New 757 freighters highlight Amerijet’s makeover

The 757s will be busy right away because of continued growth of cross-border trade, the surge in e-commerce consumption and supply chain disruptions that make air an attractive alternative to ocean transport. 

“We are oversubscribed from folks wanting a plane for as long as up to four years,” Strauss told FreightWaves. “I can tell you, we can take all six of these aircraft and put them in some other airline or logistics provider’s network today.”

Instead, Amerijet will place three of the aircraft in its scheduled network that predominantly operates in Central America, northern South America and the Caribbean and decide how to deploy the remaining planes this month. 

“Every company we do business with right now is talking with us about extensions of significant value and time — not just additional time on the aircraft, but [access to] new aircraft, new routes, new regions of the world,” Strauss said. Before the pandemic, the typical term for a long-term charter arrangement was one year.

Amerijet, as reported last summer, secured a contract to operate several aircraft for DHL Express. 

The cargo airline, he revealed, has a new contract with an undisclosed customer to begin operating regular service to North Africa in April or May. And management is exploring the potential of entering the Asia market as soon as this summer.

The versatile 757 is a good fit for a company operating in Latin America and expanding business with integrated express carriers that require daily shuttle runs from spokes in their network to the main package hubs.

“That’s one of the reasons we love the 757. The 767 is a nice big airplane, but it takes a lot to fill it up to some of our markets. The 757 lets us fill it up a little bit easier, which gives us more repetition into markets,” Strauss said, “which we think is equally valuable as the size of the airplane itself. 

“Going to a market five times per week is more valuable than going three times per week even though it may not have the same capacity, especially with the northbound side, which is a perishable market. They want to pull things out of the ground and get them to market as fast as they can.”

Amerijet started in 1974 with one leased jet flying small cargo and passengers to the Bahamas. By 1978 Amerijet was flying overnight routes operating a fleet of Falcon 20s. In 1987, Amerijet opened its hub at Miami International Airport to cover the Caribbean, Central America, Mexico and parts of South America.

The company has been rapidly growing and now has 1,000 employees.

The former Air Canada (OTCUS: AC) executive said Amerijet’s twice weekly trans-Atlantic flight, launched in 2020, between Brussels and Miami has picked up business this month because of Western sanctions that have prevented Russian cargo airlines from operating in most of the world. Officials are considering expanding the frequency to three or four times per week, which could influence where 757s are deployed.

Amerijet also has a contract with the U.S. Postal Service to fly mail across the country and operates a flight three times per week from New York’s JFK airport to Liege, Belgium, and on to Tel Aviv, Israel.

Patching up and moving on

Customer confidence and much of the expansion could have been stunted after a power struggle with former CEO and current Executive Chairman Vic Karjian broke into the open last September. Strauss resigned over the direction of the company only one year into the job after leaving Air Canada, where he was vice president of cargo. Strauss returned within a week after the board of directors and investor ZS Fund assured him he had the freedom to make strategic decisions without interference. 

Strauss tried to downplay the turmoil, saying the press exaggerated the differences and that relations with Karjian and ownership are very good.

“There were no hard feelings. It was just one of those things that there was a difference in how to manage the company and I felt strongly enough about it” to leave, Strauss said during the phone interview.

According to outside sources, part of the friction stemmed from changing the culture from seat-of-the-pants planning to one based on digitization, standardized operating procedures, strict regulatory compliance, data analytics and on-time scheduling, except for ad hoc charters.

As one individual close to the company described it, Amerijet’s primary way of doing business in the past was to fill up the aircraft and not necessarily scrutinize the yield for each shipment. And the schedule for regular flights tended to fluctuate because managers waited to fill up planes or diverted them en route to pick up another load. 

“They overbooked. That’s the way the old sales team was focused. Customers mostly accepted the fact that their shipment may not get delivered as scheduled,” the person said.

Strauss acknowledged tensions came to a boil as many senior managers with long tenures decided to leave as new talent was brought in to implement his vision and start new projects.

In the past year, Amerijet has replaced the head of flight operations, the chief pilot and the leaders of the commercial, human resources, legal and maintenance departments; initiated industrial engineering and revenue management groups; opened a project management office; and hired directors for areas such as procurement and information technology.

In January, Amerijet promoted Craig Bentley to chief operating officer to fill a monthslong vacancy left by the departure of Brian Beach last year. Bentley joined the company last July as vice president of flight operations. He previously was senior vice president of operations at Cape Air/Nantucket Airlines, a small passenger carrier that also provides feeder service for an express delivery company.

Many of the new leaders have now been with the company for six to eight months, figured out how they want to manage and are implementing Strauss’ vision.

“I’d say in my first year here I rarely slept well,” Strauss said. “Now I sleep pretty good. [Change management] is spread a little bit. More people are lifting more weight.”

757 saga

The 757 fleet represents a major growth opportunity, but getting the aircraft in the air was a bumpy, and expensive, process.

Half the planes are leased from AerSale, a maintenance, repair and aftermarket parts distribution company that bought 24 used 757s from American Airlines, licensed cargo conversion kits from an engineering firm and retrofitted the Amerijet planes at its Arizona facility. The company has performed passenger-to-cargo conversions for leasing companies and other clients for nine years but expanded its business to handle leased aircraft for the first time.

Whenever an aircraft is changed from a passenger to a cargo aircraft — new cargo door, reinforced floor and wing boxes, cockpit barrier, fire systems and other features — the flight manuals must be updated and approved before the planes can be added to the carrier’s operating certificate. Carriers must submit up to 18 different manuals with thousands of pages documenting how they plan to operate the aircraft and any differences from the original Boeing manual. Even though the 757 has commonalities with the 767, it’s a new aircraft to the Amerijet’s fleet and regulators make sure the operator has the proper controls and systems in place.

