Integrated business

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Despite the market’s continuing revival, analysis of the top US cargo airports confirms that it is a market dominated by integrator hubs and major international passenger airports, with few dedicated domestic US all-cargo flights these days outside of the integrator systems. And the brief attempt last year by Amerijet to re-introduce non-integrator dedicated all-cargo domestic flights suggests that this is likely to remain the case for the foreseeable future, even if the revival of the US economy continues to drive growth in the nation’s air freight market overall.

While total full-year air freight tonnages grew by below the global average at just over 3% in 2014, this growth was weighed down by the listless development of the region’s domestic air cargo traffic, which grew by little more than 1%. However, international traffic to and from North America’s airports expanded by almost 6% in 2014, right up there with the global average for international traffic growth last year.

Ranked by total tonnage reported to Airports Council International North America (ACI-NA) for calendar year 2013, eight of the US top twenty cargo airports were national and regional hubs for integrated carriers FedEx and UPS, one is DHL’s US hub in Cincinnati and another is a transpacific technical stop, Alaska. The balance of major US cargo airports are U.S. passenger hubs with varying degrees of international gateway service. Three US airports – Dallas/Ft. Worth, Newark and Philadelphia – host integrators’ regional hubs and major passenger hubs.

Integrated Carrier Hubs

With more than 4.1 million metric tonnes in 2013, Memphis International Airport (MEM) led all U.S. airports with nearly double the annual tonnage of UPS’ main hub in Louisville. Globally, Memphis trails only Hong Kong International Airport. Especially since Delta Air Lines closed a passenger hub long operated by Northwest Airlines, MEM’s prominence has been almost entirely dependent upon a single US all-cargo airline, while Hong Kong has a diverse portfolio of international passenger airlines supplementing its freighters. Memphis’s reported 3% annual growth through November 2014 will not overtake Hong Kong, which ended 2014 with 6% annual growth for the year.

Like Memphis, UPS’s main hub Louisville owes its cargo prominence to only one carrier. While theorists extol the virtue of diversified portfolios, FedEx and UPS offer far more reliable balance sheets than most US passenger airlines in many years. Having lost passenger hubs, Memphis and DHL hub Cincinnati – a former hub for wholly-owned Delta subsidiary Comair until its termination in late 2012 – are evidence.

Operators of Indianapolis International Airport (IND) leveraged FedEx’s secondary hub in successful efforts to support international all-cargo service from Cargolux, which added IND on flights from Chicago O’Hare to Europe. Focusing on time-sensitive life science sectors for shipments in a region that experiences a harsh winter, Cargolux recognized that the same 24-hour services (such as snow removal) supporting FedEx’s massive hub operation would meet their own requirements.

FedEx’s northeastern hub at Newark (EWR) gives the integrator an alternative to busier JFK International Airport and the airport is also a passenger hub for United Airlines. Similarly, UPS’s south-central hub is located at DFW – an American Airlines passenger hub – while its northeastern hub in Philadelphia (PHL) is a passenger hub and long-time largest international gateway of US Airways (absorbed by American Airlines). The integrator hubs contribute greatly to domestic tonnage while belly capacity offered by passenger airlines at these gateways is invaluable to time-sensitive international shippers. While EWR and PHL are heavily dependent upon their integrator and passenger hubs, DFW has succeeded in diversifying its carrier base by adding multiple Asian freighter operators. Of the integrator hub airports, DFW relies least on integrators. These international gains have been particularly significant through a period of widespread decreases in domestic tonnages.

With superior economies of scale, proprietary air and ground networks, as well as critical allied services like ground handling and deicing, FedEx and UPS are able to support hubs at alternatives gateways. Examples include FedEx’s regional hubs at Fort Worth Alliance Airport (AFW) in the same metro as DFW and its West Coast hub at Oakland International Airport (OAK) – across the bay from San Francisco International Airport. Similarly, UPS’s regional hubs at LA/Ontario International Airport and Chicago Rockford International Airport provide uncongested access to the massive Southern California and Chicago-area markets, respectively. While OAK and ONT serve millions of passengers annually, AFW and RFD are almost entirely cargo and general aviation airports.

Since 1996, UPS has operated its smallest regional hub at Columbia Metropolitan Airport (CAE) in South Carolina. Modest even at its peak annual level, CAE ended 2013 with a little more than 60,000 metric tonnes of total cargo. FedEx operates its Mid-Atlantic hub at Piedmont Triad International Airport (GSO) in Greensboro, North Carolina. Local and state governments provided FedEx with generous incentives to attract the hub but its growth has been modest, with the airport’s total cargo having grown only 9% since the hub opened in 2009.

