By Chris Ellis / www.americanshipper.com / June 12th, 2018
Ground handlers operating at U.S. airports are overwhelmed by increased cargo flows.
When it comes to handling air freight at Chicago’s O’Hare International Airport, Mark Boutros, operations manager for trucking outfit JP Line Express, knows that it’s never an easy ride.
Each evening between 4 and 6 p.m., the company dispatches several trucks to the airport’s sprawling cargo complex to either drop off or pick up pallets of international freight on behalf of its forwarder customers. If the wait time is longer than an hour to reach the airline ground handler’s dock, the driver is forced to move on to the next facility.
“We essentially have to prioritize what must be picked up that night and what might wait until the next day based on the LFD (last free day) at the ground-handling facility,” Boutros said.
If JP Line’s driver has no choice but to wait beyond the first hour to drop off or pick up a particular air freight shipment, then the forwarder begins to incur a $65-per-hour charge. “That just pays the cost — driver and fuel — to be there,” he said. “We’re not making a dime off the forwarder.”
Air cargo is just a small part of JP Line’s overall trucking business. The same forwarders enlist the company to provide intermodal and trailerload transport services throughout the Midwest. While these services are generally performed without disruption, air freight deliveries and pickups at O’Hare for the company are another story. “You don’t know what you’re going to get into at the airport until you get there,” Boutros said.
Forwarders and their truckers at O’Hare are not alone with their challenges to retrieve and drop off air cargo. Most major U.S. airports face similar logistics impediments.
Coming To Roost. The problem with air cargo holdups at the major airports has been brewing for the past 35 years. It traces its roots to the airlines dropping their former in-house, unionized ground-handling services and replacing them with less expensive third-party providers.
Instead of the airlines having to pay higher hourly wages, plus benefits, to their own employees, third-party ground handlers charge for their services on a per-pound-of-cargo basis. The outsourcing model ultimately saved the airlines millions of dollars in cargo operations costs.
By the late 1990s, forwarders interviewed by American Shipper at the time vigorously complained about the deterioration in airport cargo services and pointed the finger at the third-party ground handlers as the source, citing that these operations’ largely minimum wage, transient workforces showed little interest in customer service.
Flash forward to 2018, and the problems related to ground handling of cargo at large U.S. airports have not disappeared, and many forwarders say they’ve only gotten worse in the past five years.
But there’s plenty of blame to go around, said Steve Rakiec, president of forwarder Pride Worldwide, based in Deer Park, N.Y. “Everyone has to point the finger at themselves for this problem,” he said.
The 40-year-plus industry veteran, who handles air cargo through New York’s JFK International Airport, said the outsourcing of air cargo handling by the airlines started with the forwarders demanding lower and lower freight rates. While the airlines obliged, they eventually had to cut operations costs in the form of in-house ground-handling services.
The third-party ground handlers, which sprang up to fill the service void, are staffed with people who “aren’t paid enough to learn,” Rakiec said. “Truck trailers are taking forever to unload or load.”
Whenever cargo misses its outbound flight or is mishandled by the ground handler at the time of import, exorbitant storage fees begin to amass, which the forwarders say they cannot easily recoup from their customers.
Some truckers picking up or dropping off cargo at the airports are now charging forwarders for wait times. Others have abandoned the business altogether.
“To fix a problem, everyone has first got to admit there is one,” Rakiec said. “Otherwise, we will continue in this vicious cycle, and it will only become worse and worse.”
The airport bottlenecks for cargo are already a hot button issue for the Airforwarders Association’s membership, which includes ground handlers, and one that it’s attempting to remedy. “Let’s face it, we sell time for a living. We can’t afford to have something getting in the way of that,” said Brandon Fried, the group’s executive director.
Black Holes. In recent years, the ground-handling industry has largely consolidated and is now dominated by a handful of global operators, including Swissport, Menzies, Worldwide Flight Services, Total Airport Services and Mercury Air Cargo. These companies operate between the airlines and the forwarders and their truckers.
For imports, the airlines electronically notify both the ground handlers and forwarders, as well as U.S. Customs and Border Protection, at the time of departure overseas of what shipments are on their flights. Upon arrival in the United States, the ground handlers unload the cargo from the planes and deliver it to nearby facilities, unless a shipment is pulled by CBP for inspection. That’s when the clock starts ticking on the available free time — usually 24 to 48 hours — for the forwarder to pick up the cargo from the ground handler before storage charges are assessed.
