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Separating travelers from their luggage
Defense Market Report
Exclusively for InvestorIdeas.com
By James Smith
September 09, 2006
In the famous 1967 film “The Graduate”, a scene includes the one-word career advice given to Benjamin Braddock, played by Dustin Hoffman, as the key to success in business: plastics.
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Following the recent London terror plot to blow up aircraft in mid-flight en-route to major cities in the US, the new buzzword may be: luggage
A number of companies are focusing on providing technological wizardry to minimize the threat of explosives carried in baggage. But an industry group, Coalition for Luggage Security, which was founded and is chaired by Richard A Altomare, chief executive officer of Florida-based publicly traded Universal Express Inc, has proposed a number of solutions, including separating passengers from their luggage.
Assistant Secretary of Homeland Security for the US Transportation Security Administration Kip Hawley said on August 24 that there has been a 20 per cent volume increase in checked baggage since the ban on liquids/gel went into force on August 10. The Air Transport Association, an industry group representing 19 of the largest US passenger and cargo carriers, also reports a substantial increase in checked baggage.
The coalition and Universal Express have proposed several options which they say would be advantageous to airlines and would make the skies safer: passengers would be given a choice of paying a per-bag fee for luggage, putting the cost of luggage screening on passengers who use the service rather than imposing the fee on all passengers regardless of luggage, or utilizing alternate methods to transport their luggage to and from its final destination.
The Transportation Security Administration (TSA) will spend US$1.45 billion on baggage screening in 2005, as indicated on their 2006 budget. The coalition believes that its proposal would save the airlines between US$550 million and US$1.2 billion by freeing cargo space for commercial usage and allow quicker aircraft turnaround. A decline in passenger baggage volume also reduces the prospect of infiltration of terrorist devices onboard aircraft and decreases chances of security breaches. Lack of information on specific aircraft or trucks used for baggage transportation makes the likelihood of terrorist attacks more difficult.
The proposal calls for utilizing the US Postal Service and parcel carriers, such as UPS, FedEx, DHL and others to handle some of the baggage that is currently carried by passenger airlines. The proposal will allow airline passengers the option of carrying and checking bags at the airport, however that luggage would incur a separate baggage charge for transportation and a separate TSA baggage screening security fee.
Currently, Universal Express charges between US$50 and US$60 per suitcase for delivery between points in the US, and US$100 to US$120 per suitcase for international delivery. However, if the concept of private suitcase delivery achieves widespread acceptance, the company expects the US delivery charge to come down to US$15 to US$20 per suitcase, with comparably cheaper rates for international movements.
Universal Express, which has traded on the Over The Counter Bulletin Board (OTCBB) for the last 17 years and which also trades on the Frankfurt Exchange for less than one cent per share has garnered press coverage from a number of prestigious sources, including The WallStreet Journal, Time Magazine, USA Today, The Los Angeles Times, The New York Times, and Readers Digest, as well as interviews on major national television and cable business programs.
The company has a market capitalization of about US$48 million and is one of the highest traded issues on the OTCBB. The company has paid a dividend only four times.
Universal Express is a transportation and logistics company, specializing in providing services and products to the private postal industry through UniversalPost Network. Other company subsidiaries offer services to these stores, as well as to the general public, such as Luggage Express delivery, USXP Capital’s leasing and Cash Express gift and prepaid solutions. The company also operates MadPackers, which moves student items to and from schools.
In addition to providing an alternative to checking in baggage with airlines, Universal Express has been acquiring trucking companies that specialize in returning lost luggage to airline customers.
In late August, the company acquired Miami International Airport-based Airport Alliance, a luggage delivery service catering to airlines with the need to transport found luggage that was once lost by airlines to its owners. The acquisition of both Airport Alliance with approximately 20 per cent of the airport’s lost luggage delivery, and Global Trucking with 80 per cent of the airport’s lost luggage delivery give Universal Express virtually 100 per cent of the lost luggage business at Miami. Global Trucking also operates at Houston's George Bush Intercontinental, and has contracts with about 30 airlines, including American, US Airways and Virgin Atlantic.
The acquisition adds a 20 per cent increase in revenue that can be handled with the company’s current infrastructure, making Luggage Express Found the largest baggage delivery company in South Florida, handling an average of 1,500 pieces of lost luggage per day, resulting in approximately US$4.5 million in gross sales.
Airlines that currently utilize Airport Alliance for lost luggage delivery are: Delta Airlines, British Airways, Air France, South African Airways, Freedom Airliners, Chautaugua, Com Air, American West, Continental, TACA, Iberia and Swiss Air.
Universal Express is in negotiations to acquire lost luggage delivery operations in Fort Lauderdale (Florida), Dallas and at major New York airports. The company is seeking to expand lost luggage operations to a majority of the 450 major airports in the US.
Universal Express is a holding company that hopes to eventually move on to the New York Stock Exchange or the American Stock Exchange. The company foresees the eventual separate spin-off of its operating units. Much of Universal Express’ funding comes from private investors in Saudi Arabia and Dubai and the company may make an announcement in September concerning another capital injection from those investors.
Disclaimer
James Smith is an independent columnist for this web site. James Smith may hold long or short positions in any of the stocks mentioned in this article and those positions can change at any moment.
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www.InvestorIdeas.com/About/Disclaimer.asp, InvestorIdeas is not affiliated or compensated by the companies mentioned in this article. James Smith is a freelance writer. Nothing in the articles should be construed as an offer or solicitation or recommendation to buy or sell any specific products or securities. Past performance does not guarantee future results.
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