North America: Airport cargo investments surge

posted on 16th June 2022
North America: Airport cargo investments surge

In a hot development market, air freight facility construction or expansion projects are moving forward apace at hub and second-tier airports across the US and Canada in response to congestion issues, rising freighter activities, and the need for modernisation, with some players increasingly looking at vertical expansion or off-airport locations, reports Ian Putzger

North American airports are seeing a surge of investment in new cargo handling and air logistics capacity, with rising freighter traffic, in conjunction with congestion at the main hubs, providing a particular boost for second-tier and cargo-focused airports. But many of the major hub airports are also expanding their facilities, after the recent strong performance of cargo has highlighted the potential for logistics investments and the shortcomings of some of these airports’ cargo facilities and infrastructure.
Realterm, parent of air cargo facility developer Aeroterm, is preparing for more cargo projects. In early May it announced the successful closing of $150 million in capital commitments for its open-ended airport logistics properties fund, which has garnered about $900 million in total equity commitments since its formation in 2015.
Aeroterm has recently completed four cargo buildings, has three under construction, and two more in the concept stage, reports Bryan Rosenberger, vice-president of design and construction.

Expansion projects mushrooming
Air freight facility construction or expansion projects are mushrooming all over the US and Canada. Michael Webber, president of airport cargo consulting firm Webber Air Cargo, notes that new facilities are in the planning stage at various large airports, including Los Angeles, Dallas/Fort Worth, Miami and Chicago. “A lot of RFPs are going to hit the streets,” he says.
Alex Lowe, manager for global cargo network development at Edmonton International Airport, observes: “We’re in the midst of our largest cargo expansion.” At the moment the airport is doubling its apron capacity, a project that should be completed before the end of the year.
Vancouver International Airport is looking for a partner to develop a 300,000 sq ft (28,000sqm) area into an ‘Airport Commerce Centre’. Adjacent to the airport’s cargo village, the space was originally designated for utilities, but the airport management now wants to develop its multimodal potential to facilitate air cargo connections with future developments in the area.
The action is not confined to the established international gateways. In March, Aeroterm signed an agreement for a 30-year ground lease to develop a 140,000-170,000 sq ft cargo building at Pittsburgh International Airport. The planned multi-tenant facility is scheduled to open in the second quarter of next year. Last year, handling firm Alliance Ground International (AGI) expanded its ramp and warehouse operations at the airport.
Philadelphia International Airport is pursuing a project to more than double its cargo building footprint from currently 600,000 to 1.4 million sq ft. The City of Philadelphia Division of Aviation secured almost $31 million in funding from Washington for the current fiscal year, part of which will go toward the $1.2 billion cargo project.

Driven by strong growth
These ambitions are driven by strong growth in cargo throughput. Pittsburgh saw a 30% increase in volume last year over 2020 to around 110,000 metric tonnes, and 26% more than in 2019. And throughput at Miami International Airport climbed another 17% last year, from a record tonnage in 2020, to 2.7 million tons.
In March, Miami’s volume was up 8%, year on year. “We’re feeling what’s going on in the rest of the world with inflation and the war in Ukraine, but here it’s mitigated by our strength in the Latin America market, which is on a rebound,” says Emir Pineda, manager of aviation trade and logistics in the marketing division of the Miami-Dade Aviation Department.
Like Miami, Edmonton has seen back-to-back record volumes in 2020 and 2021. Much of this was driven by cargo charter activity, which soared 165% in two years, says Lowe.

Growth in e-commerce
This year kicked off strongly, with much growth in e-commerce, which had spawned a charter programme from China, but this was suspended in the wake of the new virus outbreaks in China. The airport also handled a lot of Antonov and Ilyushin-76 flights for the oil and gas industry, but this activity has been hit by the ban on Russian carriers from Canadian airspace.
“Freighter capacity remains challenged and tight,” says Lowe. “We’ve seen more 747s stepping in to fill the gap.”
The relentless growth of e-commerce volumes has been a strain both on carrier capacity and warehouse space. “We can’t get the aircraft fast enough,” says Jamie Porteous, chief strategy officer of Cargojet, which performs linehaul for the integrators as well as Amazon. The carrier is in the process of expanding its hub in Hamilton and almost completed the construction of a new facility in Halifax.
Capacity constraints are a problem at most of Cargojet’s facilities, says Porteous. It is also expanding at St John’s and is looking at Winnipeg, he adds.

Boost for second-tier hubs
The rise of freighter traffic, in conjunction with congestion at the main hubs, has been a massive shot in the arm for second-tier and cargo-focused airports like Rockford. E-commerce traffic from the likes of Amazon and the integrators has been a major driver, but what really changed the game was the arrival of Senator’s dedicated freighter flights from Europe, says Ken Ryan, Rockford’s director of cargo.
The airport saw throughput rise 25% last year, following a 17% gain in 2020.
Webber agrees that the outlook for aspiring cargo airports and second-tier locations has improved massively. For a long time, such aspirations were frustrated by the lack of all-cargo carriers, as players like BAX Global, Kitty Hawk and others folded their domestic freighter operations. Now a host of airports, such as Greenville, Rockford and Halifax, are seeing regular freighter flights and attracting facility developers and ground handlers, he notes.

Critical mass builds
Jared Azcuy, AGI’s CEO, has second-tier airports in his sights, noting that a growing number of forwarders are looking to these airports for dedicated all-cargo flight, which has developed critical mass at these points. AGI opened facilities in Rickenbacker and Pittsburgh last year and is looking at other markets in this bracket.
“We’re starting to see a major increase in the second tier of airports,” remarks Rosenberger.
Freighters and, to some extent, passenger planes with seats and galleys removed to carry freight in the cabin, have largely carried the advance of these airports. The latter are on the retreat now as the passenger business recovers, but freighters are expected to continue to fly a larger share of the global volume than before the pandemic, partly because passenger airlines have retired older widebodies and are replacing them with A321XLRs and B737MAX aircraft.
Bob Caton, vice-president of development at Aeroterm, expects the market share of freighters to remain elevated. “We’re seeing that trend play out in real time. It’s not a temporary uptick,” he comments.