Certification covers every aspect of safety, including the maintenance program, pilot training and aircraft handling, according to industry experts. 

Once a cargo operator receives a retrofitted aircraft from a conversion shop, it typically takes several weeks to complete technical acceptance and validation from authorities, although many variables can extend that timetable. Amerijet took possession of some 757s in early summer 2021 and wanted to have them in the air by the fall. In September, a company spokesperson said the aircraft were expected to start flying later in the year.

Strauss blamed the delays on a series of regulatory and administrative snafus, but acknowledged, “Initially, we had some problems with the manuals that we needed to correct.”

A nonmanagement source inside the company said extensive turnover among personnel hired by former COO Beach for pilot training and flight operations positions, and questions about their qualifications, contributed to the Federal Aviation Administration rejecting the initial manuals.

The FAA changed the principal operating inspector in Miami, is taking a much more stringent approach to aircraft approvals after the 737-MAX crashes, and adheres to a set process that isn’t built for efficiency, Strauss explained.

Inspectors go through every part of the aircraft checking the components to make sure they match the records and operating systems function properly. Strauss said the FAA wants the manuals in paper format and won’t do a review until all of them are ready so they can lay them on a conference table to cross-reference sections. 

Electronic versions would allow manuals to be independently reviewed, and marked for cross-reference, as they became ready, he suggested, but added, “I respect that they are very professional at what they do. It just takes a lot of time.”

The FAA might have been able to speed up the process in normal circumstances, but because of COVID couldn’t bring in personnel from other parts of the country to help with the review, according to the CEO.

The process got off on the wrong foot because lease negotiations for several aircraft took much longer than expected, which Strauss suggested was a consequence of dealing with a company new to the leasing business. A seller’s market also made it more difficult to quickly strike an equitable deal. 

Until the operator has ownership of the aircraft, it can’t get necessary information from the manufacturer and update the manuals. Under normal circumstances, lease agreements are finalized before the lessor sends the planes to the overhaul facility for conversion and the operator can update the manuals while the work is underway. 

“We lost that time,” the veteran airline executive said.

The reality is the deal also was more complicated than normal because AerSale changed its mind and sold the aircraft to another leasing company with the Amerijet lease attached, which Amerijet had to sign off on.

A source familiar with the situation, who asked not to be identified, said the departure of the chief pilot last year may have contributed to slowing the certification process.

Air cargo insiders say there are so many moving parts with lease deals that it can be difficult lining up aircraft deliveries in the right sequence when dealing with regulators.

Possessing the aircraft and being unable to use them was costly and frustrating, Strauss admitted.

Even with the delays Amerijet is in a better position in a hot cargo market having the planes compared to other companies scrambling trying to get ahold of assets, according to conversion experts. If they had waited, the planes would have been claimed by someone else.  

Demand for 757 converted freighters has picked up significantly in the past 12 months and Precision Aircraft Solutions, of Beaverton, Oregon, which retrofitted the six Amerijet freighters has a backlog of work orders through late 2023 or early 2024, said Sales Director Zach Young.

“Despite newer generation conversions already on the market, the 757 value and performance still makes it a competitive option. You get a lot range, payload, reliability, and payload for the money,” he said.

Analog to digitally savvy

Amerijet went live earlier this month with a new cloud-based cargo management and reservation system from Cambridge, Massachusetts-based SmartKargo, a significant milestone for a company that had been using a homebuilt and locally managed system — parts of which date back to 1979.

The old architecture was adequate for a company that had a half-dozen aircraft, but not for a growing one with more than 20 aircraft and a high data load, Strauss said.

SmartKargo “is priced right for an airline our size and the most important thing for us, it’s 100% cloud-based in the Microsoft Azure cloud,” not a distributed intranet like some providers offer, Strauss said. That makes it easier to do updates and plug in application protocol interfaces to back-end systems of multiparty sales platforms and direct customers, enabling real-time access to capacity and rates, and instant booking. 

Another key benefit is SmartKargo complies with industry standards for electronic messaging between air cargo stakeholders, such as forwarders and trucking companies.

The system also manages warehouse, door-to-door delivery, tracking, revenue accounting and other functions. 

“It’s quite a leap to move from the familiarity of the old system … but we think it allows us to be better positioned with our customers and is easier to use,” Strauss said.

The transition for about 650 people who use the system internally has been relatively smooth — only a couple of small bumps, said the CEO, who purchased SmartKargo for Hawaiian Airlines when he worked there prior to Air Canada.

Amerijet will launch a new, more interactive crew-scheduling software package next week and is planning to introduce a revenue management system in the near future that Eric Wilson, who Strauss brought in last year from Delta Air Lines (NYSE: DAL) to be chief commercial officer, will use to optimize revenue for each flight.

“Tim is trying to drive a true schedule and sell around that schedule because that affects your pilot time and scheduling time,” the outside source said. A small airline could get away with scheduling the crew on paper, “but as you get more aircraft and run a broader international schedule, you need a tighter system.”

Wholesale change was necessary to maximize Amerijet’s potential, but the efforts are starting to bear fruit.

“I probably didn’t realize the number of tasks that might need to be addressed. But the board and private equity group have been very supportive, invested in the company. We’re in a good spot and the marketplace is enviable,” Strauss said.

Click here for more FreightWaves/American Shipper stories by Eric Kulisch.

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