In a decidedly down market, US Airways saw its cargo revenue shoot up nearly 20 percent in the first three months of 2001, to $45.2 million, bringing a strong flow of cash into the airline as US Airways tries to navigate out of a tight market and financial box.

This while United, the largest domestic combination carrier, saw its cargo revenue plunge 11.5 percent to $192 million during the quarter. Northwest and American airlines, which closely trail United in terms of cargo revenue saw increases of about 5 percent, as did Continental Airlines.

"They've been growing quite nicely because they have focused on their core market," Bob Imbriani, vice president of international operations for forwarder Team Worldwide, said of US Airways' cargo unit.

Running Red

Charting the way is no easy task as US Airways has only seen one profitable quarter in the last seven. And with the economy in the worst shape it has been in a decade, the prospects for a quick recovery don't appear likely.

The nation's sixth-largest airline followed its $269 million in losses in 2000 by running $171 million in the red in the first quarter of 2001. It's hardly a cargo powerhouse, claiming only a little more than 4 percent of the market share among the top 10 American combination carriers.

That thin share had narrowed in the 1990s as cargo revenue slipped while the airline reined in capacity and focused on cutting costs. But under new Cargo Director Tony Lefebvre, cargo returns grew 10 percent last year and the division has been intent on aggressively adding business even as the airline's top officers focus on the foundering chances that the $12.3 billion merger with United will win regulatory approval.

The most important part of the growth has come from the most critical part of any airline's service - the addition of capacity - but US Airways officials say they are using their wider space to grow in more ways.

"It has been a combination of factors," said Lefebvre, "the number of new aircraft, the A330s into key markets, and a team of new sales people. We've added a number of key operational support items to improve our service to customers and put a better product in the market place."

One of the most visible changes is the addition of nine A330-300 aircraft since May 2000 on international flights. The twin-engine widebodies are replacing 767s over the Atlantic, boosting cargo capacity from three pallet positions to eight. Adding the narrowbody A321 also is increasing capacity on its east-west domestic routes, which had been served by smaller A319s and 737s.

It also has improved service by consolidating its local customer service centers into a single facility that is staffed 24 hours a day, seven days a week. And US Airways more than doubled its sales staff from 15 to 36, adding representatives in new markets such as Chicago, Atlanta, and Miami, while increasing existing offices in New York, Philadelphia and Charlotte.

Broadening the regional scope of its sales staff is also aimed at alleviating a weakness in US Airways' overall scope. "It's perceived as an East Coast, north-south airline. It needs to work (to increase) name recognition in some of those markets that are not their traditional markets," Imbriani said.

The international reach - the airline's direct trans-Atlantic destinations are Paris, Madrid, Manchester, London, Amsterdam, Brussels, Munich, Frankfurt and Rome - is important to the airline's freight business because its narrowbody focus in the relatively crowded Eastern U.S. keeps something of a lid on the kinds of cargo traffic it can handle.

The carrier's largest customer is the U.S. Postal Service, which moved $60 million worth of letters and packages in 2000. Although FedEx is taking over the USPS contract in August, Lefebvre said the FedEx deal duplicates dedicated airlift and does not replace commercial lift. "We expect our volume will not change," he said. "We're fairly confident we will continue our growth with the Postal Service."

Star Allies

US Airways' cargo reach, however, remains limited by the scope of the passenger expansion and by how well it can sell space on its tight route network. Its larger competitors are teaming up into far-flung alliances that extend their reach and threaten to push go-it-alone airlines such as US Airways further to the margins. American Airlines is in the OneWorld alliance with British Airways, Delta Air Lines is with a Sky Team alliance that is trumpeting its cargo capacity and United is a core member of the Star Alliance.

US Airways officials stand solidly by the United Airlines buyout as the airline's answer to the globalization push, but executives at the two carriers don't have much company in believing in the merger anymore. The merger has languished in Washington with no indication of when, if ever, it might get a full hearing with anti-trust regulators. On Wall Street, US Airways shares settled back to the $25 range, well below the $60 price United agreed to pay.

Without the United merger, "they're going to have to look for alliances with other partners," said Michael Hess, vice president of strategic planning at Associated Global Logistics. "I'd like to see them act on their own, and not merge. You can have alliances and survive."

Imbriani noted, "Cargo can lead to significant profit, but what happens with their passenger operations will really be the major determining factor (in their growth)."

Buying Kuehne

witzerland's Kuehne & Nagel jumped into the North American logistics arena with the acquisition of Connecticut-based USCO Logistics. The forwarder's first purchase of note in the United States puts Kuehne & Nagel in the arena with Exel, Danzas and others European businesses that have bought aggressively into North America.

The $300 million acquisition comes after USCO grew at a better than 30 percent annually over the last three years. As part of the agreement, KN will keep USCO's management team in place.

The warehouse-based logistics provider manages more than 70 distribution centers totaling more than 15 million square feet in the United States, Canada and Mexico. The company focuses on the high-tech, retail and pharmaceutical industries.

Klaus-Michael Kuehne, executive chairman of KN International, said adding USCO "enables us to offer one-stop, integrated contract logistics solutions in the triad of Europe, the Asia-Pacific region and North America."

... Briefly

Struggling with weak traffic and a declining share of the domestic express market, Airborne Express laid off 640 workers for a projected annual savings of up to $28 million. … A federal appeals court overturned a $1.8 billion tax penalty the Internal Revenue Service had imposed on United Parcel Service. ... SabreTech, the defunct maintenance company, agreed to pay a $1.75 million penalty to settle allegations that it violated hazardous materials rules in the1996 crash of a ValuJet aircraft that killed 110 people. … UPS created a business unit to include the Fritz Cos. and seven other brokerage and forwarding businesses the company has acquired and it placed David Abney, formerly president of UPS subsidiary SonicAir, in charge of the unit. … Aeronavali will convert three more MD-11 passenger planes to freighters for FedEx under a license from Boeing. ... United Airlines sharply stepped up its retirement of 727-200 passenger planes, saying it would ground 33 this year and 32 in 2002 because of falling traffic and higher fuel prices. … A $6.5 million federal grant to Rickenbacker, Ohio, International Airport includes $500,000 for cargo ramp improvements at the freight-only airport and $5 million to build a charter passenger terminal. ... FedEx Custom Critical opened stations in Wichita, Kan., and Portsmouth, N.H. … The Federal Aviation Administration proposed penalties of $235,000 against TransBrasil Airlines and $95,000 against KLM Royal Dutch Airlines for carrying oxygen generators on international flights into the country. … CASS Canada will use Oceanwide.com software for debit/credit memos and Cargo Charge Advisories. … AirNet Systems will buy five Cessna Caravan Super Cargomaster aircraft over the next two years. … Alaska Airlines carried 285,095 pounds of Copper River salmon out of Alaska in a weekend, stepping up an annual rush by adding nine 737 freighter flights out of Cordova, Alaska. … The government granted a certificate allowing ADS-B systems, an air navigation system pushed by all-cargo airlines, to be used on 757-200s. … Startup Voyager International Airlines applied for certification to start 747-200 charter flights with assets purchased from bankrupt Tower Air. ... General Motors Service Parts Operations extended its third-party logistics agreement with Schneider Logistics for three years.