The softening of air freight markets has reduced traffic flows through some alternative gateways, but they are here to stay, reports Ian Putzger
The downturn in global freight flows that began in the second half of last year has slowed, and in some cases halted, the meteoric rise of alternative air cargo gateways in the US and the rapid recent growth in their freighter operations. And as international passenger traffic is expected to continue its recovery, more belly capacity to the established hubs is pouring into the market. This raises questions for specialist US cargo airports gateways such as Rickenbacker, Rockford or Huntsville, which have enjoyed large increases in traffic in the last few years, especially on international lanes.
Rickenbacker International Airport (LCK), a long-standing poster boy for freighter operations, saw cargo tonnages fall by about one third last year from its record 153,000 metric tons in 2021, following a 44% year-over-year rise in international tonnages handled at LCK in 2021.
Retailers, whose imports make up the baseload of the airport’s traffic, had brought in stock early by ship to avoid supply chain disruptions and the peak rush did not materialise, reports Bryan Schreiber, manager of the airport’s air cargo business development.
Forwarder EFL used to have three scheduled freighters a week, courtesy of Emirates, touch down at Rickenbacker, in addition to charters with several carriers, but now this is down to one weekly frequency. EFL funnels traffic from southeast and west Asia to Dubai to connect to this service.
“Three times a week would be ideal,” says Evan Rosen, EFL’s president for the Americas region. With demand down and the higher cost of a dedicated operation to bear, this option is tough at the moment, but EFL continues at the lower frequency until the market improves again.
Other forwarders, such as Flexport, Kuehne + Nagel or DB Schenker, are also continuing their dedicated freighter programmes, albeit at reduced activity. They see a permanent shift in the market towards controlled capacity – not for all traffic, but for a significant portion of it.
“Some of the freight will go at the cheapest rate – in passenger bellies – but the high-value or difficult freight will likely continue to go on freighters,” comments Ken Ryan, director of cargo at Rockford.
Rosen hopes that the market will improve in 3-6 months, and with it the case for dedicated freighters and alternative gateways.
Peter Weir, senior vice-president of cargo for the Americas at handler Menzies Aviation, expects volumes “to bounce back with a vengeance very soon”, and he is bullish on the prospects for second-tier gateways.
Although Rickenbacker airport’s cargo growth accelerated during the pandemic, LCK’s Schreiber points out that the rise of cargo for Rickenbacker was well underway long before the pandemic, with its international volumes expanding by around 60% from 2012 to 2019. On top of the regular cargo charters that the airport has handled for years, it secured scheduled B747F flights by Cathay Pacific, Emirates and Cargolux, which have continued through the pandemic.
Meanwhile, traffic levels have held up relatively well at Alabama’s Huntsville International Airport (HSV), which among other things has been a long-term air cargo hub for freight forwarder DSV – and before its acquisition by DSV, Panalpina. HSV’s air cargo volume for 2022 was slightly over 140 million lbs. (63,000 metric tonnes), compared to 132.6 million lbs. in 2021. This amounted to a 5.6% increase in air cargo volume at HSV. Some contributing factors to the volume increase include additional cargo flights controlled by Kerry Logistics and the expansion of its Brazil service from Huntsville by DSV, the airport’s operator says.
Trade-offs for forwarders
For freight forwarders, the choice of metro versus secondary airports involves trade-offs in terms of speed, costs, and network options. Flexport has no plans to use alternative gateways, preferring to slot its freighters through major hubs, says global head of air freight Neel Shah. He cites a more advantageous cost structure and a preference to operate in a location where most of the firm’s imports and exports are.
“Getting exports from a place like Pittsburgh can be challenging,” he remarks.
EFL’s Rosen, on the other hand, favours alternative airports, where forwarders are in a better position to control their own destiny. “Other than cost, there is no negative. If customers are happy to pay the higher costs, I’d be happy to move all my traffic to alternative airports,” he says, adding that some customers insist on using the dedicated service.
Speed of flow is one major benefit. Asok Kumar, global head of air freight for DB Schenker, says cargo can be on a truck within 2.5 to 3 hours after touchdown at some alternative gateways.
Aircraft turnaround speeds
Air cargo consultancy Strategic Aviation Services International (SASI) has conducted studies for various clients on savings at alternative gateways. Landing and taking off can be performed within 50 minutes – compared to up to 90 minutes at major hubs. At a rate of $10,000 per aircraft block hour, this translates into considerable savings over a year that could free up time for two or three extra flights, says president and CEO Stan Wraight.
