Never Stand Still

It was 1981, and the economy was in quite the recession. CF as a department store of transportation was in quite the quandary, they were unsure of what direction to take there air freight business.

Air Freight was divided into 2 sectors, small package shipments and large LTL style shipments.

The recession lead to air freight companies scrambling for market share, and trying to expand more of each kind of shipment.

CF's management however determined that, offering specialized air freight service was the way to go. The only trouble with this was CF despite the fancy pictures and fancy planes with fancy red and green stripes and there fancy CF logo plastered on everything, did not own one air plane not a single plane not one. So they couldn't actually control any of the actual planes them selves and couldn't control quality on every route. However CF management deemed that as acceptable because well, even after having all that money they didn't know what to do with from Freightliner, accounting at CF said "Whoa, buying an airplane? You know how much those cost to buy? There not cheap I can tell you that right now. We don't have that kind of money lying around here who do you think we are?"

So they put the whole kabash on buying planes for a minute. CF management shot down by accounting had to say okay fine and decided due to costs of owning and leasing planes that they would just use other air freight companies instead and deemed that acceptable enough.

Anyhow CF air freight salesmen hit the streets selling air freight to everyone and anyone.


(This is not an actual CF Airfreight sales man it is just a picture of what an air freight salesman looks like.)

Anyhow the CF airfreight salesmen were busy selling air freight to lots of different places and air freight tonnage grew. With the growth in tonnage CF was able to negotiate better rates with the airlines and management really liked those better rates.

In 1982 CF airfreight customers were chomping at the bit for CF to offer parcel service as well with there large freight service that they were all ready providing.

So CF in conjunction with the post office merged there parcel shipping services with the post office and went and consolidated there shipments together with the post offices shipments and negotiated a lower rate from the airlines.

However CF's air management team was not interested really in small shipments and while there was quite a bit of business for small air shipments CF didn't want the trouble and instead decided that they were not going to compete for packages instead CF said they would only ship parcels for big customers in order to keep there big LTL style shipments coming through there air freight service.

However CF's air freight sales force was relentless and kept attacking the market place and like anything CF did back in those days. In 1984 once CF had most of the part of the air freight market they wanted cornered the management team turned towards "improving operating margins."

What that fancy talk means is CF wanted to keep revenue and profits for it's air freight shipments high. So basically what they did was raised prices and got real cheap with there internal CF stuff in order to make more money. However all this money grabbing cheapness back fired and air freight customers started to rebel against CF in early 1984.

Management in there infinite brilliance determined that the market place was changing and that CF would have to rethink.

The problem CF had was they still did not own any planes and there fore had no control over what kind of services they could offer, the companies that owned there own planes could offer next day and 2 day service where CF could do none of that.

At the time Airborn Express.

and Emory Worldwide

were the largest air freight companies in the nation and owned there own air planes and because of that had the highest of profit margins which is what CF was interested in.

However CF airfreight made some profitability changes and did raise rates 4% in 1984 lost some big accounts to because of that, but CF kept trudging on and Donald Berger CF executive vice president of operations was busy watching struggling Eastern Airlines at the time and decided hey there maybe something there for us.

CF approached Eastern Airlines


and asked them how they would like to do more business with air freight. Eastern said they would like that very much and CF said they would shlub all there air shipments over to Eastern in exchange for $200,000 reduction in "air haul" costs.

This worked well and in August of 1984 CF held there first air freight sales meeting in Dallas where 450 sales reps and terminal managers met to discuss the different kind of services CF air freight was going to roll out.

CF increased the tonnage and by 1984 tonnage was up again the problem was Eastern Air Freight only had so much capacity and at times CF was forced to partner with other air carriers which were more expensive and drove costs up and profits down.

CF over ran Eastern Air Lines regular capacity and by 1984 CF renegotiated a deal with Eastern which would cause CF not to have to buy expensive air lift services with other expensive air lines. This stabilized things for CF Air Freight which by the end of 1984 made an operating profit of over 3million dollars.

Stay tuned for the next installment when CF tackles there air freight capacity problem head on!

