Spring 2018 Airport Report: Growth Spurt

• Originally published at: http://www.caasint.com/spr18-airport-report

After a decade of little development, North America’s airports have resumed investing in expanding and updating their cargo facilities, writes Ian Putzger.

After a long hiatus, cargo facility development in North America looks poised to take off with a vengeance. The Port Authority of New York & New Jersey recently announced plans for a 346,000 sq ft (32,000sqm) terminal at JFK airport, a $132 million project flanked by a $62.2 million investment in taxiway upgrades to give modern freighters access to the site.

Ray Brimble, CEO of aviation facility developer Lynxs, has seen requests for proposals (RFPs) from a number of airports lately, including Washington Dulles, Philadelphia and Spartanburg. “It’s probably more active than I’ve seen in the last ten years,” he comments.

A lot of airports, including major hubs, are near capacity in terms of cargo infrastructure, observes Mike Duffy, CEO for the Americas at Worldwide Flight Services. The handler has signed a 15-year lease for the new building at JFK, which is projected to opening in the fourth quarter of 2020. “Almost all facilities we operate there are at capacity,” says Duffy.
 

Record throughput

Record throughput in 2017 has also strained many airports. “It’s been a challenge coping with the volumes. It’s been a challenge because growth has been so strong,” remarks Emir Pineda, manager for aviation trade and logistics at Miami International Airport.
The situation has been aggravated by a lack of building activity in recent years, notes Brimble. “I think we’re getting ready to go through a new cycle,” he reflects.

Shawn McWhorter, president for the Americas at Nippon Cargo Airlines, hopes that the new development at JFK will be part of a broader plan for cargo. An isolated oasis with poor access would be of limited use, he says.

Few airports in North America have as much control over their cargo area as Vancouver, which bought out the leases in 2014 to develop the cargo village as a competitive advantage. Likewise, few have as much room for cargo expansion as Dallas/Fort Worth. For Seattle-Tacoma, which saw tonnage rise by an estimated 16.2% last year, space constraints are a serious challenge, confirms Tom Green, senior manager for air cargo. The last two vacant spaces were taken up last year.

“We are looking at renovating and modernising our cargo facilities,” says Green. In the wake of some passenger facility work, some space may become available for redevelopment. In addition, the authority is looking to leverage facilities adjacent to the airport, he adds. The airport authority is working on its master plan, which should be ready before the end of the year.

Space is also an issue at Miami, which forecasts volumes to grow to 4.5 million tons in the next 20 years, way beyond its current capacity of 2.5 million tons. With no room to expand, the landlocked airport is looking at the possibility of multi-storey structures like the HACTL terminal in Hong Kong, says Pineda.

Facility development is part of the airport’s redevelopment programme for cargo that also calls for taxiway expansion and additional ramp space to park freighters.

Legacy of the GFC

The decline in demand in the wake of the global slowdown took the pressure for facility development off many airports. At DFW, unfettered by space constraints, the airport authority responded to the dampened momentum with a strategic review of its options for growth and determined that its location and network made Dallas an excellent connection point for cargo flows between Latin America and Asia.

A logical conclusion from this was to focus on perishables and establish cool chain facilities, says John Ackerman, executive vice-president for global strategy and development. In September, DFW opened a 43,000 sq ft (4,000sqm) building with multiple temperature zones.

Houston’s Bush Intercontinental Airport also added a temperature-controlled facility to its arsenal back in 2009. It handled about 18,000 metric tons of perishables last year.

Lynxs developed the cargo facility at Houston. It came on stream at the right time, just as produce exports from Mexico to Europe, the Middle East and Asia were starting to come up to Houston in transit. Volumes increased dramatically, recalls Brimble.

“It feels a bit like a gold rush now. Everybody feels a need to have a massive perishables facility, but it’s not a panacea. This is not for everybody,” he cautions.

 

Special commodities

Developing niche market opportunities for special commodities has been a strategic plank for Houston, points out Luis Aviles, senior marketing specialist for air service development. The slump in oil prices hit cargo traffic and added momentum to plans to diversify the commodity mix, he adds.

