Rise and fall of the aerotropolis

No post image

A variety of airport operators – often representing former airline hubs, closed military bases and chronically poor communities – have attempted to reshape their lack of existing air traffic activity as a marketing virtue, in bids to become alternative cargo hubs, and attract associated funding. A review, by Michael Webber, of failed and successful past efforts provides a platform for consideration of the latest such effort – dubbed the Midwest China Hub by proponents in the St. Louis area.

In the 1990’s, Kinston, North Carolina’s Global TransPark (GTP) served as an expensive laboratory for university professor Dr. John (“Jack”) Kasarda, who foresaw a futuristic logistics complex serving time-sensitive industries, located on-site for just-in-time shipments to a network of similar GTP’s around the world. In 1991, Kasarda predicted “it’s absolutely going to happen, whether in 1993 or 2005.”[1] By May 2001, editors of the Carolina Journal described the GTP’s business model as “bribery” in the form of tax-funded economic incentives to lease space in unsubstantiated hopes tenants would eventually pay full price. Rather than become self-sufficient, the GTP drained subsidies from the General Assembly, as well as grants from the federal government and most worrisome, incurred debt. Rather than the 100,000 jobs promised in a 1992 study, the Journal estimated employment at fewer than 400 people, while describing it as “a boondoggle from the start … that has brought false hopes but little impact to Kinston and eastern North Carolina.” In a 2007 Wall Street Journal article[2], Kasarda correctly blamed himself. The network of GTP’s that Kasarda foresaw also included U-Tapao Airport in Thailand which Kasarda suggested “should be developed as a specialized air cargo facility serving the Eastern Seaboard”[3]. Kasarda eventually rebranded the GTP concept as the Aerotropolis.

Located near St. Louis, in Belleville, Illinois, MidAmerica Airport has been featured in NBC Nightly News’ “Fleecing of America” programme in an expose of government waste. Without irony, the airport director suggested that variety of national exposure was the kind of advertising money can’t buy. But for lacking Kasarda’s imprint, MidAmerica’s trajectory mirrors its North Carolina predecessor, from the untested wisdom to the drain on public funds. Neither airport allowed rejection by US domestic carriers to discourage their belief that transcontinental service would somehow be more attainable. Both sought to relieve major commercial airports that ultimately were not all that congested. While MidAmerica’s operators periodically hint at imminent global gateway status, it has drawn only occasional dalliances with heavily-subsidized carriers. In its most recent embarrassment, a developer went missing with a $250,000 advance before renegotiating in August 2011 his prospective development of a new cargo terminal at half the originally agreed size. The September 2011 opening may happen in summer 2012.

In spite of these spectacularly negative case studies, cargo gateways have succeeded in what were once unlikely locales. Given their incomparable economies of scale, integrated carriers routinely develop regional hubs in alternatives such as Ontario, California and Rockford, Illinois (UPS) – near but not in Los Angeles and Chicago, respectively. FedEx has developed secondary hubs in Indianapolis, Indiana and most recently Greensboro, North Carolina – selecting an airport passed over by the academics and policymakers who selected the GTP in the ‘90s. UPS has its European hub at Cologne Bonn Airport and its UK hub at East Midlands Airport, which also hosts a DHL national hub. TNT’s European Express Centre is at Liege Airport in Belgium. While not ignoring major gateways where their forwarder operations can take advantage of capacity offered by commercial carriers, integrated carriers have the internally generated volumes, proprietary aircraft and trucks to operate more autonomously. In the case of Indianapolis explored later, the integrator hub may also support cargo-friendly conditions that can be leveraged to support other cargo operations.

International flights may also be wholly supported by one or just a few strategic shippers, as when China Airlines introduced flights to serve a Dell Computers factory in Nashville. Both the factory and flights are now gone, but the example is still valid. More durable is Cargolux’s operation at Indianapolis, anchored by the needs of the local biopharmaceutical industry working with forwarder DB Schenker. In securing the highest operating standards required by the pharmaceutical industry, airport operators credit the 24-hour operating environment, international regulatory services and cargo orientation demanded by its FedEx hub for creating the environment necessary for the Cargolux flights. IND’s marketing staff freely credits success to partners in the forwarder, shipper and carrier communities, and while heartened by the activity, suppresses the urge to try being the next Chicago O’Hare or New York JFK, in favor of organic growth that leverages IND’s own strengths and environment.

Another successful example is forwarder-led Huntsville International Airport (HSV) in Alabama, where Panalpina established its Dixie Jet operation to provide dedicated freighter capacity to regional time-sensitive shippers. While Huntsville hosts aerospace and other industries, Panalpina uses trucks to serve a region that intersects with much larger Atlanta, while linking HSV by air to Europe, Latin America and Asia. Numerous subsequently failed efforts cited Huntsville as an example, yet the wait for the “next Huntsville” continues twenty years later. Leaders thinking they can replicate the scale of Panalpina by cobbling together cooperation from competing forwarders are inevitably encouraged by noncommittal verbal pronouncements and even letters of support. Ultimately, competing forwarders can rarely even agree where to share lunch, let alone develop the unity required to forgo superior frequencies and block space agreements – among other forces – that tie them to traditional gateways.