Productivity boost
Azcuy welcomes this development. “For us, getting freighter volume is better from a productivity standpoint. They bring in more cargo at once that we can process instead of getting 15 tons from a passenger flight and then the next 15 tones maybe three hours later,” he says.
On the flip side, the extension of the screening mandate to main deck cargo last year meant that AGI and other handlers needed more space to screen the larger volumes, which added to the congestion at some airports like O’Hare.
Congestion at the big hubs has been one factor that aided the rise of the second-tier gateways. This has abated somewhat recently, but it remains a problem, which has prompted the launch of an initiative to tackle the issue. Last year the US Airforwarders Association (AfA) set up an Airport Congestion Committee to look at ways to reduce congestion.

Survey highlights bottlenecks
In collaboration with the Airports Council International – North America (ACI), the committee conducted two surveys of industry stakeholders. The feedback from over 400 respondents indicated that Chicago O’Hare had the biggest problems, followed by JFK, Atlanta, LAX and Boston.
Based on the responses from the surveys, the committee identified five critical areas – facilities and infrastructure, staffing and operating hours, technology and automation, service standards, and regulatory and paperwork challenges. Working groups were set up for each of these areas to highlight the problems and make proposals for improvement.
The initiative has gained broad buy-in from other industry sectors. In addition to the ACI, the National Customs Brokers and Forwarders Association of America, Airlines for America and the Airline Service Providers Association have joined the action. Each of these groups has set up task forces to examine the five individual themes and come up with suggestions.
These findings and suggestions will be amalgamated into a white paper to be presented to private, public and government entities to instigate actions to tackle congestion.

Recruitment challenge
One area where the authorities could bring welcome relief is in the recruitment of warehouse and ramp staff. Like most other industries, the air freight sector has struggled to find enough workers, but on-airport operations face the additional hurdle of obtaining clearance from the authorities for new recruits. Completing background checks and getting the badge takes about six weeks, which causes many applicants to turn to other industries where they can start work right away.
“It’s difficult with the recruitment protocol,” says Azcuy, adding that quite a few airports have been very supportive. To shorten the wasted time, AGI starts training newcomers in non-airport areas like import centres, where the badges are not required.
“Labour continues to be a challenge. It’s going to continue for the foreseeable future,” he says.
Webber concurs: “Labour is a big issue,” adding that various hurdles are in the way. For one thing, workers may require public transit to get to work, so now this issue has to get included in cargo planning. Moves to 24/7 operations bring additional challenges on that front, as a lot of public transit systems do not operate around the clock, he adds.

Congestion solutions
The congestion has forced airport authorities at strained hubs to intensify their study of new concepts to overcome capacity constraints. For Miami airport, the future is vertical. The airport authority is in final negotiations over a proposal for a five-storey building geared to handle between 4 million and 5 million tons, which would double the existing capacity, with a ramp area to accommodate 12 B747F positions. The plan calls for a high degree of automation using robotics and a platform for trucking, security and services. The estimated development window is 3-5 years.
“We are near capacity,” says Pineda. “We estimate probably 3 million tons is the max that our facilities can handle today.” Miami’s growth projections are for a doubling of volume over the next 20-25 years.
Webber reckons that more airports may follow in Miami’s footsteps, noting: “Many of the traditional hubs are running out of land.”

Trend to multi-storey facilities
Cost can be an obstacle. When Aeroterm was planning for a facility at JFK, the original concept called for a two-storey structure, but the cost made that “a bit uneconomic”, recalls Caton. “But there is a trend to multi-storey facilities,” he adds.
AGI took a different route in Chicago, where it opened a 253,000 sq ft import centre off-airport with a state-of-the-art racking system and a cargo mobility system for continuous tracking that allows customers to check the progress of their freight via the handler’s website.
The initial impulse for the move off airport was the congestion at O’Hare, but the concept is viable in its own right, says Azcuy. For one thing, the site is actually closer to the forwarding community in the area, he notes.
“Import centres bring tremendous value. We see them as the way forward for constrained airports,” he says. The concept would make good sense in markets like LAX, JFK or Atlanta, he adds.

Off-airport investments
In March, Aeroterm acquired two warehouses with a combined footprint of almost 221,000 sq ft about ten minutes from Montreal Trudeau International Airport. The following month it bought two off-airport facilities with over 142,000 sq ft adjacent to Costa Mesa airport, which have runway access via a special gate.
Nevertheless, Rosenberger does not view such moves as a general trend. “Off-airport is situational, based on location. It’s primarily due to land constraints,” he says.
Caton notes that it makes sense to move imports off airport, but not exports. While the concept works well, he sees one drawback. As airports control what’s on their premises, they can go for a holistic strategy, which is not possible with off-airport locations, he remarks.

Consolidation continues
Meanwhile, the region’s cargo handlers continue to consolidate. AGI continued its expansion in May with the takeover of Total Airport Services, a ramp, cargo and passenger handling firm operating at eight US locations. Further expansion is on the cards.
“We will continue to pursue acquisitions that fit in with our strategy of expanding both our product offering and our global reach, with particular focus on Latin America, Europe and Canada,” commented Azcui when the agreement was announced.
This does not mean that AGI is done growing in the US. “There’s definitely more to come in the US, but we’re already starting projects into South America and Europe,” he says.