 

Hi guys, this is a good one, I think you'll find this interesting, this is about CF Airfreight's night time express, this is actually pretty cool stuff.

So here we are on another episode of CF Master Piece Theater.

The year was 1984, Air Freight was hot and CF was at the top of the Air Freight game. However with air freight tonnage increasing, CF was out of cargo space and had pushed eastern air lines to the brink and was ridding there limit. Rember CF did not own a single air craft yet...
Any how Berger the head of CF Air Freight, was in his office and came up with an idea, his idea was, why not use space in air planes at night time. The cargo holds of most commercial passenger air planes were wide open at night and at night time most commercial passenger air planes were sitting on the ground, not flying or making the air lines any money.

Back in those days most commercial passenger air planes started there days at 6:00am and ended there day around 10-11pm. Then sat from 11pm to 6am.

Now cargo air planes flew all night around the clock. Same with CF's tractor trailers non-stop 24/7 the tractor trailers run around the clock.

CF Airfreight executives met with Eastern Air Lines and United Air Lines. Berger of CF Air Freight wondered why commercial air lines let billions of dollars worth of equipment sit idle all night long where cargo planes flew 24/7. Berger proposed Eastern and United sell CF the cargo space in there passenger jets when they are just sitting at the main hub or terminal all night long.

The way the agreement worked was CF had rights to the cargo bellies of the planes and passengers had rights to the passenger hold with there carry on luggage, but no checked baggage.

Richard Farris who was the head of United Air Lines at the time offered CF the usage of part of it's fleet of McDonald-Douglas DC-10's (which by the way as a side note, my favorite air plane is the DC-10 other then that I really don't care for planes or air travel.)

United Air Lines DC10 1980's.

The DC-10's are a good solid wide body jet the only problem with the DC-10 though is the galley is in the cargo hold and it is linked to the passenger cabin by a small elevator. Well the kitchen galley took up to much cargo space and because of that the United Air Lines DC-10's were not able to be put to use for CF.

However don't worry it's not over yet. Eastern Air Lines on the other hand had a main hub in Houston and that hub is where they parked there fleet of Airbus A-300's.


The Airbus A-300 though had an unrestricted cargo hold and no kitchen or anything silly to get in the way and Eastern Air Lines who was finacially struggling at the time moved very quickly and offered CF a 3 year lease deal.

It was actually a win win deal for both companies. CF was able to offer AM service to all the major industrial points in the US flying out of the Eastern Air Lines Houston Hub and CF was also covering Easterns Operating Costs on those flights and totally subsidizing the entire night time air flight so Eastern was then able to sell passenger tickets and the few passengers they did get to ride were pure profit it was a killer win for everyone and a killer win for America as a country. Now the gloves were off and CF was dominating the night skies.

By the begging of 1985 CF sales people were selling CF's "Moon Light Special" service hard core and Eastern Air Lines was running 7 Air Bus A-300s a night for CF out of Houston the planes flew in from Chicago, LA, San Fransico, Seattle, Atlanta, Philadelphia, Newark, and Boston. CF had a small sort facility near the Houston Air Port. but most of the times the planes flew in from all those major points and cargo was hustled on and off the planes and by CF crews.

The planes were on a very strict 75 minute pre dawn turn around time. The planes would land and be unloaded reloaded and back in the air in 75 minutes.

However leasing the cargo space from Eastern Air Lines was costly and not wildly profitable and CF Air Freight explained to CF board of directors that this would work better then if CF started with company owned air craft to make there AM service work.

In August of 1985 Eastern Airlines added 2 more Airbus A-300 Air Planes to the mix and were able to link Newark, NJ to Los Angeles, CA with 1 stop in Chicago.

By the fall of 1985 CF and Eastern also added flights to Kansas City, Miami, and Columbus, Ohio (probably because of all the air freight the rough necks at the old Columbus, Ohio CF terminal were picking up.)

By this time CF was using trucks and small air craft in a type of night time hub and spoke air freight service, what they were doing was flying and trucking freight from smaller cities to the bigger city's where the big A-300 planes were to do the big over night runs.

