WorldCity Business Magazine

04 Fuel Fight - Q&A with David Brooks, AA Cargo President

by Ian McCluskey

The WorldCity Interview: AA Cargo President David Brooks on oil, Latin America, China, MIA & more

WorldCity interviewed David Brooks, the Dallas-based president of American Airlines Cargo, touching on a wide range of topics.

Brooks oversees more than 2,000 employees and a cargo division that reported $824.5 million in 2007 revenues. The airline, which offers more than 100 million pounds of weekly cargo “lift capacity,” serves more than three dozen countries and more than 250 cities around the world.

WorldCity: What is the biggest challenge that AA Cargo faces today?

Brooks: Unfortunately, our largest challenge is one over which we have very little control, and that is the cost of fuel. AA’s fuel bill this year will increase by $7.3 billion compared to 2001, and increase by $3.5 billion in 2008 alone even with a reduction in total fuel used.

Closely following higher fuel costs is the impact of new cargo screening requirements. Last year Congress irrationally passed legislation requiring 100 percent screening of cargo on passenger aircraft only, and without any funding to accomplish this daunting task. The industry is working closely with the TSA [U.S. Transportation and Security Administration] to implement this program but its success will depend on the participation of carriers, forwarders, and shippers.

WC: How has AA Cargo adapted to the rising price of fuel? Have increased fuel costs been passed on to customers? If so, has this dampened demand for air cargo?

Brooks: With fuel being such a large component of our cost structure, American Airlines has no choice but to pass on higher fuel expenses to customers in the form of a fuel surcharge. This surcharge is based on a published index for crude oil and changes based on how the index moves week-to-week.

Regrettably, fuel surcharges for air cargo are now 1,200 percent higher than they were five years ago and we are starting to see lower value and less time-sensitive products switch to other modes of transportation. While it is very difficult to reduce the cost of fuel, we are able to influence consumption.

American Airlines has implemented its “Fuel Smart” program in an effort to conserve fuel. Under AA’s Fuel Smart program, a multitude of initiatives have been put into place such as implementing a Dynamic Cost Index program, which ensures that flights are operated at an optimal speed, route and altitude to maximize fuel efficiency, with a potential savings of $16 million. We have focused on promptly meeting the aircraft to reduce arrival parking delays, which reduces fuel burn while providing better customer service, with a potential savings of $2 million. And we are using a single engine to taxi, when possible, which also helps reduce fuel burn. That has a potential savings of $8 million. For cargo applications, American Airlines is starting to use lighter-weight “Unit Load Devices,” or ULDs. We are also doing a more aggressive job firming up bookings to avoid planning excess fuel.

WC: As a result of strong economic growth and strong currencies in Latin America, U.S. exports to the region are up sharply. How is Latin American business for AA Cargo?

Brooks: Latin America is one of AA Cargos strongest markets, serving 24 cities in Central and South America and 16 in the Caribbean. Brazil, for example, now boasts South Americas largest economy and is the third most important U.S. trade partner within the Western hemisphere. In 2007, Brazil’s trade with the U.S. exceeded $50 billion.

Over the past 20 years, American has strengthened its presence at Brazils Guarulhos International Airport (GRU) and Viracopos/Campinas International Airport (VCP) [both serving Sao Paulo]. GRU is the largest airport in the country and, in 2007, was responsible for 42.7 percent of all cargo exported from Brazil. VCP accounted for 37.5 percent of the markets exports.

WC: And how important is Latin America to the company’s global business?

Brooks: Latin America is vital to American’s global business strategy. American has the strongest network between Latin America and the U.S., and connects traffic to Asia and Europe through non-stop service to DFW [Dallas-Fort Worth International Airport], JFK [New York’s Kennedy International Airport] and MIA.

WC: How important is Miami for AA Cargo? Miami International Airport is the U.S. leader in international cargo.

Brooks: Miami is AA Cargo’s largest cargo operation and our key gateway to Latin America. The Miami sales team handles territory from North Carolina down the coast to Florida and Mexico, the Caribbean, Central America, and South America. Fifty-two stations and 28 countries are served by the Miami hub.

WC: How important is the perishables trade to AA Cargo?

Brooks: The perishables industry is very important to American Airlines Cargo, and particularly to the Miami hub, which handles the highest quantity of perishable commodities in the AA system. As a result, AA has created an onsite pre-cooling program unique to our Miami facility called AA Cool Perishables. The program provides pre-cooling services and expedited U.S.D.A. [U.S. Department of Agriculture] and Customs clearances for perishable commodities. It’s a very popular service for AA Cargo.