US airports must focus on de-bottlenecking, modernising facilities, and facilitating the cargo community to increase speed, efficiency and quality. But data and specialisation are becoming increasingly important too, report Will Waters and Tom Willis
Airports are the one place that connects all of the players in the air logistics chain, and so in theory they are uniquely positioned to help streamline air cargo and increase its speed, efficiency and quality. But it’s not quite as simple as that, as speakers outlined at this year’s CNS Partnership conference in Orlando, in a panel discussion on the challenges facing US airports and their cargo performance.
CHALLENGES AND COMPLEXITY
Peter Ulrich, partner and managing director of Boston Consulting Group, highlights significant challenges, including “dealing with complexity” and the need for long-term planning. And airports operate in a highly complex and political regulatory environment, “in which they have to manoeuvre when it comes to infrastructure investment”.
Adding to the challenges, cargo often gets a low priority compared with passenger, “even though it is very important from a macroeconomic point of view, in our view. In terms of revenue, it is only 10-20%,” Ulrich notes. “And so air cargo is often treated like a ‘stepchild’.”
That problem has got even bigger since the US domestic air cargo market began collapsing around a decade and a half ago. “Over the last 15 years, most of the airports, besides from those large airports that are dealing with the integrators, have seen cargo volumes decreasing, and so they are struggling quite a bit,” Ulrich says. That makes arguing the case for further airport investment in cargo even tougher.
Ulrich adds: “And so there is a challenge in terms of how do airports stay competitive, how do I grow, how do I be attractive to all of you over the coming years, and how do I ultimately improve the efficiency, speed, and quality of the day-to-day operations?”
AIRPORTS’ CARGO PRIORITIES
In terms of what airports’ cargo priorities should be, Ulrich says: “It is obviously about improving your day-to-day operations; there is a clear focus on de-bottlenecking; and there are a couple of things that airports can do in terms of outdated facilities and links to other operators and modes, highways, and trucking companies, that they have to address or live with.”
And there is also a changing industry dynamic. “We have heard about transformation, technology, about big data, transparency, and drones − a lot of things that are happening within the environment that airports need to take positions on now, particularly on infrastructure investments, but that maybe have to last 20 years and be relevant for the next 20 years,” Ulrich adds.
Indeed, in a survey conducted during the panel discussion, CNS delegates rated airports’ performance on cargo “somewhere around mediocre to not so good”. And delegates’ top three priorities for airports to improve their cargo performance were: “modernise facilities”; “de-bottleneck”, particularly access and the link to land transportation; and “facilitate the cargo community”, Ulrich outlines.
Airport consultant Michael Webber, founder of Webber Air Cargo, says that because airports are “dealing with bricks and mortar”, their role inevitably involves some very long-term planning. “You almost have to qualify what you mean by a ‘trend’ when you talk about airports versus much of the rest of the industry,” he explains. “I do a lot of airport master planning, on behalf of airports but based on feedback from the airlines, freight forwarders, and the trucking community. Typically you are doing that on a 30-year planning horizon, maybe looking back at 20 years of data to look forward 30 years − and you are doing it on behalf of tenants for whom long-term planning may be 90 days to 180 days,” he adds.
“That isn’t a complaint; it is just a necessary disconnect. There is no ACMI equivalent for an airport. You have to make your decisions and go about your airport improvements and you have to live with them for, by and large, hopefully the next 30 years in terms of the new facilities that you build.”
The cargo improvements airports can make vary widely depending on the airport and the space available. “For example, at DFW you might just open up another thousand acres of greenfield space, whereas at LAX, you really can’t make any improvements without knocking something down,” Webber says.
He says air cargo levels have been falling for nearly 20 years in the US, with most airports, apart from those hosting FedEx and UPS national air hubs, Memphis and Louisville, still transporting less cargo today than in the peak year of 2000. “If you take out the top three US cargo hubs − the Memphis FedEx hub, the Anchorage transpacific tech stop, and UPS’s Louisville hub − volumes at the other 17 of the top 20 airports are down collectively by about 1.5 million metric tonnes annually compared to the peak year of 2000,” he says.
