A Conversation with Bruce Miller,

CEO, Port of San Antonio

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Questions for this Executive Interview have been prepared by Thomas Goldsby, Ph.D., Gatton College of Business and Economics, University of Kentucky

LQ: What kinds of shippers/goods do you expect to make the most use of the time-critical delivery offered by air transport in/out of San Antonio?

Bruce Miller: As we get the service up-and-running, companies that are moving goods through this region will benefit from a lack of congestion and a lower price point here at Port of San Antonio, and that goes for both air cargo and surface container freight.

As an example, last year we had copper ore coming out of Idaho by gondola cars, which were loaded into sea containers and taken by truck down to the Port of Houston. They had a delivery date to be shipped by boat that they couldn’t meet if the rail cars went directly into the port and stood in long lines to get processed.

Others are companies in Mexico that are starting to expand their product lines into the United States, so there is a lot of transportation taking place between Texas and Mexico.

We also have a grocery chain headquartered here that has recently expanded and is starting to compete with Wal-Mart and Target, as they were introducing dry goods coming out of China. We put up a new rail connection for them from Asia, through to Mexico and into the United States. Containers come in through the Port of Lazaro Cardenas on the Western-Pacific coast of Mexico, and are then transported up to Laredo by train (soon we’ll have enough volume to continue with train) then they are transported to truck and this is quicker and about one hundred and fifty dollars less expensive per container than if they come in through the Port of Long Beach. Since then, we have had about half a dozen customers starting to move in the same direction.

We are also shipping cotton and waste paper products into China, where they are seeking raw materials. So, we have a fair amount of two-way traffic.

The other types of customers who will look to us for assistance are those who find themselves without a Plan B when a disruption occurs in their supply chain. On the West Coast, there’s now a new way to go through Mexico, the other way to go is through Port of Prince Rupert in Vancouver and come in through Canada by rail.

San Antonio’s location, which is central to the United States, Canada and Mexico, and its close cultural ties with these countries, has helped us build strong business relationships. In the long-term, we’re now seeing possibilities coming out of South and Central America. We have a lot of small operations working with us in these areas; it’s an extended family of sorts that works out very well for us.

We are working with Estafeta—a Mexican company that can be compared to Fed Ex here in the U.S.—that has a hub in San Luis Portosí. That hub interlines with DHL, UPS and Fed Ex out of Miami. They are interested in having another hub out of San Antonio. We’re looking at starting air cargo between us by truck; we have about 20 customers that have less than truckloads of goods going to and from Mexico, which we’re looking at consolidating now that we have some facilities opening here in San Antonio, and then shipping by Estafeta trucks across the border into San Luis Portosí for distribution throughout Mexico. Estafeta is working on rates right now and that service will probably start in the next month or so. We will also offer air cargo waybills out of Dallas and Houston that will run by truck. A tremendous amount of air cargo goes by truck in the United States, simply because it’s cheaper.

Historically, we have been the end of the line from a consumer standpoint, even though San Antonio was founded on the freighting business going back to the 1700s. Goods have always moved through Corpus Christi, Houston, Dallas, and El Paso, but until now, San Antonio didn’t have the infrastructure. With the closing of the air force base, we gained that infrastructure through access to both rail and air.

LQ: How will the port authority select those air carriers, logistics service providers, and shippers that will call the airport and FTZ home?

Bruce Miller: We have about eighteen hundred acres of land; a lot of it already has air force facilities developed on it. Our property looks large, but comparatively, in the logistics world, we’re quite small.

We do have plenty of room to develop the air cargo function because it doesn’t require a lot of ground space. In terms of rail cargo, we may have other sites over time. We are working with the Surface Transportation Board to acquire Classification Designation. In essence, we’ll end up being a short-line, which is not in our business plan today, but may be five to ten years from now.

Right now, we’re basically switching cars off our property. As we become a railroad and work out our negotiations with Union Pacific, we should be able to move cars directly out of the yard.

San Antonio has an antiquated rail system, but it moves over eighty trains a day; 50 of these trains don’t even stop. We are on the crossroads. The companies that have historically had rail spurs here in San Antonio have been losing them, because there’s so much through traffic that short movements are no longer Union Pacific’s primary business. As a result they’ve cut delivery to the spurs for individual users. Those users are looking for one-to-two weeks to receive and disperse a car with the Union Pacific; we switch our customers twice a day, so that’s a unique difference that plays well in some markets. If someone has a transload project where they have to move their product pretty quickly, we have exemplary service.

LQ: It is important for air carriers to balance freight into and out of San Antonio so that they enjoy sufficient revenues flying in both directions. How will carriers select those markets that offer such balance?
Bruce Miller: I don’t know how they make a selection. I do know the ones that will work here are ones that recognize the potential for two-way business. Because of the tremendous amount of trade that goes back and forth between Texas and Mexico, many companies are pretty anxious for us to get our doors open. We’ve built some warehouse distribution space; we’ve built a cargo terminal, and we’re in our final stages of opening a Federal Inspection Station.

LQ: How do today's security provisions, as well as impending and future provisions, affect the shipper's decision of whether to use air as a means of transport?

Bruce Miller: Generally, it’s our understanding that those security measures are the airline’s responsibility; however, it seems that over time, larger facilities will handle that. The question is: what size will these facilities be? There is currently no other facility to handle that in San Antonio, as the international airport is principally a passenger facility. This is actually a part of our partnership with them; we’re moving into the cargo arena because we have the air field capacity that they don’t have. So, that is a question that will be answered over time.

LQ: How will the port authority work with U.S. Customs to make the San Antonio facility a port of choice for shippers?

Bruce Miller: The CTPAT Operation basically allows expedited cross-border access if you’re a non-carrier and you are able to document and verify what is passing through in a sealed container. Much of the air cargo is cleared in the air; however, as screening requirements come into place, the cargo won’t need to go by Customs.

LQ: How will the port authority work with U.S. customs to make the San Antonio facility a port of choice for shippers?

Bruce Miller: We are developing what is known in the business as a cargo-friendly airport. Many airports are passenger-focused, and cargo is sometimes considered a hassle that must be tolerated by these airports. Since we don’t carry passengers, our principal focus with our industrial airport is to remain in tune with the logistics industry.

LQ: Is the San Antonio port fully dedicated to cargo or will the facility also offer passenger services (e.g., charter flights)?

Bruce Miller: We see no passengers here at all. The air field is still owned-and-operated by the air force. Their use of the air field today is for training purposes, so safeguards have to be in place. We will have a small corporate aviation operation, oriented to the town businesses that are here.

Cargo and maintenance repair is where our focus lies. Right now this airport operates at less than 20 percent of its capacity, so you’re able to fly in directly with very short taxi times. The expectation is that in two to three years this place will see larger planes.

There are not a lot of holding patterns here in San Antonio. It’s complex air space, but we have two air force bases in San Antonio plus the international airport, and their strategic locations make it pretty simple to fly in directly and without delay.

Our challenge will be to prove ourselves over the next several years. We know we’re cheaper, and after several years of watching us, I’m sure the industry will notice that we can also deliver consistently and on time.

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