Sunday, May 17, 2009
HOW AMERICAN AIRLINES HANDLED CARGO IN 1955
In this article I want to take a look at how air cargo was handled by American Airlines in 1955.
At this time there was three different types of cargo traffic they are grouped under the title air cargo.
(1) air freight;
(2) air express;
(3) air mail.
Air freight, differs from (2) and (3) in that the airline is the carrier and most of the time the selling agent also freight space is sold in the same way as passenger space though the load is handled and stowed in a different way and is carried for a lower fare.
In the case of air express, the carrier is the Railway Express Agency Inc. (Air Express Division), whose use of the airlines as sub-contractors is incidental to the Agency's basic function of selling a competitive door-to-door delivery service. The Agency does not discriminate between airlines and consigns its loads on the fastest and most convenient flights available. Nor is there any
contract between the public and the airlines in the case of air mail, which is a service offered by the Post Office for the high-speed delivery of cards, letters, printed matter and parcels.
There seems no reason why the bulk of express and mail traffic should not always be carried as supplementary loads on passenger aircraft. By contrast, the all-freight service is aviation's equivalent to the goods train or cargo ship, carrying bulky loads at relatively low rates.
Taking a look at American Airlines for 1955 the company's current re-equipment programme Is to be completed in 1957 its fleet will consist of 206 aircraft, including an all-freight division of 16 machines—nine DC-4s and seven DC-6As. America's present all-freight fleet consists of nine
DC-4s and four DC-6As. In terms of both passenger and cargo ton-miles the company has a larger turnover than any other airline; seats on its aircraft are now sold at the rate of nearly six million annually. Freight and express ton-miles flown by American Airlines in 1954 amounted to nearly 65m—more than the total ton-miles (passenger, freight and mail) flown on the
scheduled services of B.EA. and all British independent operators during the same period.
American Airlines inaugurated all-freight services, with converted DC-3s, in October 1944. DC-4 freighters were introduced in June 1946 and DC-6A Liftmasters—the first aircraft built specifically for long-range cargo work—came into service in May 1953. Since the introduction of those DC-3 services A.A's freight traffic has grown enormously—from 2m ton-miles in 1944-45 to over 30 times that total last year. It is important to note that these figures include the freight carried on passenger services and that the working capacity provided by the all-freight division is still supplementary to that of the main fleet. The nine DC-4s and four DC-6As are today carrying about 35 per cent of AA's total freight and express traffic. They are operated over a carefully planned network embracing one-fifth of the 77 cities served by American Airlines—including, of course, such major traffic centres as New York, Buffalo, Detroit,Chicago and Los Angeles.
The backbone of the all-freight network is the trans-continental route between New York and Los Angeles, which is flown nightly by DC-6As to give next-day delivery to consignees on either side of the continent. Calls are made at Detroit and Chicago in each direction.
The price of air freight relative to the other types of service operated by American can be gauged from the earnings in cents per ton-mile (a cent is worth 0.8 pence) in
1954. These were:
passenger, 54 cents; mail, 39 cents; express, 37 cents; freight, less than 22 cents. This figure of 22 cents per ton-mile is the average yield, though individual rates vary (according to distance, direction and type of load) over a range of approximately 16 to 24 cents. In exceptional cases air freight is carried for as little as 12 cents per ton-mile. To put these costs into some kind of perspective it may be added that road-transport charges for the class of goods carried by air are in the region of 6 to 7 cents per ton-mile, and that equivalent rail rates are perhaps 3 to 5 cents.
The earnings of transatlantic carriers are now standing at about 40 to 44 cents per ton-mile of air freight. Air freight is still in an early stage of development on the relatively short and low density air routes of Europe, and this is naturally reflected in high rates and a low volume of traffic.
