Mixed fortunes

No post image

International cargo volumes have been down slightly overall this year at North American airports. But the longer-term trend is of international growth and domestic air cargo declines at US international gateways

Air freight volumes to and from North American airports have been broadly flat in 2016, according to preliminary figures from Airports Council International (ACI). However, unlike previous years, international air cargo volumes have seen a decrease, whereas domestic volumes have shown a slight increase, year-on-year, in the first eight months of 2016 – the latest figures available at the time of writing. According to ACI preliminary figures, international volumes to and from North American airports fell by 2.4% in the eight months to the end of August, whereas domestic air freight volumes rose by around 0.7% during that period. Total volumes were down slightly, by an estimated 0.6%.

Those relatively flat average figures for 2016 are broadly reflected in those of the top US airports, with MIA showing growth of just 0.26%, year on year, and LAX showing growth of just 0.2% for the first eight months of 2016. Elsewhere, Chicago saw volumes fall by around 6.5%, and JFK also saw a significant decline of 3.6%, while whereas the integrator hub Cincinnati/Northern Kentucky (CVG) recorded an increase of around 1.3% in the first eight months of 2016.

Although little can be deduced on the basis of a few months or even a single year, an examination of some longer-term trends and the fortunes of some of the top US international gateway airports is more revealing. Of the top twenty US airports, ranked by 2015 cargo tonnage, only six enjoyed growth between calendar year 2000 and 2015 (inclusive), writes Michael Webber. Ten experienced double-digit decreases.

Extraordinary growth at FedEx hub Memphis, UPS hub Louisville and DHL gateway Cincinnati/Northern Kentucky were driven by single carriers, while Anchorage’s high ranking is largely attributable to transpacific refueling stops.

US gateways

At US gateways, cargo market shares are disseminated among an array of domestic and international passenger (belly cargo) and freighter operators. Most experienced significant international growth that was insufficient to offset substantial domestic declines.

Almost 90% of Miami International Airport’s (MIA) 2015 total cargo was international and even the small share of domestic cargo may have been mostly the domestic leg of international shipments. MIA is also a conduit for trade between Latin America and Asia. MIA often offers the only direct service – whether passenger or all-cargo – from North America to many Caribbean and secondary South American destinations. While mergers and acquisitions have created regional behemoths of former Central American competitors (the TACA carriers now joined with Colombia’s Avianca) and South American competitors – LAN (Chile) and TAM (Brazil) – none have the economies of scale that allowed European and Asian carriers to aggressively expand throughout North America.

MIA’s dominance has often been attributed to geographical and cultural forces that undoubtedly are helpful, but maintaining MIA’s primacy has not been passive. For decades, the Miami-Dade Department of Aviation has consistently given air cargo attention lacking at other airports. Air cargo tonnage grew 22% at MIA between 2000 and 2015 and the airport’s cargo facilities have been improved and expanded to sustain that growth. The bankruptcy of its former market share leader – Arrow Air – in 2010 and similar disruptions involving other carriers were absorbed without threat to MIA’s competitiveness. Whether ensuring that facilities and services supporting perishable imports are adequate or pressuring regulators, MIA’s management operates as if it is still chasing the lead, rather than firmly entrenched as the leader.

In 2015, Los Angeles International Airport (LAX) accounted for about 1.9 million metric tonnes of air cargo – as much as the next five US western airports (FedEx regional hub Oakland, UPS regional hub Ontario and international gateways San Francisco, Seattle-Tacoma and Portland) combined. Alone, FedEx’s operation at LAX would rank among the top twenty US airports with more 2015 tonnage than Seattle-Tacoma International Airport had from all carriers. Not one transcontinental destination is served by either passenger or freighter service from any West Coast airport that is not also served at LAX.

Since its peak year of 2000, LAX’s regional dominance only expanded even as its total cargo decreased by 5%, due to a far more severe 47% decrease at former rival gateway San Francisco International Airport. As SFO suffered erosion of demand from Silicon Valley, freighter operators and their forwarder customers were no longer able to rely upon base loads that previously anchored payloads.

Even as tonnage slipped slightly, LAX’s cargo facilities and supporting infrastructure nearby have presented challenges for cargo operators. Ongoing improvements to local surface transportation should dramatically improve roadway congestion that currently vex truckers and those who rely upon them. Operators of LAX, Los Angeles World Airports (LAWA) have invested billions of dollars in improvements for passenger operations that will accommodate years of growth for intercontinental passenger carriers whose shares of international cargo are to increase. The airport operator has indicated that a request for qualifications for new cargo facility development may be released in the first quarter of 2017.

New York’s JFK International Airport experienced a 29% decline from peak year 2000. The Port Authority of New York and New Jersey operates JFK and Newark Liberty International Airport (EWR) which accounted for more than 1.9 million metric tonnes of cargo between them. While JFK is the region’s dominant international gateway, EWR serves as the northeastern regional hub for FedEx which accounts for almost 50% of its almost 700,000 annual metric tonnes. EWR’s ability to bleed integrated carrier traffic from JFK is critical to preserving capacity for international freighters and other operations at JFK.

JFK and LAX share many attributes and challenges. For decades, both airports were automatically part of the networks of any carrier aspiring to global status. Airfields and surrounding infrastructure were originally planned for another era. Development long ago surrounded the airports, curtailing options for expansion such that any on-airport enhancements at either JFK or LAX must likely occur on land already accommodating other tenants and possibly even different operations, such as catering and maintenance.

Chicago O’Hare International Airport (ORD) performed relatively well with 8% growth since 2000. In terms of industrial demand, ORD serves one of the last regions in the US with density of large employers in manufacturing and distribution. Unlike MIA’s virtual bottleneck to Latin America and LAX’s dominance on the West Coast, ORD thrives in a region filled with substantial competitors, even overlapping JFK’s service area. Indianapolis International Airport accommodates FedEx’s second-largest North American hub, nearby Rockford hosts UPS’s regional hub and DHL has its North American gateway at Cincinnati/Northern Kentucky. ORD has strengthened its preeminence as the region’s international gateway, even adding international carriers while other regional airports languished. In late 2016, ORD opens a new $200 million state-of-the-art cargo facility with more than 800,000 sq. ft. of warehouse space and ramp sufficient for 12 Boeing 747-800 freighters.

General observations

With a diversity of carriers, international gateways confront some common issues – not least being truck congestion on the landside and evolving spatial demand for larger freighters on the airside. All international gateways are challenged to predict future market shares of belly cargo versus freighters while retaining flexibility to accommodate possibly unanticipated developments in cargo security. These challenges are even more complex at land-locked legacy hubs LAX and JFK than airports where thousands of acres of developable land remain. Alternatively, the next tier of cargo airport operators might protest that their own challenges include simply building the network connectivity that legacy gateways already have and in some cases may be accused of taking for granted.

Michael Webber is the president of Webber Air Cargo, Inc., a consulting firm primarily serving cargo planning needs of airport operators and civil aviation authorities. Based in Austin, Texas, he has completed multiple projects in the US, Asia, Africa, the Middle East, and Latin America, providing consulting services to a variety of airports, international air carriers, and their cargo handling units