Cargo Combination Under Merged US Airways Has Aggressive Plan

Randy Richards' first venture into the belly of an A330 gave him an eyeful - and a new business plan. After running cargo at decidedly narrowbody America West for four years, Richards went to Philadelphia last September for a firsthand look at the international widebody capacity the airline was taking on its merger with US Airways.

"We were going from planes that could hold 5,000 pounds to an A330 with a belly big enough to throw a party in," said Richards.

If it's a party, freight is clearly on the invitation list. The merger of America West and US Airways is bringing the combined business new energy in the air cargo arena, says Richards, and a plan for growth that was never possible at a carrier where a 757 was as large as an aircraft got.

The plan includes a target of $165 million in cargo revenue this year as part of what Richards says is an aggressive plan to manage yield, sharpen service and build business. "We think there is a lot of opportunity here," he said. "Capacity was our biggest inhibition to growth at America West. Now we've got A330s and 767s, two East Coast hubs and 13 departures a day to Europe from Philadelphia. There's more upside than we reallzed."

The opportunity came from the slow but certain consolidation of the American airline industry.

After stumbling out of Chapter 11 bankruptcy protection, financially ailing US Airways finally merged with smaller but profitable America West, combining its network on the United States Atlantic Coast with that of a Phoenix-based career built around the Rocky Mountains. The combined business is operating under the US Airways name and based in Phoenix.

In Sourcing

Formerly head of cargo at America West, Richards, a forwarding industry veteran formerly with Emery Worldwide, Eagle USA Airfreight and AIT Worldwide, took the reins of the combined freight business and made a splash immediately.

The airline canceled an agreement that US Airways outsource its bellyhold capacity to Lufthansa Cargo, reclaiming control of westbound trans-Atlantic business Richards says will help build up higher-yield revenue.

The $165 million in revenue would mark a sharp step up from 2005, although how big a step is unclear since the airlines combined books part of the way through the year.

The biggest step will come in combining the cargo information systems of the two carriers. They have been operating separately since the merger and the cargo division has kept the sales and services of the America West and US Airways capacity separate to prevent potential foul-ups.

"Having two IT systems and trying to cross-utilize your capacity is setting yourself up to fail," said Richards. "Our strategy has been to be methodical and to get it done right. We hope to have the project completed in June," said Richards, saying the US Airways Sabre will provide the management backbone. "That has been our biggest focus."

Ground Up

Even with combined capacity and IT systems, however, US Airways remains a far bigger force in the passenger arena that it is in cargo. And with its narrowbody focus within the United States, the airline is fighting business headwinds that are pushing more domestic cargo to trucks and new flavors of expedited transportation within the United States.

"The more the airlines reduce their offerings the more we move to ground," said Chris Van Hagen, vice president of forwarder Adcom Worldwide. "Ground shipping has seen tremendous strides over the years in service, tracking, and a better level of customer service."

Richards says service at the retooled US Airways is important to cargo growth plans. "We're going to yield manage the bellies under the wing just like we manage yield over the wing," he said. "We're going to focus on bringing value to customers. ... For us, that means dependability."

With the U.S. Postal Service the airline's single largest customer, and with the airline is defying trends by seeing more mail each year, mail figures prominently in the future. And so does the domestic market that has been weighing on the American passenger alrlines.

"There is always going to be a future for domestic (cargo for the airlines)," said Richards. "But you can't approach it the way you did five years ago, or even two years ago. As cliched as it sounds, it's true - you have to partner with the forwarders."

Radiant Glows

N ewly formed Radiant Logistics says its acquisition of forwarder Airgroup Express is the first step in a strategy of building through buying.

The Bellevue, Wash.-based company says it plans to combine "regional best-of-breed" logistics companies with a base of domestic and international forwarding to create "an expanding array of value-added supply chain management services."

Radiant is the latest investor-based business in recent months to start making acquisitions in the American forwarding market. IJS Global, headed by ex-Air Express International executives, launched its acquisition strategy in December 2004 and Gregory Burns, a former Wall Street investment analyst, raised $90 million in a public stock offering in March for a company he is leading that aims to buy up logistics operators.

Radiant has a background in larger-scale logistics. Chairman and Chief Executive Bohn Crain is a former senior executive of Stonepath Group, Schneider Logistics and CSX and founded the company to, "execute a consolidation strategy in the sector."

That happened in January with the purchase of Airgroup, a Seattle-based forwarder with 34 stations in the United States, mostly franchises.

Radiant wants companies that show annual profits between $1 million and $5 million.

... Briefly

Nippon Express will move into a 12,000-square-foot facility owned by the Franklin Community Improvement Corporation site at Rickenbacker International Airport, a key endorsement from a global forwarder of the all-cargo airport. ... Regional cargo airline Alpine Air Express had a $622.011 net profit in the three months ending Jan. 31, moving into the black on a 53 percent gain in revenue, to $8 million. The Utah-based airline says the improvement was partly from improved rates negotiated with the U.S. Postal Service. ... Target Logistic Services opened a station near Boston's Logan International Airport. ... DHL struck a three-year sponsorship to become the official express delivery and logistics provider to the National Baseball Hall of Fame. ... Adcom Worldwide opened stations in Toronto and Santa Ana, Calif., giving the Minneapolis-based forwarder four new offices in recent months. ... Less-than-truckload trucker Estes Express Lines says its recently-started freight forwarding operation is producing some $10 million in annual revenue. ... Regional air cargo carrier Alpine Air Express won a new service contract for freighter flights between Honolulu and Lihue, on the island of Kauai. ... Aloha Freight Forwarders opened a 40,000-square-foot terminal in Compton, Calif., it says will allow Hawaiian shippers to "extend their warehousing pipeline to the mainland" United States. n

News stories provided by third parties are not edited by "Site Publication" staff. For suggestions and comments, please click the Contact link at the bottom of this page.