, many in the freight forwarding            percent) (although early retirements and            indeed ironic that FedEx,
community and those academics who believed             severance costs contributed to the                  having pumped an increasing
FedEx was the answer to every problem in               reduction). Has FedEx lost its spark, even          chunk of its capital and
transportation.                                        that arrogance that once so infuriated              manpower in its ground
                                                       forwarders in the past? Or has the air              operations, is discovering this

               Volume 8 Issue 1                                                   2
market also may be fool's gold in its lack of any            It was a much easier task in the company's               faces enormous competition.
real growth.                                                 early days when UPS was preoccupied                      Let's see how they fare when
   They must be burning the midnight oil in                  with delivering packages from department                 the going gets really tough.
   Memphis trying to figure out ways to regain or            stores to consumers and DHL operated
   even increase market share on land and in the air.        almost exclusively abroad. Today, FedEx

  United Cargo Falling Deeper Into Irrelevance:
                                                               dropped major international destinations               care? Not to again beat up on
  In December's Newsletter, we talked about airlines'          served by 747-400s, 777s and 767-300s;                 United, an airline still in
  increasing use of outsourcing for their cargo                aircraft with the greatest capacity to carry           bankruptcy after two years, but
  departments. Of all the "legacy" airlines, United            cargo. Even United's director of cargo                 the carrier is an extreme example
  probably has gone further in its outsourcing                 admitted outsourcing and elimination of                of the arrogance and downright
  philosophy. If United's cargo volume is any                  wide bodied aircraft on many routes was a              insolence of the so-called
  indication, forwarders are not happy with their              mistake by recently stating, "we have lost             "legacy" airlines. To the
  decision. The carrier saw a steep decline in freight         volume due to outsourcing and                          forwarder, cargo is as important
  revenues last year, particularly in the second half of       elimination of flights. This didn't go over            as breathing. To many airlines,
  2003. Cargo volume was down almost 40 per cent,              as well as we envisioned."                             freight is more of a hindrance
  a huge drop by any standards. Outsourcing ground-            We sometimes wonder why airline                        than a help. We forwarders need
  handling activities was one-way United thought it            executives get paid! Didn't the United top             no less than a complete change in
  could cut costs, but all it accomplished was to raise        brass in Elk Grove realize their actions               airline management's thinking
  the ire of both domestic and international                   were driving cargo into the hands of their             about cargo.
  forwarders. To top off its disdain for cargo, United         competitors? Or worse yet, didn't they

  Jet Blue Vis. United, Delta, and American
                                                   board, find TV in the back of their seats              seemingly have no interest in cargo. If Kitty
What Jet Blue and to a lesser extent other         supplied by satellite. What a contrast to the          Hawk does not survive, domestic forwarders
low cost carriers like AirTrans and                negative spirit and poor service prevailing            will have still less choice and will have to
American Trans Air are achieving may spell         inside the offices and behind the counters of          capitulate to UPS and FedEx. We can't
the end of the big three legacy airlines as we     the legacy carriers.                                   depend solely on BAX. They only have 19
know them. Speaking as a passenger and                 Unfortunately, from a cargo point of               aircraft, 9 of which are smallish and old
enduring the "slings and arrows" of rudeness       view, these "no frills" carriers have little           727s.
and plain bad manners, the demise of the big       interest in carrying freight. Can we                       Often times, I think air cargo, particularly
three couldn't have happened to a "nicer"          forwarders blame them? Moving cargo by                 the domestic branch, is flying backwards.
bunch of people. The new airlines have             air at thirty cents per pound plainly is               Twenty-five years ago, American Airlines had
studied the antics of the old carriers and         unappealing.                                           their own fleet of 747 freighters. United had
have adopted exactly opposite methods.                 Maybe Emery, now Menlo Logistics,                  freighters. Northwest had all cargo aircraft on
They have fastened onto what their                 gave up their aircraft too soon. Among the             its domestic runs. Today's it's all belly freight
passengers, and equally important, their           integrators we have just a corporal's guard            by the "big boys." It is the end of an era.
employees want. This recipe has become             including BAX Global and Kitty Hawk.                   Today there are almost as many wide bodies
outstandingly successful. Passengers are           Plus a gaggle of newcomers no one has ever             sitting out in America's deserts as are flying.
greeted by contented employees and once on         heard of. The combination carriers

The World’s Greatest Philanthropist—Ever:
                                                        other than the founder, CEO and principal               the world's richest man and one of
When most Americans think of                            shareholder of Microsoft; Bill Gates.                   America's greatest sons is living quietly
philanthropists, they remember the great                Gates' story could happen only in                       with his wife and family on the shores of
ones of the past--Rockefeller, Carnegie,                America. While many of the Russian                      Puget Sound.
Morgan. But America's                                   billionaire oligarchs are languishing in jail            Bill Gates probably is the most
greatest philanthropist by far is living and            for ripping off their country, or in exile to         successful businessman the world ever has
working today in the upper Northwest                    escape jail, or buying "essential" items              known. He also is a man with the greatest
corner of the U.S.--Seattle. It is none                 like English Premier League soccer clubs,             heart. He already

  Volume 8 Issue 1                                                            3
has given away a good part of his wealth to    ridiculous, politicians have stepped in              Bill Gates is a perfect example of free
more good causes than anyone else in the       around the world to try and kill Microsoft's      market capitalism at its best. America too often
history of mankind. Yet, he still is in his    business.                                         has been promoting free markets in theory and
forties. The Rockefellers and Carnegies              In the midst of all this storm und drang,   restricting markets in reality. Gates is the
waited until they were very old before they    the Bill Gates Foundation keeps on giving.        antidote to that. No human being has given so
gave their money away! Gates keeps giving      The Foundation has donated $billions to           much back, so quickly. Lawyers and
despite a blizzard of lawsuits against his     fight AIDS on the African continent--more         politicians, instead of bashing Gates, should
company. Because he beat his competitors       money than the afflicted governments              embrace him. Just imagine if his spirit of
by making better products at a cheaper price   themselves have provided. At home,                philanthropy would be embraced by other
(think Henry Ford), Microsoft's profits, by    literally every school in our nation's poorest    Fortune 500 companies. The U.S. and the
any investment standard, has been the          areas is receiving computers, courtesy of         world truly would benefit. I embrace Bill
greatest in history. Not only have many of     Bill Gates. Less fortunate kids can end up        Gates. His personifying the true spirit of
the law suits been frivolous and downright     having a chance to join today's digital world.    America makes me proud to be an American

  New Year’s Greeting!!
                                               Among all the nasty things that came out of         International hope that 2004 will be both
                                               the Box, there also was Hope. Hope springs          happy and prosperous for our
As the New Year begins, we must never          eternal. All of us at Co.nsolidators                Many friends within and without the air
forget what flew out of Pandora's box.                                                             freight industry.


                                                         Julian Keeling

  Volume 8 Issue 1                                                    4

Shared By: