Cargo companies prepare for a massive overhaul of federal guidelines for aviation security

Ross Flynn has been in the cargo business for 35 years. He entered the industry at 18, and since 1988 has been running his own company, Panmet Group Logistics Inc. The company is nothing fancy, but each year he and his staff of 12 generate between $6 million and $7 million in sales, moving cargo for trade shows and the auto industry by passenger airline.

"Over the years [Panmet] has been a nice little business that has enabled me to do what I know how to do," Flynn said.

In just six months, however, Flynn's world could be turned on its head as cargo companies such as Panmet prepare for a massive overhaul of federal guidelines for aviation security.

The plan, which is expected to cost the cargo industry between $3 billion and $4 billion over the next 10 years, essentially leaves shippers such as Flynn with two options: purchase costly screening equipment, or hope for the best.

"It's absolutely tragic," Flynn said. "It will destroy the industry and put thousands of people out of work."

The new guidelines, which were signed into law last August following the recommendations of the 9/11 Commission, will require the screening of 50 percent of all cargo transported on passenger aircraft by February 2009. By August of 2010, 100 percent of the 6 billion pounds worth of cargo transported on passenger planes will have to be screened.

Unlike the 1.5 million pieces of luggage screened each day at the nation's airports, however, the Transportation Security Administration will not perform the screening of cargo.

Instead, screening will largely be the responsibility of the more than 4,000 airforwarding businesses that serve as the middlemen between manufacturers needing to ship cargo and the airlines that transport merchandise for them. That has left airfowarders wondering why they have been assigned a costly role that, for passenger luggage anyway, has historically been a government function.

"While we endorse the concept of the program . it's regrettable that the program has no federal funding is attached to it," said Brandon Fried, executive director of the Airforwarders Association, the main trade group for the nation's airforwarders.

Among the largest costs to airforwarders will be the screening technology required to fulfill their new mandate, which can range from the high thousands of dollars to the low millions.

"That's one of our big concerns, our ability to absorb the costs," said Bob Imhof, vice president of business development at ALG Worldwide Logistics LLC, in Wood Dale. "It could be a very costly venture, and some of the smaller vendors . could have a tough time," he added.

ALG handles about 2,000 shipments a day from its 11 different facilities. Imhof said ALG may have to charge clients a security surcharge to make up the costs. The company could keep costs down by only screening at some of its facilities, he said, but that would hurt overall service.

At Panmet Group, "I think we're basically sticking our heads in the sand and pretending it's not going to happen," Flynn said.

Because Panmet will not be purchasing any screening equipment, Flynn said, the company will soon have to start moving more of its goods on the more costly all-cargo airlines. Cargo aircraft carry about 75 percent of airfreight, with passenger airlines carrying the rest.

All-cargo airlines, such as DHL Express Inc. and Fedex Corp., do not carry passengers, so their screening requirements are nowhere near as stringent as those that passenger airlines will have to abide by. This provides them an advantage, according to Flynn, because they will be able to charge more for space on their planes to forwarders unable to meet the screening standards on passenger jets.

At the same time, said Flynn, the cargo airlines will be able to fly their freight for less on passenger aircraft as carriers lower prices in order to meet falling demand.

Flynn, along with many others in the airfowarding industry, has tried to express his concerns to the TSA, but thus far to no avail.

"I'm so frustrated because there literally is no one listening," Flynn said.

TSA officials will oversee the new screening procedures, but do not see the actual work of checking cargo as part of their mandate.

"Do you want the taxpayers to shoulder the costs of screening cargo or do you want the companies making the money from shipping cargo to pay for screening?" said Dwayne Baird, a public affairs manager at the TSA. The TSA is, however, supplementing 13 companies participating in a pilot phase of the new program with as much as $375,000 for each piece of screening equipment purchased.

That rationale has yet to appease airforwarders, however, nor has it convinced the nation's passenger airlines, which earn approximately 15 percent of total revenues from the transport of cargo.

Airlines are nevertheless working with the TSA, as any cargo not screened before arriving at an airport will have to be checked by carriers themselves. But screening costs could further burden an industry already struggling at the moment with high fuel costs, and stretch the time it takes for goods to hit the marketplace