Banking on health care
Cargo airline finds niche transporting medical samples, pharmaceuticals, and human tissue.
By Chris Dupin
AirNet Cargo Charter Services has gone through a dramatic transformation over the past several years.
The Columbus, Ohio-based cargo airline started in 1974, concentrating on the movement of cancelled checks for the banking industry.
When the electronic transfer of check images was permitted in 2004, transport of checks plummeted and the company had to expand in other segments.
It has since found a niche in the health care industry. Today, transport of samples being sent to diagnostic laboratories, radioactive pharmaceuticals used in diagnostic procedures and treatments, organs and tissues, “cord blood” from umbilical cords, lab animals, and products for clinical trials account for about 80 percent of AirNet’s sales.
John Dupuy, AirNet’s chief executive officer, said the company’s health care business has been growing at an annual rate of 16 percent the past two years.
“I would not like to see another recession and would not say we are recession proof, but there are such unique opportunities that we are not tied to the economy,” he said.
Once a publicly traded company, AirNet was purchased in 2008 by Bayside Capital, a Miami-based affiliate of H.I.G. Capital.
Dupuy would not reveal the company’s current sales, but said it’s about half the size it was when it was a public company, both because of the decline of its banking business and a decision by AirNet to divest a non-asset piece of its business to MNX. (Between 2003 and 2007, AirNet’s net revenues ranged between $149.2 million and $196.4 million.)
AirNet is what is known as a “part 135 airline,” operating cargo planes with payloads of less than 7,500 pounds.
Dupuy says the part 135 industry has revenues of about $1 billion, but most other large companies in the industry are wholesalers who sell lift to the large integrated carriers such as FedEx, UPS, and the U.S. Postal Service.
AirNet flies over 200 flights nightly and serves more than 100 cities.
It has over 130 planes, running the gamut from single engine piston aircraft to Lear jets, with payloads ranging from 1,000 to 4,000 pounds. The company says it is the largest commercial user of Cessna planes in the world.
Dedicated flights, where a company may charter an entire plane’s space to move cargo on a weekly or daily basis “is the backbone of what we do,” Dupuy said. These dedicated flights account for about half of AirNet’s business. The other half comes from network or ad-hoc charters.
Dedicated services might involve, for example, flying specimens that a diagnostic lab has collected from doctors and hospitals in a metropolitan area to a centralized laboratory nightly.
When those planes reach their destination, there may be no backhaul cargo, only information in the form of test results to be transmitted back to the physicians’ offices.
But building from the dedicated flights, AirNet has created a national network of scheduled flights, what Dupuy says amounts to a less-than-trucking network in the sky.
Some of the cargo AirNet handles in that network comes directly from shippers, while other freight is generated by wholesalers such as MNX, which remains a large customer, as well as Quick International Courier, World Courier, and Network Global Logistics.
Frank DiMaria, AirNet’s senior vice president of sales and marketing, said most of these shipments are small, generally weighing less than 100 pounds. About 85 percent of what the company carries is less than 20 pounds.
Though small in weight, some of these shipments present formidable challenges —for example, radioactive pharmaceuticals.
“We fly very small aircraft and because the pilots are in close proximity to the radioactive product, we have to maintain a very tight safety program,” DiMaria explained.
The pilots wear tags that measure their exposure to radiation, and the drugs are packaged in lead “pigs” for shielding.
While the planes AirNet flies don’t have the economies of scale that big freighters have, DiMaria said they are “the most nimble in the industry….Candidly, when you start to optimize these planes with maximum payloads you really get very efficient performance.”
Because of reduction in flights by regional airlines, restrictions on the movement of hazardous cargo and the efficiency of single-engine Cessna planes, AirNet is able to connect cities in upstate New York with the New York City market through Teterboro, N.J. (just 12 miles from Manhattan), and compete effectively with ground carriers, he said.
In many cities AirNet has later cutoffs and planes that leave later and arrive earlier than FedEx, DiMaria said.
And on dedicated flights, of course, the plane will wait for the shipper.
Though cargo is sorted by hand, the company said turn-times at its hubs are shorter than those operated by FedEx because they handle lesser cargo volumes.
The company also uses hand-sorting at its hubs because of the freight — for example, blood and hazardous materials — that it carries.
Hubs include facilities in Columbus, Charlotte, Teterboro, St. Louis, and Denver.
The small planes are more flexible — if bad weather closes Teterboro, for instance, the company’s planes can be diverted to other nearby airports in New Jersey —Morristown, Caldwell, or Lincoln Park. Similarly, if St. Louis, the major hub for AirNet, is closed, it can staff up and run the operation out of Columbus.
AirNet has about 400 employees, pilots, maintenance workers and sorting personnel.
The company has developed its own software and scanning capabilities.
Package visibility is important to its customers and the company has a Website where customers track their products. It has partnered with three manufacturers of radio frequency identification devices (RFID)/GPS tracking technologies—Moog Crossbow, OnAsset Intelligence, and GTX Corp. — to get their equipment certified and operational in the AirNet network.
The devices can sense not only location, but parameters such as temperature, humidity and whether cargo has been exposed to shock or light.
“You can tell the rigors that a package has been subjected to in a real time way,” DiMaria said. “Technology is trying to move beyond ‘no news is good news.’ ”