On top of this are the costs of higher fuel consumption spent in holding patterns before landing at a busy hub and on the ground, where the time for a plane to taxi can be 33% less at a cargo airport. Fuel burn at a major hub can be three times as high as at a second-tier airport, SASI found.
On balance, a carrier could save between $3 million and $4 million over a year on costs by using an alternative gateway, says Wraight, adding that the CO2 footprint could be 3,000 tons lower over a year with a B747F running four times a week.
Land to expand
Most major gateways are running out of capacity and have no land to expand, notes Kent Hindes, senior director and air freight lead of commercial real estate services firm Cushman & Wakefield. Many also have cargo facilities built over three decades ago, he adds; and doing upgrades and incorporating environmental aspects there are impossible without tearing something out. It is easier to shift to a second-tier airport and have a new facility there, he says.
Chicago Rockford International Airport (RFD) completed the construction of a 50,000 sq ft (4,500 sqm) cargo building in January. “The next focus will be Building 4. That will potentially be 400,000 sq ft,” says Zach Oakley, the airport’s deputy director of operations and planning.
Before the end of January, Menzies signed a 10-year lease for Rockford’s newly finished building. Weir expects the facility to come onstream by July. “We plan to grow new business and attract scheduled operations,” he says.
Illustrating Menzies’ positive attitude to secondary gateways, Menzies has won the tender to run the new 150,000 sq ft cargo building that is currently taking shape at Philadelphia International airport, and Menzies will also set up shop at Baltimore Washington International. Weir sees promising potential in both locations.
“A lot of pharmaceutical and life sciences companies gravitate towards Philadelphia. Baltimore has a lot of charter operations,” he says.
One player that is moving to get a lot of smaller airports into the game is Burrell Aviation. Among projects that it signed recently are Lincoln airport in Nebraska, Baton Rouge Metro airport and Colorado Springs. In Nebraska, Burrell is going to invest $65 million to develop 210,000 sq ft of cargo facilities, while its commitment at Baton Rouge calls for the lease and development of a 53-acre parcel with runway access to turn the airport into a hub for air cargo and other aviation-related activities.
Burrell’s strategy is based on the growth of e-commerce to allow regional airports with available facilities and logistical support to compete successfully with larger, more congested airports. However, in many cases these projects are not limited to cargo but aim to pursue other aviation-related opportunities as well, such as aircraft service and maintenance, notes Hindes.
“Instead of doing MRO at Denver, why not do it at a place like Colorado Springs that’s a heck of a lot cheaper?” he asks.
Burrell has struck up partnerships with handling firm Alliance Ground International, Lemartec Construction, and Perez and Perez Architecture and Design to offer comprehensive packages for facility planning, construction and operation. It has also retained Cushman & Wakefield to market its portfolio of airport properties. Hindes estimates that the pre-development efforts by Burrell and its partners can reduce the development cycle by as much as 18-24 months.
One challenge for aspiring cargo gateways has been the development of backhaul traffic to develop better economics and reduce costs for freighter operators, forwarders and shippers. After years of hosting inbound charters feeding the distribution centres of major fashion brands and retailers, Rickenbacker saw exports take off nine years ago after Cathay Pacific had started regular freighter flights to the airport.
Over the past few years, Schreiber has witnessed a growing number of bio-medical firms set up shop in the area, which prompted the development of a handling facility for pharma traffic, which is nearing completion.
Another boost is coming from the rising trend among US firms to relocate part of their sourcing to North America. Intel is investing $20 billion in a new production facility in Ohio, which is about a 40-minute truck drive from Rickenbacker. Presumably this will draw in a number of tier-one and two suppliers.
“Intel will manufacture chips here for both domestic and international markets. And the export lanes are almost the same lanes in which our fashion comes in. It’s great backhaul,” says Schreiber.
This is likely to generate more scheduled traffic. On top of charter programmes by the likes of National and Kalitta, Rickenbacker has scheduled freighter services by Cathay, Cargolux and Emirates.
EFL has been running freighter flights through the airport for over ten years. Elsewhere in the US it uses the major passenger gateways to move its freight.
During the pandemic it tried out another aspiring second-tier airport, but that experiment did not prove very successful, recalls Rosen. “They took on more freight than they could handle,” he says.
Willingness to invest
Feedback from industry insiders indicates that aspiring cargo gateways that succeed have experienced cargo teams, and they are willing to invest. Rockford, for example, is gearing up to launch a cargo community system. Progress on this was slowed by the development of the new cargo facility, but with this completed the focus can shift to the electronic platform, which is now expected to come onstream later in the year.