Group’s unstated goal: Kill CCSP

GroupÆs unstated goal: Kill CCSP       The Air Cargo Security Alliance is a group of freight forwarders and other aviation interests that is upset with the Transportation Security Administration's new program to certify shippers and logistics companies to screen air cargo that rides on passenger planes.
      All such cargo must be checked prior to loading by August 2010, compared to 50 percent now. The program is designed to prevent the entire burden from falling on airlines and causing transportation bottlenecks.
      The alliance is fighting the rule's implementation, saying it is unfair to small forwarders who don't have the space to conduct cargo searches or the means to buy screening technology. It wants the TSA to do all the screening itself, or hire surrogates, and take the responsibility off the private sector. A 5-cent-per-pound fee would help underwrite TSA operations.
      The group claims it is totally comfortable with continuation of the Certified Cargo Screening Program (CCSP) and is just interested in a federal screening option to even the playing field and give businesses more choice. Companies that need to ensure their products aren't opened by screeners downstream could avail themselves of the self-screening options, the alliance said.
      But make no mistake. The group's intent is to kill the CCSP altogether. Holding out the private sector screening as an option seems to be a strategic move to minimize the appearance that their proposal presents a radical change from the status quo.
      Talking down the program and suggesting the federal government is more qualified to conduct security checks undermines its rationale. Plus, there are Democratic members of Congress who never liked the program because it was hatched by the Bush administration and gives industry more control. Once Congress opens the door to reconsidering the CCSP, it's not likely a hybrid program will survive.
      For the time being, lawmakers seem to be waiting to see how well industry complies with the 100-percent mandate, which TSA began to phase in earlier this year. It is difficult to gauge how much traction the alliance will gain on Capitol Hill. Surely, it has some sympathizers, but with most of the air cargo industry in support of TSA and the CCSP program, there does not seem to be wide support to change the current approach unless the TSA totally drops the ball on meeting the screening mandate and overseeing the private security effort.

Free pizza + spot rates = tough times
   The decline in air cargo volumes is so severe that many airlines are offering forwarders spot rates at rock-bottom prices. The spot rates tend to be much lower than the normal contract prices.
   Air carriers usually refrain from providing forwarders with spot rates, but are under pressure to attract business any way they can.
   How bad have things gotten? One co-loader is offering free pizza to forwarders for every five shipments they book. The company is under pressure because as a wholesale seller to forwarders it pays for guaranteed space allocations on planes whether or not it has enough cargo to fill the space.
   Spot market pricing is also favored during the current recession by many businesses that ship by air. As Gloria Whittington, managing director at DAX-Dependable AirCargo Express, explains, shippers are unable to accurately predict their own future volume and cargo destinations. Rather than lock in volume commitments, they prefer the flexibility of using the spot market, she said in a commentary distributed by the Rancho Dominguez, Calif.-based air freight forwarder.
      Contract rates still apply on full flights, but the only full all-cargo or passenger aircraft tend to be found on the most heavily traveled routes and at seasonal times of the year, Whittington said.
      Another silver lining in the weak air cargo market, besides low rates, is that DAX is picking up new customers as some smaller forwarders go out of business, she added.
      Whittington said air freight contracts will return when the global economy strengthens, but they will differ from those of the past.
      'The dynamics of service contracts are changing,' she said. 'The old days of rigid, fixed contract rates are gone. In its place will be some combination of spot and contract rates that will be fair to the airlines, the shipper and his forwarder.'
      A similar dynamic is taking place on the ocean transportation side. Many shippers are signing fewer contracts with container lines this year because they can't commit to contracts that guarantee they will ship a certain amount of volume.

Air cargo volumes stabilize
      The International Air Transport Association said June 4 that global air freight volume fell 20 percent in the first quarter of 2009, but that volume has started stabilizing after hitting a low point in December.
      In a cargo market update, IATA said that excess capacity in the global fleet is now the major problem, keeping load factors low despite the stabilization in volume. Loads fell 7 percent in the quarter, but more worrying, yields dropped 17 percent.
      Many airlines have parked freighters in an effort to balance demand and supply, but IATA said while 99 freighters are now parked, widebody passenger plane capacity is up.
      On the plus side, fuel prices on June 1 were 60 percent lower than the same time in 2008 and nearly even with prices at the start of the year. However, IATA cautioned crude prices are on the rise, up $20 per barrel so far this year.
      'Cargo profitability has been under extreme pressure from collapsing volumes and yields in the past six months,' the association said.

DHL Express consolidates regional management
      DHL said June 2 it is merging its Asia Pacific and Eastern Europe, Middle East and Africa regions into one region. As a result, Dan McHugh, chief executive officer of DHL Express Asia Pacific, has left the company.
      The move is part of a previously announced reorganization within DHL Express, the company said.
      John Pearson, CEO of the Eastern Europe, Middle East and Africa region, has taken over as executive vice president of Asia Pacific/EEMEA and chairman of the customer service executive committee of the DHL Global Express board.
      Pearson joined DHL in the Middle East in 1986 and in 2008 was appointed CEO of EEMEA. McHugh joined DHL in the Asia Pacific in 2005 as senior vice president of commercial and has been CEO of the region since 2007. He is credited with achieving record profits for his division the past two years.