This illustrates the scale of the problem for airports when trying to convince stakeholders and secure investment for new and improved infrastructure for cargo or to build new buildings “even though you are down maybe double digits since your peak year – and in many cases, with empty buildings”, Webber says. “But the good news is that Chicago and LAX airports are just about back at the levels seen at the turn of the century, with Miami doing a little bit better.”
And even at the rest of those international gateways, the figures are “a little deceptive”, he notes. “If you look at DFW or Atlanta, where they may be down upwards of 20% since 2000, it’s a very asymmetric statistic, because they will be up in international tonnage by double digits; it’s just that the fall in domestic tonnage was so great that it eclipses that trend. So it is quite a diverse playing field out there. You can just about compare LAX and JFK, and all the rest are quite distinctive.”
As a result, identifying and defining trends among cargo airports can be difficult. But there are some strong growth areas, such as perishables, pharmaceuticals and e-commerce “that are going to change the industry in the future”, says Emir Pineda, manager of aviation trade and logistics for Miami-Dade Aviation Department.
“But we are also seeing trends on a regional basis rather than just at individual airports,” he notes. “Miami being so tied to Latin America, the trends there have to be followed, and when those change, that affects us,” he says. “With Brazil’s economy struggling in recent years, we have seen stagnation at our airport; it hasn’t been the strong growth we have seen historically.”
But regions often contain winners and losers, he notes. “When you have some countries that are down, right now we also have Colombia, Mexico, and Chile continuing to do well, which is positive to us as well as other airports in our community. And you also have growth in areas such as perishables, which has been important for us, and that trend will continue, and more recently pharmaceuticals. So, some trends work for you and some work against you,” Pineda says.
He notes apprehension at the current US government, which he says is “a little less international”. He adds: “Some of the trade negotiations that historically have prompted growth of trade may be a little different in the future, so that is a trend that has to be looked at on a broader scale.” And there is also the consolidation among airlines, for example. “An airport has to follow trends not just locally but also internationally, to really understand what is going on in the market and where we’re going in the future,” he says.
SPECIALISATION TO DIFFERENTIATE
One opportunity is for an airport to differentiate itself through specialisation, for example Miami’s strength in the perishables market and recently its investment in pharma infrastructure. Some of that has been achieved through collaboration with and lessons from other airport cargo communities, Pineda says, such as Amsterdam, and Brussels. “Those have been very successful in bringing the community together in working together on a common goal,” he notes.
“In our case, we looked at a particular industry, pharmaceuticals, and we saw an opportunity. And working with IATA and its certification, Miami was dedicated a pharmaceuticals hub. We followed Brussels, which led the way and have now been working with them closely to continue to develop this sector. And I really believe that the community approach is the best way to go forward.”
He continues: “And we need to include that community, the freight forwarders, the trucking companies, the airlines obviously, and the handling companies: all of those components of the supply chain need to be part of the community approach, in this case for a particular vertical, the pharmaceutical industry. But it can also be applied to other areas. We have been doing that to some extent in the perishables area, where we have also been very successful.”
Part of that success is historical, part is geographic, and part of that is cultural, Pineda says. “But all those components over time have got us to where we are today being the leader in the perishables marketplace. But it took time, it took effort, it took focus, and it took commitment.”
But Webber says part of the success of Miami is that it has the capacity, the carriers, the frequencies, as do other big international airports such as LAX. “Unfortunately, some aspects of the industry can become quite ‘trendy’,” Webber says. “With some airports there has been this rush towards the ‘build it and they will come’ notion. I have been asked by airports whether they should build a perishables centre, when they have no international service whatsoever. The notion that if you build a perishables centre and the services will come is rather backwards.”
Instead, the appropriate specialist facilities can help optimise the capacity that an airport has, he explains.
Meanwhile, the challenge for Chicago’s O’Hare International Airport for the last couple of years has been congestion due to recent growth that has taken its traffic to record levels, notes Adam Rod, planning administrator at Chicago Department of Aviation. With annual cargo throughput now at roughly 1.8 million metric tonnes, Chicago has recently completed the first phase of a project to increase its cargo capacity by 50% to keep up with growing demand, driven by Chicago’s role as “a long-time business and trade centre with strong transportation infrastructure”. Roughly $170 billion worth of goods come through O’Hare each year to …