A shipper in New York pays about $6 to have a 100 lb consignment flown 500 miles to Detroit; a London merchant will pay the equivalent of $6 45 cents to have a similar consignment air freighted from London to Paris—a distance of about 230 miles. Similarly, the charge for air freighting a 100-lb load from New York to Los Angeles (about $25) is little more than the rate for
sending the same shipment by air from London to Rome, even though the distances involved are, respectively, 2,500 and 900 miles. The problems faced by the operator—and his solutions to them are reflected in the pages of the air-freight tariff. A fundamental difficulty is that most freight travels only once; return loads are not guaranteed. The rate charged must, therefore, be reduced when necessary to attract some kind of load aboard an aircraft which would otherwise return to its base empty after outward trip. Thus, 50-odd commodity groups are listed in the American Airlines freight tariff, and it will be seen, for example, that fruit and flowers from the West Coast can be shipped to New York at a more favourable rate than clothing or electrical parts moving from the industrial east to the agricultural west. A second reason for the commodity-rate system is, of course, that reduction of a cent or two may turn the scales in the airline's favour when competing with a surface carrier for a large contract. Handling costs vary according to the size of load carried, and the tariff system covers this problem by the incorporation of "break-points," which define the minimum weights at which various bulk discounts apply. Break-points vary with the type of commodity and the route. Normally, however, the first discount is offered for loads of about 50 lb and in some cases there are further break-points at 1,000, 2,000, 3,000, 5,000 and 10,000 lb. The economy of American air freight is thus largely based on the carriage of items weighing at least 50 lb and consignments below this weight can generally be considered as being more suitable for shipment via the air express service. At this stage the freight forwarder makes his appearance.
The forwarder's function is to consolidate a number of small separate items into a single shipment which exceeds the breakpoint weight and thereby qualifies for a discount which the airline cannot offer to the individual shipper. The forwarder receives the whole discount, allows part of this to the customer
and pays himself with the balance. In New York, Los Angeles and Chicago, forwarders feed in a sizeable proportion of the freight flown out of these cities by American Airlines—probably 25 or 30 per cent in the case ofNew York.Contrary perhaps to general belief, most air-freight revenuecomes from consignees rather than consignors. Something like90 per cent of American's freight traffic is routed by consignees.
Unlike air express, air freight is essentially an airport-to-airport service. Rates are based on the cost of carriage between airports, though for an additional charge truck delivery is available to and from any airport; the airline does not itself maintain vehicles for this purpose and allocates the work to local transport services. The question "What sort of goods are moved by air freight?" is answered by the list overleaf. It separates into 20 categories the total freight uplifted by American Airlines during one month of 1954. The diversity of the list is its most impressive feature, indicating that air freight is being appreciated and used in a wide cross-section of American industry and agriculture.
Progress so far in the United States has been encouraging, but air freight is still an immature industry, using makeshift equipment, and this fact is freely acknowledged. The super-modern freight terminal is very much a rarity and most of the plans for building new terminals are rather nebulous; it is difficult to provide for the requirements of an industry which is certain of
ultimate success but cannot yet predict how or when it will be
achieved. We illustrate here the American Airlines freight building at La Guardia, which exemplifies victory of adaptability and enthusiasm over barely adequate facilities. This terminal has handled up to 100 tons of outward freight alone in a single day— and most of the work-load is concentrated in the four-hour evening rush period. The airline would naturally like to spread its traffic more evenly over the full 24 hours, but must accept as largely inevitable the industrial customer's practice of sending his goods to the airport at the close of the working day for next morning delivery. The DC-6As in service with American symbolize their owners' belief in the potentialities of air freight because, unlike all other aircraft of their type, they are not fitted with cabin windows and therefore cannot be adapted for passenger work. Four more DC-6As will be added to the fleet early next year, considerably increasing the company's freighting capacity and providing extra reserve to meet local and seasonal peaks. On several occasions demand for freighting capacity has exceeded supply, notably in November and December. The DC-6A has a cruising speed of about 300 m.p.h. and will carry up to 32,500 lb payload. It has large double loading doors and the cabin is fully pressurized—an essential feature of any modern long-range freighter. The DC-4, which cruises at up to 240 m.p.h., has a maximum payload of about 20,000 lb. Among aircraft which can be regarded as the next generation of freighters, the most likely candidate is the turbo-powered
