Air freight CEO: Elton John yes, deadhead no

Howard Dicus Pacific Business News

Pacific Air Cargo recently hauled Elton John's concert gear to Honolulu, but when the new carrier has lots of flowers and produce to carry back to the mainland, it's really music to the CEO's ears.

Beti Ward is no deadhead fan -- referring, of course, to deadheading, the dreaded practice of heading somewhere with a load of freight and then returning empty.

"Bigger carriers don't especially like to haul Hawaii products to the mainland," Ward says. "Some of them will fly back empty rather than reduce rates because they don't want the responsibility of handling flowers. It takes special skill to ship agricultural products well."

Pacific Air Cargo, which flies a 747F five times a week between Los Angeles and Honolulu, tries not to deadhead. So it charges an average 70 cents to 85 cents a pound westbound but only about 30 to 35 cents a pound on the return flight.

"It's good for us and it's good for the community to charge less for Hawaii goods being shipped to the mainland," Ward says. "Some shippers wish we could cut the rate even more and make mainland shippers pay more, but the people who want that would actually be the ones paying more, since shipping costs are always passed through the end user."

Ward, who confounded American International Cargo in 1992 and hired some of the same people for Pacific Air Cargo, got into air freight through the freight forwarding business in Arizona, where she often heard complaints from florists that there was too little "lift" from Hawaii.

The deadheading issue helps to explain why it's tough to do well in the Hawaii air freight business, but there are other factors. The biggest is the cost of jet fuel.

"Basically the cost of air freight hasn't changed in five years," Ward says. "But the cost of jet fuel has doubled. Even with a 10 percent fuel surcharge, we operate on very small margins. If a plane isn't full, we don't make money." She maintains that air freight costs per mile are actually lower over the Pacific than over the mainland.

It costs Pacific Air Cargo about $120,000 to make one run. The company has a dozen employees in Los Angeles to handle, among other things, booking, billing and accounting.

Ward thinks the picture looks bright both for her company and for air freight generally because of "just-in-time delivery," as more merchants avoid stockpiling because of high storage costs and because of the changeability of some merchandise. She says air freight makes sense for any merchandise that can be sold for what works out to $10 a pound.

Also operating in the field are UPS, Federal Express, and, t leer extent, the passenger carriers, who sometimes ship freight in the cargo holds of their passenger aircraft.

Hawaiian Airlines spokesman Keoni Wagner says his company considers this a significant revenue stream, not just on interisland hops but on flights to the U.S. mainland and to the South Pacific.

Although these carriers are competitors, they also help each other, using each other as overflow carriers for their own business and sometimes actually steering business directly to rivals.

Pacific Air Cargo, in addition to hauling its share of flowers and fruit, has also carried everything from cows to helicopters -- and, of course, Elton John's gear.