Airline Targets Packages, Express Mail : PSA Moves to Boost Revenues on Cargo

Pacific Southwest Airlines, which built its reputation as a people mover, has joined competitors who have bolstered revenues by filling cargo holds of regularly scheduled flights with freight, parcels, produce and letters.

“Cargo has been subjected to a back-seat role,” said Walter Carlin, PSA’s air cargo director. “(PSA) has not aggressively sold itself as a cargo carrier, so there is a problem in the market perception that PSA (carries) people only.”

Although PSA generated just $13 million in air freight revenues during 1985, the San Diego-based airline has developed three programs that could boost cargo revenues to $36 million--or 5% of gross revenues--by the end of 1987.

“In a passenger carrier, (cargo) should (generate) between 3 1/2% and 5 1/2% of revenues,” Carlin said. During recent years, however, PSA’s cargo revenues have hovered at about 1% of passenger-generated revenues.

PSA, AirCal and Western Airlines are fighting for a share of the West Coast cargo market because cargo revenue margins--unlike passenger revenue margins which have been shrinking during fare wars--enjoy relative stability.

However, because PSA hasn’t aggressively sold itself as a cargo carrier, it now finds itself “somewhat behind AirCal which has been doing it for some time, and Western, which has developed good cargo operations,” observed Greg Kieselmann, director of research at Morgan, Olmstead, Kennedy & Gardner in Los Angeles.

Cargo Is ‘Gravy’

“Cargo is important for (passenger airlines) because the revenues are pretty much gravy,” Kieselmann said.

“(PSA has) expanded its available seat/miles by 30% with the expansion into the Pacific Northwest and suburban markets and they now have the route system to capitalize on,” Kieselmann said.

“We think we can double revenues in a couple of years,” said Carlin, who joined PSA in January after 23 years in freight operations at other airlines. “We’re looking at revenues of $24 million (by the end of 1986) and $36 million by the end of 1987.”

The airline expects to generate those increased revenues with programs designed to attract letters, overnight packages and freight that is now carried by cargo and other passenger airlines.

PSA unveiled the first leg of its strategy last month when it introduced “IntraMail,” a program which provides pickup and delivery of inter-office mail for companies with operations in San Francisco and Los Angeles.

For a set fee, PSA couriers will make regular corporate mail pickups and deliveries.

The program, which has attracted “several major clients,” soon will be expanded to include daily mail delivery service from San Francisco to San Diego, Seattle, Portland, Reno and Phoenix. However, return service from those cities to San Francisco will not start until a later date, Carlin said.

On April 1, PSA will initiate “PSA Guaranteed Express,” an overnight service which will carry packages and mail up and down the West Coast on regularly scheduled flights.