The pharmaceutical sector is one major target there. “We are working with the International Air Transport Association to obtain the CEIV pharma certification for Dnata, which operates the on-airport perishables facility,” notes Aviles.

Elsewhere in Texas, the perishables facility at Dallas contains two dedicated pharma chambers. “Pharma is part of our perishables strategy. It is a big push for us,” says Milton De La Paz, vice-president of airline relations at DFW.

“The next step for us is to create a CEIV community. American and AirBridge are already certified,” he adds.

Pharmaceuticals are also a big focus at Miami, which saw some $4.3 billion worth of pharma traffic pass through the airport last year. “It was an advantage for us to have the temperature control infrastructure already. It’s easier to designate an area in an existing facility than start from scratch,” remarks Pineda.
 

CEIV’s first wave

The first wave of companies obtaining CEIV listing received their certificates last year, reports Dimitrios Nares, section chief for marketing at Miami. The airport authority itself is taking an active role in the development of CEIV. Together with Brussels Airport, it launched the Pharma.aero initiative for airports with CEIV-approved communities to work together, which has now grown to 21 members.

Miami’s focus on produce and flowers remains undiminished, though, stresses Pineda. “Perishables have been our bread and butter,” he says, adding that 67% of the perishables that are flown into the US pass through Miami.
 

Sea-air programme

In a bid to generate new flows of perishables, a programme was launched last year with the blessing from US Customs and Border Protection to develop sea-air traffic from Latin America to markets in Europe. For certain commodities out of certain countries that arrive by ship in Florida and are subsequently trucked to Miami for flights to Europe, customs waive the inspection between port and airport, resulting in faster transit times.

According to Pineda, the trials so far have been encouraging. “I think we can broaden this in the future. We saw traffic to Europe grow and evolve in 2017. I know there is tremendous interest to go to Asia,” he says.

The programme is only for all-cargo aircraft; passenger carriers are not eligible. Miami has some Asian freighter operators, so it would be viable to extend the scheme to flows from Latin America to Asia. Meanwhile, DFW and Houston, which are both targeting traffic between Asia and Latin America, are hoping to attract a freighter operator from South America.

“The Air Service Development team sees the need to develop freighter service to and from Latin America and offer diversified distribution channels to shippers. The perishables facility is a success with bellyfreight or imports arriving at Houston by truck from Mexican markets, but the challenge is to establish that continued freighter operation to/from Latin America,” remarks Houston’s Aviles.

DFW’s Milton De La Paz says bringing in a freighter operator from South America is “a big focus for us”, adding: “The big challenge is the backhaul, and that’s where Asia-Latin America comes into play. We’re talking to Asian carriers to consolidate their Latin American freight here.”
In Vancouver, Raymond Segat, director of cargo development at Vancouver airport authority, also sees good opportunities in traffic between Asia and Latin America. And, like the US gateways in pursuit of this business, Vancouver also has ambitions when it comes to perishables. “A perishables gateway is one of our aspirations – including pharmaceuticals. Pharma and perishables are significant growth opportunities,” says Segat.

Vancouver has not built up much commercial freighter traffic. Air Canada’s growing international network has been a major vehicle for growth, alongside belly lift of Asian and European carriers. Nevertheless, freighters move a large chunk of the airport’s volume. Whereas most large airports have been happy to see the integrators go to smaller airports nearby, Vancouver has actively pursued them.
Their presence should ensure robust growth in e-commerce traffic for Vancouver. Over in Seattle, the start of dedicated freighter flights for Amazon Prime plus the migration of DHL from Boeing Field to Sea-Tac, was a major driver for the airport’s growth in traffic in the past year.
Brimble warns that the rise of e-commerce will bring infrastructure challenges. While this will bring issues with facility design, he sees a bigger headache on the other side of the fence. “The big choke point I see is landside. It will require different vehicles, and a lot more of them. This can lead to bottlenecks and traffic jams,” he reflects.