Among US airports hosting FedEx and UPS hubs, only Memphis, Louisville and Greensboro enjoyed positive net growth between the peak year of 2000 and 2013 (inclusive). Other regional hub airports commonly suffered double-digit losses – common to FedEx hubs Indianapolis (-15%), Newark (-40%), Oakland (-26%) and Alliance Fort Worth (-55%), as well as UPS hubs Dallas/Ft Worth (-35%), LA/Ontario (-10%), Philadelphia (-32%), Chicago/Rockford (-37%) and Columbia (-55%).

While the integrators are not the only cargo carriers at these airports, the integrators account for at least 90% of total annual cargo at most of these airports. The decreases coincided with huge market share gains by the integrated carriers but during a period of extreme modal diversion from air to truck transport for purely domestic shipments, as well as for the domestic segment of international shipments. While regional hubs have fared better since 2009, more years of growth will be required just to return to 2000 levels.

Too dissimilar for easy inclusion among the other integrator hubs, Anchorage International Airport (ANC) has long been a technical stop for refueling, crew changes and catering of transpacific freighter operators. Alaska’s airport operators and economic developers have long pursued an expansion from these functions to sorting and distribution operations by Asian carriers, but only DHL, FedEx and UPS use ANC for significant hub-style distribution.

Once a major integrated carrier in the US, DHL no longer serves the domestic door-to-door consumer market but focuses upon international shipments drawn from a network of U.S. feeder cities connected by truck, airline partners and contract carriers to its Cincinnati/Northern Kentucky International Airport (CVG) hub and its access to DHL’s unrivalled global network. While CVG experienced impressive 52% growth from 2000 through 2013, DHL acquired the former Airborne Express and first moved its hub to Airborne’s former base in Wilmington, OH before restoring CVG as its US hub.

US international gateways – excluding integrator

hub airports

Ranked #4 through 7 consecutively among U.S. airports in total cargo, Miami International Airport (MIA), Los Angeles International Airport (LAX), Chicago O’Hare International Airport (ORD), and JFK International Airport (JFK) trail MEM, SDF and ANC in reported total tonnage but reign supreme in international cargo network connectivity and carrier mixes.

No other gateway so dominates a region as MIA does Latin America. Many Latin American markets have direct freighter service to no other US market but MIA, and Mexico is the only major market in the region for which MIA is not the #1 gateway. MIA’s share by market commonly exceeds 80%. Long targeted by the likes of Dallas/Ft. Worth and Atlanta, MIA experienced 18% growth in total tonnage between 2000 and 2013 (inclusive) while most of its rivals endured double-digit decreases. The airport’s share of total cargo that is international (87%) is higher than any other US gateway. MIA has unique mixes of passenger and all-cargo carriers and is the Latin American gateway for DHL, FedEx and UPS. Perhaps most impressively, its dominance was little affected by the loss of its former largest cargo carrier Arrow Air in 2010 and a more recent inactivity by Centurion Air Cargo. Other carriers fill the void and seem to consider no other gateway in which to do so.

The next three largest gateways – LAX, ORD and JFK – jockey between them for the #1, 2 and 3 rankings for almost every major Asian and European trading partner. While these are larger trading partners than the Latin American markets that MIA dominates, some of the Asian and European trade lanes are served by a dozen or more US airports.

LAX gains advantages from Asia-based allied trade services (banks and forwarders) as well as some exclusive transpacific capacity. LAX also hosts a unique FedEx ‘Metro Hub’ serving Southern California (basically, Greater LA) that connects directly with MEM and handling traffic volumes that are equivalent to more than half the annual tonnage of FedEx’s regional hub at OAK, which serves the entire Western region except LA. As a result, LAX has more domestic tonnage than any of its rival international gateways.

ORD has added several international carriers in recent years, helping the airport to 4% growth during a period of losses for many rivals. ORD passed JFK in total tonnage but slightly trails in international tonnes. About 72% of ORD’s total cargo is international. Even with two U.S. passenger hub carriers in American and United, domestic tonnage at ORD is limited by the presence of two (IND and RFD) nearby integrator hubs. ORD has used the relative slow growth of the last decade to initiate ambitious cargo facility improvements. DHL Global Forwarding opened a new $35 million dedicated facility at ORD in early 2015 and a $200 million Northeast Cargo Facility is planned by private developer Aeroterm. Also in late January 2015, CEVA announced an expansion to its Chicago operation near ORD that adds a new 208,000 sq. ft. multi-use facility adjacent to its existing facility.

