Alternative Gateways

The fundamental truth about alternative gateways is it's best to be an alternative when and where one is actually needed.

Michael Webber

nder seemingly ideal conditions, the development and expansion of alternative air cargo gateways is challenging. While aspiring gateways can cite models, too often would-be 'champions' have failed to fully appreciate specific conditions supporting those successes.

As deluded thinking goes, "we're going to start with international" makes a good bookend with the equally fallible "we've been unsuccessful with passengers but cargo should be easier." Unfortunately, U.S. airports unable to justify flights to Louisville or Memphis are likely to find Luxembourg and Shanghai no less challenging.

A market's ability to garner and sustain international service depends upon a variety of inter-dependent factors.

"We have no congestion!" Airports precariously make this pitch without recognizing what the forwarder or carrier may be hearing is "nobody else will come here but we think you should." For all the complaining about congestion at Miami International, New York Kennedy International and Los Angeles International, diversification has rarely amounted to more than new service at other major hubs. Beyond West Coast beachhead LAX, for example, Asian carriers added frequencies at Dallas/Ft. Worth International and Hartsfield-Jackson Atlanta International, neither of which readily qualifies as an underdog.

For decades, other would-be Latin American gateways have cited congestion, claiming 'everyone wants out of overcrowded Miami.' Yet, the lukewarm distillation has been largely attributable to passenger hub carriers' network expansions in Latin America - Delta Air Lines from Atlanta, American Airlines from DFW and Continental Airlines from Houston Intercontinental. Major Latin carriers have not abandoned Miami appreciably - not for other hubs, let alone smaller airports seeking time-sensitive perishables.

In spite of congestion, as well as frequently higher airport costs and land rents, traditional gateways triumph. Connectivity - sheer volume and diversity of frequencies, destinations and carriers - is key to garnering consolidations that also attract competition in allied services, such as ground-handlers and trucking. Non-American air cargo carriers don't have comparable U.S. domestic networks so they interline with U.S. carriers and rely on allied service providers - extensively trucking - for interior transport. Therefore, the flow of international carriers from one hub to another is unsurprising. Both cause and effect, this service superiority attracts shippers and forwarders whose demand then supports even more service.

"We just want their freighters!" Alternative airports often talk lightly of splitting operations of combination carriers flying both passenger and freighter aircraft. In the United States, this has meant mostly non-U.S. carriers that have developed the U.S. market with widebody capacity, adding freighters as demand warranted. Belly capacity allows these carriers to sell additional frequencies and network destinations that freighters might not justify on their own. This capacity serves smaller communities as well as major segments with chronic imbalance in directional volume. For some, freighter operators must either triangulate service or maximize one-way revenue, while belly carriers can better tolerate imbalances in cargo by generating round-trip revenue from passengers.

Combination carriers have relationships with customers and allied service providers often based on long-standing operations and cumulative capacity at traditional gateways where they also often have fixed investments in legacy facilities and may co-locate administrative functions. For all these reasons, combination carriers are difficult to attract from traditional gateways.

All-cargo airlines are presumed to have greater operating autonomy than combination carriers but these airlines' principal customers often are a core group of freight forwarders, rather than thousands of individual shippers. Trading dependencies, these airlines are likely to "be glad to serve your airport - if the forwarders demand it."

Wet lease airlines fly on behalf of other carriers, seasonally when such service is not required year-round or occasionally for testing a route before carriers committed to their own equipment. ACMI clients largely determine routings, so an alternative airport's long runways and lack of congestion won't convince Atlas Air, for example, to tell its customer they're not going to LAX.

Forwarders rely on a mix of belly and freighter capacity. Consolidations gravitate to gateways where air options are greatest. Network offices merely feed those consolidations, mostly with trucks. Simply having a variety of forwarders in an area doesn't guarantee alternative gateways the critical mass required to support international operations. Local forwarder station managers have little autonomy in routings, when the company must satisfy volume-dependent block-space guarantees at major gateways.

Expressions of cooperation come easily at local cargo association luncheons but fall short of contractual commitments that might convince an all-cargo airline to redirect capacity. Instead of rallying a collective of competing forwarders, at Huntsville, Ala., International, forwarder Panalpina sustains dedicated international airlift.

A legitimate success story, this service inspires envy among airports larger than HSV, which ranked No. 66 in cargo among North American airports in 2006. Contrasting HSV's forwarder approach, both Nashville International and Indianapolis International have international air service based on high-volume shippers - Dell at BNA, Eli Lilly and a few other pharmaceutical companies at IND.

Integrated carriers have the network operating volumes and internal resources to try less obvious options. Integrated carriers can provide their own ground handling and deicing, which airlines with limited schedules would likely require from third-party vendors serving multiple customers.

In the United States, DHL's main hub is Wilmington, Ohio, and its Western regional hub is the former March Air Force Base in Riverside, Calif. Both sites as well as FedEx's regional hub at Ft. Worth Alliance International illustrate integrators' unique ability to anchor cargo airports. The FedEx regional operation is sufficient to rank Alliance No. 28 among North American airports. Tellingly, however, no other air carrier has followed FedEx from traditional gateway DFW, home also to UPS' regional hub.

"How hard can it be?" In addition to LAX, Los Angeles World Airports operates LA/Ontario International, which ranks among the top 15 U.S. cargo airports. ONT hosts regional air and trucking hub operations for UPS, as well as some of its China gateway activity. ONT has superior access to existing users of LAX and serves the desirable Inland Empire economy. ONT possesses a proven cargo track record, 24-hour availability, critical highway access and an enviable base of shippers and shared management with the traditional gateway. Developer Aeroterm is constructing the first phase of a one million square- feet of cargo facilities to accommodate operators unable to grow at LAX.

But even with LAWA's support, forwarders and non-integrated carriers have only registered interest in ONT as LAX approaches its operational limits.

With the disclosure that LAWA is a client of this writer, I cite this example to illustrate how much greater the challenge must be for airports lacking many of the resources behind ONT's efforts.

The vast majority of alternative gateways are integrator-based, including virtually every successful all-cargo airport. Alternatively, HSV greatly depends upon the commitment of a single forwarder, while Nashville and Indianapolis' international service depend upon a few very large shippers. Airport operators nurtured cargo growth but success was driven not simply by their ambitions but more by the specific needs of carriers, forwarders and shippers.

Too often overlooked, perhaps, the fundamental truth about alternative gateways is it's best to be an alternative when and where one is actually needed.

Michael Webber is president of Webber Air Cargo, a Kansas City-based business development consultancy. He has managed air cargo affairs for Airports Council International-North America and recently chaired the Airport Track of IATA's World Cargo Symposium.