“As soon as we get the air waybill from origin, we track it and then call the airlines,” said Peter Gruettner, president of Los Angeles-based Extra Logistics. “We constantly have to be a detective to find out the status of the shipment. You need to be proactive as the airlines provide limited assistance to their particular import procedures for smooth and accurate release.”
The details for last free day of storage vary across the board. “You are faced with an emergency-type response to retrieve cargo prior to being assessed the storage fees. When you call the airline, you are advised of ad-hoc charges to pay and who to pay them to,” Gruettner said.
To the forwarders, the ground handlers effectively have become black holes, where cargo goes in but is difficult at times to efficiently extract.
And just because the proactive forwarder obtains notification that the cargo is ready for pickup doesn’t mean it will be waiting on the ground handler’s dock when the trucker arrives. Gruettner has found this out the hard way on several occasions.
“Either by service failure, airport congestion or even the airline losing cargo, the forwarder is forced to pay additional storage fees,” he said.
Gruettner said what he finds most frustrating is that there’s no clearly advertised visibility to the import charges, terms and conditions of the last free day, exact documents required by the airline for import release or how charges are assessed upon arrival.
“We have been faced with daily storage charges ranging from $1,700 to $4,000 per day, with no explanation or support as to how these charges were calculated,” he said.
Gruettner called the airline storage charges “completely excessive,” adding that diligent forwarders risk a “complete loss” on shipments due to the Import warehouse implied conditions.
“If we could review the terms and conditions of the import warehouse in advance, it would provide the forwarder, as a consumer, a proper consideration of which airlines to favor and which airlines to avoid,” he explained. “If you knew of the import terms and conditions in advance, you would advise origin which respective airlines to avoid all together and which airlines afford a competent and competitive service.”
With less-than-containerload ocean warehouse services, on the other hand, the forwarder has visibility to all the terms and conditions, what’s required and costs associated with storage. “LCL ocean import is very clear and nowhere do you pay storage of $4,000 per day,” Gruettner said.
But the forwarders in the air cargo environment have nowhere to go with their complaints, unlike their brethren that handle ocean freight and can lodge complaints with the U.S. Federal Maritime Commission.
“I called the Department of Transportation, and they told me they only deal with passenger complaints and that I should try and resolve the matter with the airline directly,” Gruettner said.
One way to diminish the chaos between forwarders, truckers and airport ground handlers may be to develop a nationwide airport cargo pickup and scheduling system.
“Regardless of the causes that created the present situation, all industry stakeholders must now work together in finding innovative solutions to the challenge,” Fried said. “If we can leverage technology to develop a scheduling system that helps to remedy the problem, then it is incumbent upon us to begin the process as soon as possible.”
Tied In Knots. The ground handlers at the major U.S. airports face physical capacity constraints to handle the influx of air cargo, which has been further exacerbated by the increase in e-commerce shipments in recent years.
Mercury Air Cargo’s operations at Los Angeles International Airport, for example, is working out of buildings constructed during World War II. While various changes have been made to the buildings over the years, their design is still not optimal for today’s air cargo requirements, said John Peery, the company’s chief operating officer.
On top of this, Mercury’s ground rent at the airport and labor costs, which include medical coverage, continue to rise. Last year, ground rent at LAX reached more than $22 per square foot, while the employee costs will exceed $24 per hour per entry-level warehouse and office employee.
And the freight keeps coming in increasing volumes. Last year, the airport processed 2.4 million tons of cargo through 2 million square feet of warehousing. Thus, the last thing that the ground handlers want to become is long-term storage for air cargo.
“With 15 new carriers serving LAX since January 2016 and organic growth of existing carriers, surplus warehouse space is nonexistent” Peery said. “Handling the volume of cargo now at LAX is like sucking an elephant through a straw.”
Despite LAX’s significance in the U.S. air cargo business, especially for high-value goods coming from Asia, it has little room to build larger warehouses. Mercury, which handles about 23 percent of the air cargo volume at LAX, operates within a space of 437,000 square feet.
“It all boils down to LAX being a 3,500-acre airport, smaller than Amarillo or Myrtle Beach, while being the fourth-busiest cargo airport in the U.S. and the second-busiest passenger airport,” Peery said. “LAX is investing over $14 billion on the passenger side and now it is time for cargo facility infrastructure improvements.”
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