Rather than emulating modest but successful examples, the proposed “Midwest China Hub” at Lambert St. Louis International Airport (STL) has borrowed the exuberance and even some of the same players from nearby MidAmerica. Real estate developer Paul McKee, his attorney Steve Stone and Stone’s cousin, consultant Steven Perry, formed MidAmerica’s international “landing party”. Before swapping for Lambert, McKee promised of MidAmerica “this is going to be an incredible international hub for freight”[4], linking China and Latin America at the expense of O’Hare (ORD). McKee, and his legal and familial consulting team – aided by regional economic developers – have Missouri’s legislature considering $360 million in tax credits and subsidies to copy MidAmerica’s failed strategy. The Legislature has been warned that delay may result in potential rivals realizing China’s potential and therefore the need for any independent analysis not procured by proponents would jeopardize the deal. Essentially, proponents hope Missouri’s legislature will forgo the kind of due diligence shown by Pennsylvania and Louisiana where legislatures commissioned independent feasibility studies that illuminated such serious concerns that sensible safeguards prevented repeats of the GTP and MidAmerica. As they did in Pennsylvania and Louisiana, an independent study might question central claims about the lack of capacity at traditional gateways and the uniqueness of the local uncongested airport.

Both at MidAmerica and now at Lambert, proponents have claimed that runaway growth left traditional gateways unable to accommodate the demands of the air cargo industry. However, the four largest traditional US gateways – Miami International Airport (MIA), New York’s JFK International Airport, Chicago’s O’Hare International Airport (ORD) and Los Angeles International Airport (LAX) – suffered losses in air cargo traffic between Calendar Year 2000 and 2009. Hartsfield-Jackson Atlanta International Airport (ATL) and Dallas/Fort Worth International Airport (DFW) fared even worse. Apart from 4% growth at Houston’s Bush Intercontinental Airport, major US international gateways lost a decade of growth but gained a reprieve from previously projected near-term capacity limitations. Nothing could be as constructive for would-be alternatives as having dominant gateways reach their limits.

Source: Airports Council International – North America

A significant recovery in 2010 (MIA: +17%; ATL: +17%; IAH: +13%; DFW: +12%; ORD: +31%; LAX: +15%; JFK: + 18%) lessened the gap with past peaks, but in most cases cannot replace a decade’s lost growth, and the US’ economic demand drivers have been transformed from manufacturing to a service-industry economy. Proponents cite institutional forecasts that suggest a potential tripling of global cargo, while ignoring how little global growth will touch North America, where the world’s most mature air cargo industry portends relatively anemic growth, and where traditional gateways are more likely to extend their advantages based on international growth while the vast majority of US airports will experience relatively slow domestic growth.

In calendar year 2000, most medium and large US cargo airports were served by all-cargo tenants Airborne Express, BAX Global, DHL, Emery Worldwide, FedEx and UPS. A decade or so later, those six all-cargo airlines have shrunk to two at most airports, and abandonment of stations commonly left occupancy rates below 50% at non-hub stations. Consolidations also occurred in on-airport cargo facilities where Northwest and Continental had operations, rationalized into Delta and United, respectively.

TWA’s absorption by American Airlines led to a shuttered former hub in St. Louis. Worse, a $1.1 billion runway justified by that hub opened in 2006. Lambert went from among the top ten North American airports with more than 30 million passengers in 2000 to barely more than one-third that amount and a number 34 ranking (ACI-NA) in 2010 – scarcely higher than cross-state Kansas City International Airport (MCI) at  number 36. In cargo, Lambert ranks only 39 in the US, after decreasing 20% between 2000 and 2010. Lambert only passed Kansas City, as well as Des Moines, Iowa, in 2009.

Debt service on the unneeded runway resulted in a rate structure that is uncompetitive with regional rivals, but Lambert is not alone in having lost a hub. In fact, prospective users can find vacant all-cargo hubs formerly hosting Emery Worldwide in Dayton, Ohio, Airborne Express in Wilmington, Ohio and all-cargo airline Kitty Hawk in Fort Wayne, Indiana. DB Schenker is in the process of closing what had been the former BAX Global hub in Toledo, Ohio. After returning to their former hub in Cincinnati (CVG), DHL’s international emphasis to the detriment of domestic business required only some of its former capacity. CVG’s airfield is also overbuilt after Delta/Comair slashed a former CVG hub.

Such a surplus of on-airport cargo capacity may never have existed before in the US, and private third-party developers with national portfolios of cargo facilities with low occupancy face financiers low on confidence. Even at major gateways where outdated facilities clearly need replacing, airport operators may have to demolish old capacity to prove that replacement, rather than augmentation, is occurring.

