Facing a certain future

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Michael Webber analyses trends across North America’s cargo airports over the past decade, and in doing so identifies the direction they are heading

Annually, Airports Council International (ACI) releases rankings of airports on the basis of passengers, cargo and flight operations. Traditionally, these statistics were anticipated with excitement to find which airports had improved their relative positions within air cargo’s airport hierarchy. However in the US in recent years, improving an airport’s standing has been more a function of descending less rapidly than one’s peers. For calendar year (CY) 2011, ACI-North America (ACI-NA) reported that its top 50 cargo airports experienced a combined 1.3% decrease in year-on-year total air cargo.  Disturbingly for anyone predisposed to positive numbers, the small decrease in CY 2011 was an improvement over the market’s air cargo experience in the preceding decade.

For much of the 1980s and ‘90s, North American airports experienced air cargo growth that encouraged airport operators − often partnered with commercial real estate developers − to develop dedicated facilities and infrastructure to serve cargo carriers and allied services. By the end of the 1990s, most large and medium-sized markets hosted most (if not all) of the prominent cargo carriers: Airborne Express, BAX Global, DHL, Emery Worldwide, FedEx and UPS. US passenger carriers still carried substantial amounts of freight and mail on wide-body aircraft serving domestic routes and some even operated freighters. Non-integrated, all-cargo airlines like Kitty Hawk were also in the mix.

At the end of the 1990s, classic air cargo demand drivers began to falter in the US and then the aftermath of 9/11, subsequent economy-starving wars and unprecedented fuel costs accelerated downward momentum. Emery Worldwide had its fleet grounded before its forwarding operations (Menlo) were eventually acquired by UPS. To the extent allowed by US regulators, DHL acquired much of what had been Airborne Express, closing redundant stations and then subsequently retreating altogether from the US domestic express market. DHL first closed its Cincinnati (CVG) express hub in favour of the former Airborne all-cargo airport at nearby Wilmington, OH. Only a few years later, DHL reversed its decision, closing Wilmington in favor of CVG. Meanwhile, BAX Global was acquired by Deutsche Bahn (the German rail operator) and merged into another acquisition to form DB Schenker. DB Schenker terminated its own dedicated air operations in late 2011, closing its Toledo, Ohio air hub.

The consequences for former hub airports were devastating. Emery Worldwide’s former air cargo hub, Dayton, fell from being the #13 cargo airport in North America in 2000 to #101 in 2011. Its annual tonnage fell by more than 99%. Even before DB Schenker formally terminated its hub, annual cargo had already fallen by more than 60% at Toledo. Now, the airport’s descent is likely to mirror that of Dayton. A third Ohio airport − the former Airborne hub in Wilmington − did not report tonnage to ACI-NA but lost 100% of its cargo activity when DHL returned to Cincinnati. The effects of these hub activities are recognisable in the exhibit above. Former all-cargo hubs for Kitty Hawk and Kalitta Air closed in Fort Wayne and Terre Haute, Indiana. While hub closings had the most devastating localised economic ramifications, ripple effects were felt throughout the carriers’ entire networks.

Compounding vacancies for those managing on-airport cargo facilities, belly cargo carriers were negatively impacted as well. As passenger airlines all but eliminated wide-body aircraft on domestic routes, trucking often replaced domestic air transport and feeder routes connecting international gateways to secondary markets. As belly cargo fell, third-party handlers accommodated multiple airlines in space previously hosting only one tenant. Acquisitions of Continental by United and Northwest by Delta created even more cargo facility redundancies.

Integrators: FedEx and UPS.

While airports moved within the rankings, the composition of the top 20 North American cargo airports remained relatively consistent, except for airports that lost major hubs.

As it has been for decades, North America’s top cargo airport is FedEx’s hub, Memphis. FedEx’s secondary hub Indianapolis (#8) and regional hubs Newark Liberty (#9) and Oakland (#13) also rank in the top twenty. FedEx also has regional hubs at Fort Worth (Texas) Alliance Airport and in 2009 opened its Mid-Atlantic hub at Piedmont Triad International Airport in Greensboro, North Carolina.

