There was no apocalypse on 6-6-06, as some predicted, though the end of days would probably have been good business for Air Transport International LLC of Little Rock.
“We say if there’s famine, wars, earthquakes, we make money,” said James Hobson, president and CEO of the charter airline.
The company, which operates 18 airplanes from more than a dozen locations around the world, shipped relief supplies during Hurricane Katrina and during recent earthquakes in Southeast Asia.
Air Transport also has found some extra work because of the wars in Iraq and Afghanistan, though not nearly as much as some contractors.
And in late 2002, when striking West Coast longshoreman briefly choked trade between the United States and Asia, Air Transport hopscotched back and forth between the United States and Hong Kong with goods that could not be put on ships.
For a company that seems to thrive on chaos in a chaotic world, it should be no surprise that Air Transport has been able to adapt to a recent change of ownership and new challenges in the transportation industry.
Though higher gas prices do not directly impact the bottom line — the cost is passed along to customers, who pay for fuel as part of shipping costs — sticker shock at the pump has made companies think twice about transporting things by plane. Trucks are cheaper, and trucking companies have become better at shipping smaller loads.
Also, some companies are relying less on “just-in-time” production, as it has become cheaper in some situations to keep more inventory instead of using increasingly costlier shipping.
These challenges and others have forced Air Transport to become more efficient. That includes plans to spend some $150 million on more efficient aircraft, tweaking the company’s operations and even a recent round of layoffs.
Still, the company can boast that its revenue — Hobson would indicate only that it is more than $200 million annually — has been on the upswing in recent years.
Noah’s Airline
The list of animals Air Transport has shipped reads like a roll call on Noah’s Ark: gorillas from the San Diego Zoo, ostriches to China, a killer whale from SeaWorld Orlando in Florida to SeaWorld San Antonio in Texas, overseas jaunts for lab monkeys.
“We’ll carry anything but pigs and cows because they’re too nasty,” Hobson said.
No animal, however, has been as important to Air Transport’s complicated history — or at least its history in Arkansas — as the horse.
The airline’s beginnings date back to the early 1980s, when its predecessor was based in Ypsilanti, Mich., and made money shipping auto parts for General Motors and Ford Motor Co. The owner at the time, Dave Clark, became interested in thoroughbred racing — so interested that he was spending his weekends in Hot Springs and flying back to Detroit on Mondays.
“I guess he realized you could run an airline out of your garage with a fax machine and a computer,” Hobson said.
So in 1984 Clark moved his airline to Little Rock. Four years later Clark merged his airline with a 50 percent purchase of Air Transport International, which had been an inactive airline in Oklahoma.
By 1989, Air Transport’s customer base of freight forwarders produced $29 million in annual revenue. Then in 1994, Clark bought the other half of Air Transport.
In 1996, a group of investors from Michigan bought the airline but failed to make the operation successful.
“They sucked all the money out of the revenue to pay the debt and didn’t take care of the airplanes or the people,” Hobson said. “When you don’t take care of the airplane, it doesn’t produce reliability, so consequently nobody’s going to pay you big bucks to fly something on an airplane if you can’t guarantee it’s going to be there.”
The company went bankrupt in 1998 and was bought by BAX Global — formerly Burlington Air Express Inc. — of Irvine, Calif. BAX Global was owned by The Brinks Co., which was bought by German railway Deutsche Bahn in 2005.
Because U.S. law does not allow a foreign company to own a U.S. registered airline, Air Transport was sold in February to a holding company, Cargo Holdings International Inc. of Orlando.
The sale brings Air Transport’s roving ownership journey up to date.
Although the company’s headquarters and roughly 110 of its 450 employees are in Little Rock, none of Air Transport’s 18 aircraft is based here. Instead, they are at 10 fixed-base locations in the U.S. and two in the Pacific region.
A Horse Tale
Animal transportation is part of only one of the company’s three business segments.
The segment that gives horses plane rides, the company’s ad hoc charter business, accounts for just 14 percent of Air Transport’s revenue. And animals are not the only ones chartered.
The company can also transport military troops around the world, along with their weapons and gear. The company has also given rock groups and their equipment lifts.
But the majority of the company’s revenue comes from regularly scheduled, long-term flight contracts.
Regularly scheduled flights for the military are the company’s biggest segment, accounting for 52 percent of its revenue. Those flights, which typically include passengers and cargo, make stops in places like Wake Island and the Marshall Islands in the Pacific, Diego Garcia in the Indian Ocean, Thailand and Singapore in Southeast Asia, Yokota Air Force Base in Japan, and Bahrain in the Middle East.
Air Transport’s third segment, which also includes regularly scheduled flights and accounts for about a third of its revenue, is its overnight freight business. Like FedEx or UPS, Air Transport ships general cargo — on a much smaller scale and with larger pieces of cargo, like palletized freight.
Most of the overnight freight Air Transport ships is for a freight forwarder, typically BAX Global.
But since Air Transport and BAX became separated from the same corporate family, Air Transport does not make as much money for the work it does for BAX.
“What we got paid for flying was not a big deal since we were all one,” Hobson said. “Now we’re owned by somebody else…and the deal we struck was so much money per hour and it was less than what we were getting paid.”
Changes like this one and others in the industry have forced Air Transport to tighten its belt.
For example, earlier this year Air Transport made companywide layoffs. The company would not detail the job losses except to say it evaluated all departments and did not eliminate any positions that would hurt its service to customers.
Rising fuel prices have also challenged the way Air Transport does business, according to Charles Carson, the company’s vice president of sales and marketing.
“What has happened in the overnight freight business is that as the price of fuel keeps increasing, coupled with the increased reliability and route structure of specialized trucking companies, air cargo has had to scramble to provide better and better service to support the higher cost of air cargo versus trucking,” Carson said.
Two decades ago, trucking companies were not as deft at handling expedited coast-to-coast deliveries with less than trailer-sized loads. But that has since changed and cut into some of Air Transport’s business.
“Not only are they very good at it, many trucking companies now have networks that in some ways, especially over short distances, can equal air freight in terms of transit time,” Carson said.
Air Transport has responded with a more efficient operation.
For example, the company was ahead of the Federal Aviation Administration’s mandate to have all of its planes equipped for reduced vertical separation minima, which allows the planes to drift a lot less up and down during flight. In turn, the FAA lets Air Transport fly its planes at a higher altitude, thus burning less fuel.
Also, during the next three years the company is phasing out some of its older DC-8s, many of which are nearing the end of their flight cycles, and buying five Boeing 767 freighters. Like the DC-8s, these planes will be able to carry about 45 tons of cargo, but they will require a smaller crew and have only two jet engines per plane to service instead of the DC-8’s four.
Each of the 767 planes, former American Airlines passenger jets, will cost about $20 million and cost another $8 million to $10 million to outfit them to carry cargo.
The company also has worked to make its personnel more efficient, Carson said, by offering a companywide incentive program. If the company meets certain performance objectives, each quarter employees who have not had more than two sick days are eligible for a bonus up to $600.
“And we’ve been giving the bonus out pretty regularly,” Carson said.
Air Transport recently received acclaim from Aviation Week & Space Technology, which last year awarded the company Most Improved Privately Owned Large Freight Airline and second place in the category Top Performing Privately Owned Freight Airline.
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