After 10 months of confusion and lack of communication, the air cargo industry is getting some clues as to what the USA's security agency wants
In the weeks after 11 September, the air cargo industry was thrown into confusion about security measures. Regulations seemed to change almost every day, with the USA suspending known shipper programmes for a while, demanding the screening of all shipments, and even demanding each shipper be telephoned before a shipment could move.
Gradually, some sense of business-as-usual reasserted itself, but the uncertainty remained, with no one in the cargo industry appearing to have any insight into the new US Transportation Security Administration (TSA) thinking.
That confusion to some extent persists. In sharp contrast to the passenger side of the business, where there is a clear programme of baggage screening being implemented, if well behind schedule, there have so far been few pronouncements on cargo.
Unspecified changes
As recently as September 2002, Larry Coyne, president of the International Air Cargo Association (Tiaca), warned of sweeping changes ahead, without being able to specify what they might be. "We have so far only seen the tip of the iceberg," he told the Air Cargo Forum in Hong Kong. "What we have now are just stopgap measures."
A major problem, at least until 19 July when John Magaw was dismissed as head of the TSA, seemed to be lack of communication. Even cargo managers at the US majors, expected to be close to TSA thinking, admitted they had little meaningful contact with the administration. They made such comments quietly and off the record. "If you criticise them in public, they cut you off altogether," said one US cargo manager.
In the absence of hard information, speculation flourished. Among the worries were that belly cargo might be banned altogether from passenger airlines - fuelled by the decision to ban mail over half a kilo (16oz) in the bellies of US carriers - or that all cargo might have to be screened. Both would have massive consequences, not just for the air cargo industry, but for airlines and the world economy as a whole.
Just how massive is illustrated by a presentation from PwC Consulting, which has also conducted a study for the TSA. Stephen Tisdale, director of aviation and transportation practice at PwC, stresses that the results of that study are confidential. But in September at the air cargo forum in Hong Kong he did share some broader conclusions.
Screening all belly cargo, Tisdale told the Forum, would cause three-quarters of all shipments to miss their booked flights, and would "cripple" the cargo supply chain. The loss would run into billions of dollars, wiping out all the logistics efficiency gains made by global industry in the 1990s. The cost of just the screening, leaving out other costs of the bottlenecks created, would be $7.4bn in the USA alone, Tisdale concludes.
Third-party clearing houses would be an even worse solution. "They would need additional transportation to and from the clearing houses, and you would need at least one per airport. With 429 airports in the USA, how long would they take to construct, and at what cost?" he asks.
Revenue generator
Banning belly cargo was no more feasible. Pointing out that up to 25% of airline revenue can come from cargo, Tisdale predicted this would "significantly alter" passenger network coverage.
Support for this view comes from Michael Wisbrun, executive vice-president of KLM Cargo, who points out that belly cargo is a factor in 80% of all airline routes and 90% of all frequencies. "It generates $10 billion in revenue, around half of which is contributions to fixed costs, and all of which would be lost to passenger carriers," he says. "Without belly cargo, a lot of destinations would not be served anymore, or passengers would pay 10-15% more a ticket."
One last option suggested by some, especially makers of aircraft unit load devices (ULDs), is the use of bombproof containers. However, Tisdale points out that even if the cost of replacing existing ULDs - estimated at $4.6 billion for the USA alone - is factored out, and even ignoring the weight penalty of the reinforced containers, such a measure would only protect widebody aircraft. "Many narrowbodies cannot take ULDs and would not be covered, which would leave a major security loophole," he says.
What then can the TSA do to ensure cargo security? According to Tisdale, the three key tasks are: to confirm the shipper's identity; verify the contents of the shipment; and verify who has come into contact with it. Known-shipper programmes, started in Europe in response to terrorist attacks and extended to the USA after the TWA explosion over Long Island in 1998 (which was at one point suspected of being caused by a cargo bomb), did not go far enough.
In particular they did not identify what was in the shipment or who had been in contact with it. "Current US regulations are more like a regular customer programme, requiring only that the airline or forwarder keep a tally of 24 shipments from a particular customer or make a site visit," Tisdale says. The regulation was also self-administered by airlines, and no central database was kept.
PwC's solution, and one that others increasingly expect the TSA to adopt, is an enhanced known-shipper programme, accompanied by stiffer employee checks. The known-shipper programme would be administered nationally, with shippers registering online and receiving a unique ID number in return. The database would be linked to law enforcement databases to ensure that terrorists did not use legitimate companies as a front. Such a database would only cost tens of millions of dollars to set up and could be done in six to eight months. "The biggest obstacle is the legislative mandate to require all shippers to comply," said Tisdale.
This approach would almost certainly win broad industry support. "It would mean shippers would not have to re-register with every airline they want to use," says Jim Friedel, president of Northwest Cargo. "That would significantly reduce the portion of unknown shippers."
For those shippers that remain, phase two of PwC's proposal would be selective screening, based on security profiling. This would be possible without significantly disrupting the supply chain, said Tisdale, adding that the $350-400 million cost of such a programme in the USA compares favourably with the billions required for compulsory screening. Indeed, there is already something of a precedent on Latin American routes into the USA where perishable shipments into airports such as Miami or Atlanta are routinely screened because they are considered high risk for drug smuggling.
Two questions that would be unresolved if the TSA does go the enhanced known-shipper route would be who pays, and how the programme would work in the rest of the world. Tisdale suggests that it is down to industry to come up with proposals in both areas, and he adds that Tiaca could be a forum for that. To date, however, Tiaca does not have a great record of getting its voice heard at the TSA. "We don't have the budget to lobby them to the extent we would like," admits Coyne.
Both Coyne and Wisbrun think a way forward is to get ICAO or IATA involved. Wisbrun points out that the IATA Cargo Security Task Force has already done work on enhancing the known-shipper concept, and in the past ICAO has also produced known-shipper proposals that were never acted on. The European Commission is also trying to enforce the tight known-shipper standards agreed in 1998 and already in force in the UK, but progress has been slow. Europe's Transport Commissioner Loyola de Palacio also recently set up a US-Europe transportation security group.
Setting the standard
It is unlikely that any such initiatives will make much progress until the TSA pronounces, however. Whatever the rest of the world thinks, it will be US requirements that will set the standard. It is also likely to be a US national known-shipper database that emerges first.
At least, however, the air cargo industry is now getting better signals from the TSA. "For the first 10 months, the attitude was when in doubt, keep it out. There was a legal, law-enforcement mindset. The new management seem to be much more practical," says Friedel.
US airports too have noticed the difference. Richard Norris, cargo development manager for Washington Dulles, says a security director has at last been appointed and meetings have taken place. "He is straight talking and very experienced in security issues, and has offered to get together with the cargo community to establish a dialogue. He seems to understand the importance of the cargo business at Dulles, so I, for one, am very encouraged."
REPORT BY PETER CONWAY IN LONDON
Source: Airline Business