While JFK International Airport has completed a variety of cargo planning exercises, the physical improvement and development of new cargo facilities has lagged those of ORD. In 2014, New York Governor Cuomo suggested moving freighters from JFK to other regional airports in order to relieve congestion. The backlash from many of JFK’s largest cargo users illuminated that while the cargo community is profoundly upset – an emotion for which New Yorkers have a singular gift of expression – with the current operating environment at JFK, they are not inclined to go elsewhere.

In the next tier of international gateways, Hartsfield-Jackson Atlanta International Airport (ATL) finished 2013 with about half the total annual tonnage of JFK and one-third that of MIA. Apart from the UPS regional hub at DFW, ATL largely mirrors that airport’s recent cargo successes and challenges. Anchored by Delta Air Lines’ largest passenger hub, ATL has attracted enough foreign carriers that international cargo passed domestic cargo in the airport’s total cargo mix in 2006. The international gains were not enough to offset domestic losses that left ATL with a 29% drop in total cargo between 2000 and 2013 but have cemented the airport’s focus as an international gateway.

Houston’s George Bush Intercontinental Airport (IAH) achieved impressive growth during a period of losses for most of its presumptive benchmark US airports. A former Continental Airlines hub now operated by United with extensive connections to Latin America, Houston enjoys symbiotic relationships with key oil and natural gas-oriented markets around the world. Not surprisingly, IAH is consistently an expansion priority for Middle Eastern carriers. IAH’s operators aggressively pursued expansion of its dedicated cargo apron and warehouse facilities, such that no other US gateway likely has as much surplus capacity of relatively new development.

As LAX solidified its dominance as the region’s international hub, San Francisco International Airport (SFO) suffered the largest drop (58%) in total tonnage since 2000 but remains a firmly established transpacific passenger gateway with at least the benefit of belly capacity. While Seattle-Tacoma International Airport (SEA) also suffered a double-digit (36%) cargo drop for the period, it has been on an upward trajectory since 2011, with Delta Air Lines’ seeming commitment as its regional transpacific gateway filling gaps for direct service to several major Asian markets. Phoenix Sky Harbor International Airport (PHX) continues to rank just inside the US top twenty after a 26% decrease but airport operators have mostly seemed dedicated to pushing cargo operators to other alternatives.

International cargo at Washington Dulles International Airport (IAD) first exceeded domestic in 2006 but the market’s international needs are entirely met by belly capacity. IAD serves a region stocked with businesses involved in life sciences – a key growth area for the air cargo industry – but is presently more of a research than production hub.

Beyond The Top Twenty

Since 2000, US airports have witnessed the end or absorption of numerous once-powerful air cargo entities. In the 1990’s, even medium-sized cargo airports hosted Airborne Express, BAX Global, DHL, Emery Worldwide, FedEx and UPS, as well as a variety of belly cargo carriers in their own dedicated cargo space. Now, FedEx and UPS are customarily the only freighter operators at the majority of top 100 U.S. cargo airports – especially outside the top twenty – and a string of belly cargo facilities have been contracted into a single third-party cargo handler’s warehouse.

In spite of the demise of these carriers and even in spite of the tonnage losses documented among most of the integrator hubs and international gateways detailed in the preceding sections, some US airports continue to target the imagined “runaway cargo growth” and “overflow” from legacy gateways that for the first time in memory may have available cargo facilities to lease. Perhaps most telling was the 2014 experience of airports in Columbus, Ohio (Rickenbacker) and Reno, Nevada that briefly were hubs for an experiment by Ft. Lauderdale, FL-based Amerijet International, which sought to provide the kind of domestic all-cargo lift once offered by some of the now-extinct carriers. After two months, Amerijet returned to its more traditional Caribbean-focused business and the US airports had another cautionary tale on their hands regarding the challenges of air cargo development.

Michael Webber is the president of Webber Air Cargo, Inc., a consulting firm primarily serving cargo planning needs of airport operators and civil aviation authorities. Based in Austin, Texas, he has completed multiple projects in the US, Asia, Africa, the Middle East and Latin America, providing consulting services to a variety of airports, international air carriers, and their cargo handling units.

You can contact him at or by phone/fax on +1 913-660-0701