Anchorage: Air Crossroads of the World

The “new” Anchorage, a vigorous hub for air cargo in the past, is quickly becoming a vital link to China and global commerce.

The investment from third party developers such as UPS and FedEx is nearly $121 million of the ongoing operations. FedEx is planning on a $30 million contribution of that in anticipation of the A380; $27 million of that will go for aprons and $3 million to additional investments. FedEx has informed the airport that Anchorage and Memphis will be the first two airports in the United States that the A380 operates.

“We are putting in three spots, two of those will be A380 and that cost is going to be around $13 million,” Plumb says. “Just yesterday, after talking to UPS, it looks like they’re going to put in an additional $25 to $30 million. So again we have apron works going on but there’s a great deal of private investment going on here.” The largest investment for the airport is going into a location labeled the “postmark development area.” Alaska Global Logistics and Development (AGLAD) is going to put in nine spots estimated at $55 million.

Unlike any other large airport in the United States, Ted Stevens International Airport’s competition is global and the important factor is the payload versus range equation. “For example,” Plumb says, “if you are flying from Oakland to Shanghai, that’s approximately 6,103 miles carrying 65,000 kilos. If you stop in Anchorage, its 6,157 which is 144 miles difference but you can carry 110,000 kilos; the difference being 45,000 kilos. At $2 a kilo, that’s $90,000 kilos four times a day with four aircraft departures. Multiply that times five times a week, 50 times a year and there is quite a savings.”

According to Plumb, the airport uses an econometric model and believes fuel prices will be stabilized and become competitively neutral. Of course the model does not factor in another horrific event such as 9/11. “Any of those things can happen, but this is a cyclical business,” Plumb says. “However, over the next five years we feel comfortable that 3 to 4 percent is a fair forecast of the increase in activity per year at this airport.”

The Future Bodes Well

China continues to grow. We are watching Japan come back now. So between both countries, Plumb believes business at the airport will continue to be very productive. And though it’s just a personal observation, he comments, “If things in China start to mature and prices go up, I think you’ll watch the labor market move south to Vietnam … [the market] is very strong and I think that’s been reflected when [the airport] went to the markets to sell our bonds and we got an upgrade from all three rating agencies. So that is not only our position; it appears the markets and the rating agencies have reflected this too.”

The airport has and will continue to make investments to capitalize on the globalization of aviation. “It’s our intent to remain competitive, let the airlines know about the efficiencies here and let them also capitalize on that,” Plumb says. “As a result of that, [the airlines] have committed to make investments here and they’re comfortable that we are fairly stable, and they’re going to be able to get a good return on investment and advertise their assets in the future.”

In a recent visit to the “state-of-the-art” cargo operations at Shanghai Pudong International Airport Cargo Terminal Co., Ltd (PACTL), Plumb observes, “[It] is a very unique way of doing it. I think the only ones that correspond to that mode of operation that I have seen personally in the U.S. is the integrators like FedEx and UPS.”

To speed up export cargo processing, PACTL is the first handling terminal to introduce dedicated warehouse space within its facilities to forwarding agents for palletizing, which is equipped and supervised by PACTL, providing the same security, safety and handling equipment for cargo acceptance and build up. “[PACTL] literally handles all the customs brokerage, storage, quarantine, hazmat … they do it all,” Plumb says. “It’s a huge operation—as a matter of fact, at the conference I attended, which was the Payload Asia Conference, Ron Mathison, director and general manager of Cargo Cathay Pacific, indicated that the combined airports at Shanghai would in fact surpass Hong Kong in total tonnage in about 10 years.”

In the future, Plumb feels the more economies of scale are understood and the more we continue to see consolidation in the freight forwarding business, the more we will see a consolidation and an efficiency of vertical integration.

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