Returning to the virtues of underachievement, Lambert’s proponents suggest their prospective Chinese carrier prefers STL in order to avoid a more competitive O’Hare. Avoiding competitors is an understandable desire, but is unlikely to overcome the fact that it also means avoiding customers and service partners. The network connectivity at major gateways sustains diverse carriers operating passenger and freighter flights with superior frequencies to an incomparable number of direct destinations. The forwarders drawn by those offerings are unlikely to segregate cargo for a few weekly flights to a single destination from STL, while accommodating all else at ORD. Both American and United Airlines operate major passenger hubs at ORD with wide-body flights to numerous international destinations, as well as spokes throughout the US. Even as STL’s proponents claim that ORD is too congested to accommodate new carriers, Russian cargo airline AirBridge Cargo (ABC) made Chicago its inaugural US destination in May 2011, Chinese all-cargo carrier Yangtze River Express began a new service in June 2011 between ORD and Shanghai Pudong International Airport, and in August Cathay Pacific initiated direct passenger flights between Hong Kong and Chicago, complementing long-standing freighter services. O’Hare is in the midst of a modernization that will result in greater efficiency and capacity, as well as new cargo facilities. Unlike the St. Louis effort, O’Hare’s programme has been subjected to considerable FAA oversight and enjoys great industry support.

Another carrier to add ORD service (beginning in December 2011) is Panama-based Copa Airlines. The cornerstone of STL’s own Latin American connection was to be Brownsville, Texas-based Pan American Airways Inc. The startup appropriating a legendary name is run by Robert Hedrick – a builder of swimming pools for resorts and amusement parks. Hedrick exuded confidence that he could capture Latin American air cargo from Miami – something attempted with underwhelming results by Atlanta, Dallas/Ft. Worth and Houston, but Hedrick noted that incentives from the Missouri legislature would be critical. In July 2011, Hedrick was arrested on child pornography charges. Prior to Hedrick’s arrest, STL’s director Rhonda Hamm-Niebruegge signed a MOU with the man, while offering: “I think we’ll see more and more of this sort of thing if the Chinese decide to come here.”[5] In light of the subsequent events, this now appears an unfortunate prediction.

St. Louis proponents appropriated the term “aerotropolis” from the man most responsible for the disastrous North Carolina Global TransPark, John Kasarda. His co-author on the March 2011 book “Aerotropolis: The Way We’ll Live Next” was Greg Lindsay – a writer for Fast Company and previously for Fortune, as well as numerous other highly regarded publications. In July 2011, Lindsay reluctantly entered the St. Louis fray with a brief tweet that “calling some cargo flights and warehouses an aerotropolis doesn’t make it one”, adding “I don’t think it will work”. Informed by the numerous case studies required to complete his book, Lindsay injected credibility into a subject previously derided as little more than a vehicle for consulting paydays. Especially in mature North American and European markets, where airports and surrounding industry sorted out their coexistence decades ago, logistics professionals often question “vision” studies and worse, legislation, bearing the name aerotropolis. Brand new airports do offer the opportunity for holistic planning beyond airport fences, but experienced airport master planners and land use planners have tackled those functions for years using conventional language, while appreciating and absorbing lessons learned from new opportunities. In his book, Lindsay has made these cases and lessons more accessible to airport operators, planners and cargo enthusiasts willing to receive that information as the shared wisdom that it is. In his brief tweet, Lindsay acknowledged that some situations simply do not suit the vision, regardless of hopeful semantics. Like all critics, Lindsay was labeled by St. Louis proponents as an operative of traditional gateways threatened by an airport with annual cargo volumes that are down 20% over the last decade.

Rather than denouncing expert critics and taking on faith the pandering of self-serving consultants, prospective alternative gateways should confirm whether their proposed alternative is needed. Claiming O’Hare (and more recently, DFW) can no longer accommodate growth seems ridiculous in the midst of torrid expansion of carriers and frequencies. Lambert must also compete with Indianapolis, Cincinnati and Detroit – all with existing international service and other competitive advantages. Rather than alluding to Chicago, Miami, Memphis and Louisville, Lambert’s proponents would be better served by studying successful efforts by Huntsville and selectively, Indianapolis. And by all means, the Missouri Legislature should learn from counterparts in Louisiana and Pennsylvania so that later they won’t be keeping company with veterans of the North Carolina Global TransPark and MidAmerica.


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. While US-based, he has completed multiple projects in Asia, Africa, the Middle East and Latin America. Webber has recently completed cargo assignments for airport operators in Chicago, Los Angeles, Miami, New York, San Francisco and Vancouver. As an on-call resource to IATA’s cargo consulting group, Webber has provided consulting services to a variety of international air carriers and their cargo handling units.

[1] “Is It Time for a Huge Air Cargo-Industrial Complex?” Economic Developments, National Council for Urban Economic Developments, April 1, 1991.

[2] “Flight Plan: Airports Take Off As Development Hubs” by Susan Carey and Bruce Stanley, The Wall Street Journal, January 24, 2007

[3] “Time Is Ripe for U-Tapao to Take Off, Expert Says”, by Choosak Jirasakunthai, The Nation (Thailand), August 19, 2002

[4] “Regional Group Unveils Plans for MidAmerica St. Louis Airport”, Patrick J. Powers, Belleville News Democrat, January 12, 2011

[5] “Lambert in talks about Latin America cargo flights” by Tim Logan, St. Louis Post-Dispatch, May 11, 2011