# Presentation: 735841

## Airport Challenges In The New Cargo Security Environment

**2005 FAA Northwest Region Airports Conference**
**Tuesday April 5, 2005**
- Daniel B. Muscatello, Director, Air Cargo
- Landrum & Brown        (513) 530-1250

## Before we begin:

**The industry in general, and airports in particular recognize the need for, and support enhanced cargo security.**
**The scenarios discussed are theoretical.  Final policy guidelines have not been issued by the TSA. **

## General Background

**Global economy is in flux**
**2004 tonnage reflected modest recovery **
**Fluctuating fuel prices**
**Passenger demand is up while belly capacity is down**

## Forecast Growth - 2005

**Domestic Cargo 3.3% percent annual growth for 10 years.**
**International Cargo 6.3% percent annual growth for 10 years**
**Passengers 3.7% percent annual growth for 20 years, more than doubling existing passenger volumes.**

## Industry Uncertainties

**Economic fluctuations**
**FedEx mail contract**
**Second and third day trucking**
**West Coast dock strike**
**Freight constraints on passenger aircraft**
**Unknown TSA guidelines**
**Political pressures**

## The New Environment in the Air

**Less belly capacity**
**Fewer passenger aircraft **
**Reduced carry-on luggage**
**Downsized aircraft **
**Greater reliance on freighters**
**Introduction of the A380**
**Lower yields**

## Federal Responsibilities

**Facilitation – assisting the flow of cargo through the airport facilities**
**Interdiction – protecting against contraband goods and theft**

## The Emphasis Shift

**Anti-Theft to Anti-Terrorism**
**Facilitation to Interdiction**
**From keeping things in, to keeping things out**

## Potential Change Agents

**Transportation Security Administration Guidelines**
**H.R. 3798 “Secure Existing Aviation Loopholes (SEAL) Act”**

## TSA NPRM Requirements

**Extends full security to all-cargo carriers**
**Requires the SIDA (Security ID Display Area) to airport cargo areas**
**Extends security requirements to foreign flag carriers and Indirect Air Carriers (IAC)**
**Requires a percentage of all cargo to be screened**
**Requires employee screening and the vetting of IAC’s **

## TSA NPRM Requirements

**Requires carriers *****not *****airports to secure the cargo areas**
**Requires a Security Threat Assessment for all personnel with unescorted access to the cargo areas**
**Requires the TSA to manage the Known Shipper Program and audit the industry.**
**Requires training for all members of the cargo community.**

## SEAL Act Considerations

**No cargo in the belly of passenger aircraft.**
**100% inspection of belly cargo.**
**Partial inspection of belly cargo.**
**Sky Marshals on freighters.**
**The imposition of a “security fee”.**
**Tighter aeronautical access controls.**
**Background checks for all workers.**
**Physical screening for all workers.**
** **

## Impacts of Potential TSA Changes

**System Entry**
**Airport Entry**
**Site Entry**
**Building**
**Airside Entry**

## System Entry –The Known Shipper

**Restricts shipper flexibility**
**Limits forwarder account growth**
**Causes delays related to screening of cargo for passenger aircraft**
**Diverts cargo to freighters **
**Creates additional airport infrastructure requirements**
**Does not deal with mail**

## Airport Cargo Planning ABC’s

**A****lign goals and primary objectives with financial and business reality**
**B****uild facilities and infrastructure that enhance the flow of goods**
**C****ombine processes and systems into a seamless operation**

## Airport Entry – Truck Inspections

**Defined shipping windows**
**Peak trucking hours**
**Existing on airport roadways and space**
**Regional traffic issues**
**Limited truck queuing**

## Implications and Issues

**Extensive delays**
**Air quality deterioration**
**Reduced regional cutoff times**
**Roadway modification-traffic flow issues**
**Land demand for screening facilities**
**Shift to alternate airports**
**Additional shift to trucking**
**Regional job loss**

## Site Entry – Controlled Access

**Separate truck and automobile entrances**
**Segregated vehicle parking for employees **
**Localized truck queuing**
**Controlled personnel access for employees and customers**

## Building – Entry and Internal Security

**Design modifications to further restrict access to cargo areas**
**Design modifications to enhance direct visibility and accommodate CCTV and other electronic systems**
**Design modifications to accommodate internal cargo screening devices**

## Implications and Issues

**Increased cost of new construction**
**New costs for retrofitting existing buildings**
**Increased warehousing requirements for consolidation and security holds**
**Less available space for normal cargo handling**
**Higher overall rents for tenants**

## Airside – Entry to Ramp Areas

**Tighter access controls**
**Elimination of “through the fence operations”**
**Elimination of trucks in the aeronautical areas**

## Implications and Issues

**Substantial changes to some carrier operations and equipment**
**Greater demand for on-airport property**
**Relocation of some carrier operations to other airports**
**Regional job loss**

## Implications of the SEAL Act

**If the outcome is either 100% inspection of or no belly cargo:**
**Massive diversion to trucking and freighters**
**Loss of airline revenue and potential flight cancellations**
**Reduced demand for belly cargo facilities**
**Increased demand for freighter ramp**

## Implications of the SEAL Act

**Lost airport revenues in flight fees, fueling fees, and rentals**
**Potential shift of operations to other airports**
**Potential shift in manufacturing/distribution and related jobs.**

## The Business Realities

**Most of the nation’s top 20 cargo airports have severe land constraints**
**Virtually every airport must make hard choices on allocating resources between passengers and cargo**
**Unlike passengers, goods can go from point to point in a number of ways**

## The Business Realities

**The differences among airport cargo operations and their requirements are far greater than the differences between passenger operations**
**Potential security requirements  could require substantial new properties for facilities and/or roadway modification**

## The Business Realities

**Many of the potential changes could involve greatly increased costs**
**Few airports are positioned to effectively address dramatically altered property and financial requirements**
**Many businesses that operate on low margins could not meet higher costs**

## The Business Realities

**Regional roadway systems at gateway airports could be severely tested by what is now forecast growth. Additional delays related to screening will be very difficult to address**

## The TSA Program Cost Estimates

**Total estimated cost is   $837 million**
**	****a)****	****Aircraft operators****	****     $758 million**
**	****b)  Indirect air carriers        51 million**
**	****c)  TSA****	****	****	****	****         28 million**
**	****d)****	****Airport operators****	****     $900 thousand**

## Things To Take Away Today

**We do not have the answers.**
**We need to start asking ourselves hard questions.**
**We need to be examining the planning implications of potential changes. **
**We need to understand the actual financial  implications of potential changes.**
**We need to consider the economic implications of potential changes.**