Good morning ladies and gentlemen. This is John Graber with the ABX Air INFOline for September 2, 2010.

Safety
Though it is 90 degrees in Wilmington today, it is also the first week of September, and things are going to cool off as we move into fall. You have to pay attention to the change in the seasons. Transition periods are often the most dangerous times at work and at home. A subtle difference in road conditions can cause big problems. It is going to start raining more soon – plan for that on your drive. Days are going getting shorter – remember your flashlight if you’re working an issue late in the day. Take the time to prepare and be ready for the seasonal change. Be Safe.

Compliance
The FAA tells us that Mr. Pat Ryan is our new Principal Operations Inspector. Inspector Ryan has been assigned to our certificate for a long time, and is no stranger to many of you. When you see him, congratulate him on his new job.

Reliability
Unofficially ABX Air flew our DHL system 98.67% on time in August. We had 13 delays charged against us. We’ve done better. A persistent altimeter problem on one of our airplanes was the single largest delay cause last month, and it really knocked down our performance. That happens from time to time – we struggle with a particularly complex issue on one airplane. A lot of people think that in this age of digital diagnostics, sophisticated Fault Isolation Manuals, and Built in Test Equipment we ought to be able to push a button and know exactly what’s wrong. But sometimes jets, even modern ones like the 767, develop complicated cross-system problems that take time to resolve. In this case, we involved Delta, Boeing, and our own grey-beards. They eventually solved the problem that involved pitot-static system integrity, angle-of-attack vanes, air data computers, and the repair specifications of those components.

Persistent issues like this highlight why we focus so much on eliminating the avoidable delays – paperwork, crew, line maintenance and material. We’ve designed our maintenance program to reduce the mechanical issues we face – to fix things before they break – but airplanes do go down hard from time to time. When we keep the number of delays we take from all other causes as low as possible, we’re best able to preserve service when something really breaks badly.

Growth and Competitive Pressures
I’ve heard from several of our folks lately who worry that we aren’t ready for the demand spike we’re seeing in the marketplace. The common thread of concern is that we need more airplanes, we need more pilots, and we need them now.

We’re adding pilots, and have been for a couple of months. Adding airplanes is tougher – long lead times for acquisition and modification – but we do have the capacity to fly more with the airplanes we already have, and more pilots will help us do that.

This is an interesting time for the air cargo business. On the one hand we have carriers in distress – Arrow Air is in bankruptcy right now, and on the other hand demand is spiking all over the world.

Arrow stood for a court approved auction on September 1st. Assets for sale included the Arrow name, goodwill, furniture, databases, and accounts owed Arrow outside the United States. Also for sale were Arrow’s leases on 757 and DC-10 aircraft. Not for sale, were Arrow’s accounts owed from inside the US, aircraft spare parts, and ground service equipment.

While bidders pick over Arrow’s remains, the Air Transport Association, the ATA, reported freight revenue up 51% in July. International markets contributed 72% to the July’s $228 million in freight revenue.

How do carriers fail in a booming marketplace? Generally, they don’t. The failures started before the boom. They lost track of their competitors, they didn’t control their costs, and they didn’t meet the needs of their Customers. The soft economy took care of the rest.

Here at ABX, we’ve focused on competitors, costs, and our Customers, and are well positioned to support a lot of growth. We find we can’t always meet the demand for flying that comes in on a given day, and as we explore adding capacity, we find our Customers reluctant to pay a premium for our services. We fly a global operation now, and we’re running into local competitors in the marketplace with lower prices than ours. Our Customers are very sensitive to price. So we work to strike that delicate, competitive balance between adding enough capacity to make money in the marketplace and having so much that we lose money when things soften. We will follow a disciplined approach, and if we err in this process, we are better off erring on having the capacity we can afford beyond any bubble in demand.

That’s all the news I have for this week. Thank you all for all you are doing for our Company. Drop me a note with any questions or comments you have. My email address is john.graber@abxair.com.