Lockheed C-130. In the air, it promises to have a much lower ton-mile cost than the DC^6A; on the ground, economy will further benefit from simplicity and speed of unloading its low slung, capacious fuselage. Range, payload and flexibility are essential attributes for the economic air freighter, and cannot be sacrificed to speed for its own sake. The aircraft capable of 300-400 m.p.h. provides the operator with all the speed he needs to compete against railways and roads in terms of delivery time; the efficacy of this competition now depends on delivery costs, and will continue to do so for many years. Cargo specialists of American Airlines feel that a high proportion of their present business must still be classified as "emergency" shipment, which can never be the basis of a thriving, large-scale air-freighting industry. They contend that not only is the world at large unaware of the significance of air freighting, but that air transport is itself only beginning to appreciate its possibility. It is not enough, the argument runs, to set before the potential customer a list of the theoretical ad advantages of air freight, leaving him to work out for himself whether or not they offset the higher cost of transportation. In a series of lectures and articles, American Airlines executives have put forward their belief that 60 cents of the average manufacturing dollar is accounted for by distribution costs, and that, furthermore, many manufacturers have no more than a hazy idea of how those costs are made up. They argue that the use of air freight must be scientifically studied in relation to the entire distribution
process, and that if the customer has no inclination to perform such a study the airline must do it for him, presenting the case for air freight with a set of indisputable figures. This theory is now being applied by the largest and most progressive operators. American Airlines have set up an air-freight
development branch staffed by a cadre of selected salesmen who receive an intensive and lengthy course in distribution economics. These men are equipped to meet industry on its own ground and address it in its own language. Six months or more may be spent investigating the distribution methods and economics of a company which appears to the airline to be potentially a large scale user of air freight. Most of the advantages of air freight are well-known, though their financial value relative to a specific industry is rarely obvious. They are defined by American Airlines as "greater speed, greater security and protection in transit and more efficient and simple methodology in its use." Each of these basic characteristics has functions affecting the process of distribution and, thus, the final decision as to whether the introduction of air freight is economically desirable. The airlines can claim that they have redrawn the map of practically any area of die world, and that no two places in any continent are separated by more than two, or at the most three, days' total delivery time. This speed greatly reduces the need for warehousing and inventories, and can offer a manufacturer new markets as well as increasing his sales in existing markets. Reduction of warehousing and inventories results in less stagnation of capital and lower freight-handling costs and, in turn, lowers the depreciation of goods in transit between the producer and the customer (since the transit period will in many cases be shorter).Packaging of goods for air shipment is frequently lighter than for other forms of transport and never heavier. Goods, are
exposed to damage for a much shorter period of time, and for this reason there is also less likelihood of deterioration or pilfering. American Airlines state that damage to shipments in transit costs only 0.28 of 1 per cent of total freight revenues, and that the corresponding figure for loss caused by theft is 0.23 of 1 per cent. It can be assumed that there are three cases where existing
users of surface transport would consider the change to air freight. In the first case, when freight rates are the only variable, the decision will be made on a straightforward comparison of charges.
In the second case air freight rates may be considerably higher but some of the factors mentioned above may justify the switch to air freight, even though the volume of business does not change. In the third case the value of new business resulting from the use of air freight may exceed the additional transport charges. A fourth field of opportunity lies ahead. The future will bring new forms of business and industry owing their birth to the In the second case air freight rates may be considerably higher but some of the factors mentioned above may justify the switch
to air freight, even though the volume of business does not change. In the third case the value of new business resulting from the use of air freight may exceed the additional transport charges. A fourth field of opportunity lies ahead. The future will bring new forms of business and industry owing their birth to the existence of air transport. Such enterprises will enjoy an advantage denied to older-established competitors; they will start life with the knowledge that air-freight brings a manufacturer to the doorstep of his most distant customer, and they will plan
accordingly. The beginnings of this trend can already be detected in America,where quality of air service is beginning to be taken as a major factor in the choice of location for new towns and factories.