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Lambert-St. Louis officials gamble on cargo

By Hpanchal on September 27, 2011

A China Eastern Boeing-777 from Shanghai is scheduled, as of this writing, to touch down at Lambert-St. Louis International Airport on September 23.

This is possibly the most significant sign of progress in a four-year bid to turn the currently under-used airport into an international cargo hub. Now, we are left to wonder if the city’s effort in attracting a Chinese carrier has been worth the financial concessions, political fallout and risk taken in making the initiative successful.

Trying to attract air cargo flights to underutilized Midwestern airports is not new. Officials in Rockford, Ill.; Fort Wayne, Ind.; and Columbus, Ohio, continue to implement aggressive marketing campaigns in the hope of establishing major hub operations.

Despite these failed attempts at attracting a flight from China, Lambert-St. Louis International Airport does have past experience with vast air cargo operations. Veteran freight forwarders and airline employees likely remember the TWA days, when the former airline ran extensive passenger and cargo services through its St. Louis hub.

Brandon Fried

Brandon Fried

Even though the TWA flights were successful, the carrier’s history with the airport cannot be used as a basis for predictions about the current proposed services. Circumstances are significantly different today, creating an uneven comparison between the two services. Cargo on those TWA flights came from many cities throughout the airline’s system — not just St. Louis.

On the other hand, if local businesses are able to fill the China Eastern flights, it will be affordable for both airlines and forwarders to serve Lambert-St. Louis International Airport. The airport plans to waive its landing fees and facility rental charges for the first 18 months.

If all goes according to plan, the Missouri legislature will have voted on a $360 million Aerotropolis tax credit package by the end of September. The package will provide subsidies for forwarders to export from Lambert and will also establish new tax credits to build warehouses around the airport. Passage of that bill will allow forwarders to enjoy a savings of $0.35 per kilo for exports.

If the tax credit package fails to arrive, however, both Chinese and St. Louis officials fear the flights will unfortunately discontinue as well.

St. Louis officials understand the risks associated with attracting China Eastern, especially when faced with a $360 million public financing package that will further bankrupt the already financially ailing state. FedEx, UPS and DHL already have committed to extensive operations at hubs in Memphis, Louisville and Cincinnati. As such, assuming those cities will be able to help support the Lambert-St. Louis China flights would probably be a severe miscalculation at this point.

Many factors have to be considered when establishing service to China. For example, if St. Louis-area freight forwarders pull volume to China from their committed Chicago departures, will the space still be there should the St. Louis flight prove unsuccessful? Moreover, the evolving nature of the venture depends upon community support to continue. Some contemplate whether this is too expensive for the state of Missouri and forwarders to endure.

Despite the inherent gamble involved for St. Louis and the state, those involved can take comfort in the freight forwarders’ ability to adapt to new circumstances and seize opportunities quickly. With preferred flight times, rates and other economic incentives, forwarders outside St. Louis may be attracted to the China Eastern flights as a way to save money and improve performance to the world’s most active market.

The China Eastern flights to Lambert-St. Louis could have a big payoff; success will generate jobs and increased tax revenue from businesses taking advantage of the direct service to China. Chinese officials apparently agree and have spent close to three years in protracted negotiations with the Lambert-St. Louis representatives.

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