Between CY 2000 and 2011 (inclusive), Memphis’ total cargo grew 57% to about 3.9 million tonnes. That growth did not trickle down to regional hubs, as IND (-16.6%), Newark (-24.9%), Oakland (-29.5%) and Fort Worth Alliance (-47.6%[1]) suffered double-digit total cargo (all carriers) losses. Among FedEx’s regional hubs only Greensboro grew, having opened during the period, but remains small enough that the airport ranked only #44 among North American airports. Fort Worth Alliance relies entirely on FedEx for its air cargo tonnage, which fell by almost half between 2000 and 2010, when it ranked #32.

Anchorage owes its #2 ranking to its role as a tech-stop for transpacific freighters that mostly only refuel and perform crew changes, but is also a cargo transfer station for both FedEx and UPS. The Alaska International Airport System has an effort underway to incentivise more carriers to use its airports for distribution, including transfer rights unavailable at airports in the ‘Lower 48’ states.

The UPS system followed a similar trajectory to that of FedEx. While the Louisville hub grew 44% between CY 2000 and 2011, double-digit losses were experienced at Dallas/Ft. Worth (-27.5%), Philadelphia (-25.8%), Los Angeles/Ontario (-18.4%) and Columbia, South Carolina (-55.2%[2]). In CY 2011, Louisville ranked #3 in annual cargo tonnage, Dallas/Ft. Worth ranked #11, Philadelphia ranked #16 and LA/Ontario ranked #18. UPS also has a regional hub in Rockford, Illinois but that airport does not report to ACI-NA. Rockford likely would rank in the upper twenties among US airports. UPS’ Mid-Atlantic hub at Columbia, SC missed the top 50 and only accounts for about 63,000 annual tonnes of total cargo.

Apart from the two national hubs, the remainder of FedEx and UPS hub airports suffered setbacks comparable to most other US airports. Unprecedented fuel costs and superior growth abroad, as well as reliable infrastructure widely encouraged a shift to trucks. Moreover, both integrators’ fastest-growing business segments were deferred-delivery, accommodating to ground transport.

International Gateways

While ten of North America’s top twenty cargo airports in CY 2011 were hubs and regional hubs of integrators FedEx, UPS and DHL, the balance were international gateways for passenger carriers and all-cargo airlines. Three airports − Newark, Dallas/Ft. Worth and Philadelphia − are integrators’ regional hubs and international passenger gateways.

Unlike integrator hubs Memphis and Louisville that are dominated by a single carrier, and the mostly tech-stop Anchorage, the next four largest US cargo airports are international gateways characterised by great diversity of carriers. Miami International Airport (MIA), Los Angeles International Airport (LAX), New York JFK International Airport (JFK) and Chicago O’Hare International Airport (ORD) have shifted rankings in the last decade and have substantial differences between them but as a group, the four airports so dominate international air cargo that most useful comparisons can only be made among themselves. Not for lack of trying, major gateways like Delta hub Hartsfield-Jackson Atlanta International Airport still only accounts for about half the annual tonnage of O’Hare – the smallest of the ‘Big Four’. Any aspiring competitor to these airports must contend with forwarders’ self-interests, driven not by any sentimental loyalty to the legacy hubs but by incomparable network connectivity manifested in superior frequencies, direct international destinations served by multiple carriers and mixes of belly and freighter capacity. No US gateway so dominates a region as MIA does Latin America, while LAX, JFK and ORD offer superior service to Europe and Asia. Of the four largest international gateways, only MIA experienced growth (less than 1% per annum) between 2000 and 2011, while the other three suffered double-digit cumulative losses for the same period. Depressingly for would-be alternatives, the last decade provided the four dominant gateways with a buffer against what had been projected as a rendezvous with absolute capacity limits. Airport operators in Miami, New York and Chicago have completed planning for long-term air cargo improvements intended to accommodate future growth. Chicago and Miami have already approved development partners for near-term expansions. Both JFK and Newark (EWR) are operated by the Port Authority of New York & New Jersey. In addition to the FedEx regional hub, EWR hosts a United (formerly Continental) passenger hub, as well as several international passenger carriers. Its carrier composition − particularly the FedEx hub − is distinctive from JFK but the presence of EWR allows the Port Authority to more effectively manage system capacity.