With the added expansion and growth CF was able to get a 2 year contract with the United States Post Office, worth approximately 22million dollars.

This was CF's first big federal contract and took up approximately 1/4 of CF's cargo space.

However trouble emerged, competition and pricing was putting a big drain on things major bummer and customers were unsure of this new AM super service so this new program was taking off rather slowly.

However shipments did slowly increase and volume also slowly increased.

The trouble in the market place came when CF aggresivly got into the AM super service and competitors had to follow suit, however the big problem with the entire thing is competitors who controlled there own air craft were way more flexible in lowering rates and non-aircraft operators were forced to try and follow the best they could.

Curry over at CF air freight complained to the CF board of directors that air freight prices were being slashed and there was no end insight to how low air freight prices would go.

CF air freight now losing there shirt did all the things business do when losing there shirt, got rid of employees, cut overtime, went after more lucrative accounts got rid of bad accounts stopped hiring and told the workers to do more with less and then said you get less that's to much you get nothing.

The sales force initiated a sales blitz and that brought back some business, however, CF's agreement with Eastern Air Lines was a good and bad deal.

During the 1985 United Air Lines Strike, CF was protected among higher air freight haulage rates because they had negotiated a fixed cost. However when the economy softened CF didn't get the lower pricing either on haulage rates.

However things in 1985 were a mixed bag for CF, CF Air and International posted a 1million dollar operating loss, however there average shipment size was 190lbs which was 4xs heavier then there competitors and shipment sizes were getting heavier and larger so CF kept up with the air freight. CF also claimed that there best asset was cash and they would not be purchasing air planes any time soon.

However the optimism of 1986 quickly vanished
Burlington Northern Air Freight also known as BAX Global a fully owned subsidiary of Burlington Northern Rail Road


and Emory Air Freight were cutting CF's rates by 50% and CF was having a hard time competing.

Also Eastern Air Lines was continuing down it's rocky road and it's financials were continuing to deteriorate (By the way for all who are wondering Eastern Air Lines went out of business in 1991.)
Eastern Air Lines cut it's contract with CF by $500,000.00 in 1986 and also the staff at Eastern Air Lines was threatening a strike and walk out.

CF did start looking elsewhere, but were unable to come up with any solutions to get the same rate that they were getting from Eastern and CF decided that they were just going to have to stick with Eastern even though Eastern was running into more financial trouble and other troubles.

However with Easterns trouble CF decided why not kick a dog when it's down and started strong arming Eastern for rate reductions and a longer term contract and hub in Chicago. Curry at CF figured with all those changes he could get shorter haul times with a Chicago hub and also save $2.3million a month over the original contract and get CF Air back to profitability by April of 1986.

Curry also planned on using an Eastern 727 jet between Phoenix and Houston to triple cargo capacity without any price increase.

However spring of 1986 management shifts at CF rippled through the top brass of the company and Curry was switched to corporate sales and no longer in charge of CF Air Freight. Robert Lawrence was now the new man in charge of CF Air Freight.

Berger was vice president of CF Air Freight and had the notion and it's true customers didn't so much care about mode of transport as they did results and if a shipment could arrive on time via truck Berger would throw it on a truck and charge air freight rates and ship it on a CF truck instead of some goofy Eastern Air Lines plane.

Berger was an agresive day to day man, but he was not a money man and long term wise his decisions and results did not always work out and when economies and competition changed and fluctuated Berger and his staff became overwhelmed.

Anyhow I am going to stop there for tonight. CF air freight is big and complex and this will have to be split into another post.

 

That's pretty cool, that they did that.

 

So I think when were done with CF, which is still going to be a while, were not even out of the mid 1980's with CF and were not even done with CF Air Freight, but when were done with CF I'm going to probably do an expo-say on Cannon Express from Spring Dale, Arkansas. There expo-say will be about 1/4th the size of this one considering Cannon Express was some no frills third rate dry van truck load carrier run by a bunch of screwballs who thought they could actually compete against JB Hunt.