Texas Airports Chasing Cargo Industry for Extra Revenue From Landing Fees

Worldwide air cargo has averaged 7 percent annual growth for the past 30 years.


D/FW AIRPORT -- Hauling almost anything imaginable, from monkeys and movie reels to cash and corpses, the passenger airline industry has found a way to pump profits through the belly of the plane.

It's an example of how competitive the $30 billion air cargo industry has become. Freight is going beyond boats, trucks, trains and all-cargo planes.

Airlines such as Fort Worth-based American and Dallas-based Southwest are aggressively selling the unused crevices next to passengers' luggage in the cargo hold below their feet.

And as a result of the heightened cargo competition, airports across the country, including Dallas/Fort Worth Airport and Fort Worth's Alliance Airport, are battling for the extra revenue that comes from larger landing fees because of heavier planes and expanded warehouses.

D/FW Airport saw its latest coup in the cargo industry enter the market Saturday night when Cathay Pacific Airways, one of the world's largest air-cargo carriers, landed its first flight at the nation's ninth-busiest airport for cargo.

The cargo industry that airports are chasing has quietly emerged as a more prominent business over the past few years, according to industry analysts.

"I think airports are taking a whole new perspective on air cargo," said Tom Phillips, a Seattle-based consultant who helps airports recruit cargo carriers. "Up until about five years ago, they didn't really focus on it much."

Worldwide air cargo has averaged 7 percent annual growth for the past 30 years, said Robert Dahl, project director for Air Cargo Management Group, an industry consultant.

In 2004, though, it saw 13 percent growth. This year is on pace for a less-impressive increase of 3 percent, Dahl said.

Regardless, passenger airlines are chasing the growth.

"It's a very exciting but unheralded, unglamorous side of the business," said Dave Brooks, president of American Airlines Cargo, a division of AMR Corp. that saw its revenue grow 12 percent to $625 million from 2003 to 2004.

"Over the next 10 to 15 years, air cargo will grow faster than passenger demand," Brooks said. "If you're a carrier like American, you need to make sure there's a place in your portfolio because it's a growing segment of your business."

It may be growing, but right now it's still a small slice overall for passenger airlines.

Air cargo represented 3 percent of total revenue for U.S. passenger airlines in 2004. Southwest pulled the biggest cargo gain last year, going to $117 million from $94 million, a 24 percent jump, according to Cargo Facts, an industry trade journal. But it's only 2 percent of Southwest's total business. AMR's total 2004 revenue was $18.6 billion.

"It's a small percentage of our total passenger revenues, but it's a very profitable slice of the pie," said Dave Hinderland, senior manager of cargo sales for Southwest.

Every little bit helps, airline executives said. With high fuel costs and fierce competition for lower fares, airlines are looking for revenue anywhere they can get it. And airlines can spread their costs out by flying both passengers and cargo. Years ago, the airlines flew fleets of all-cargo planes, but they quit in the 1980s when costs rose.

Challenges remain

But for all the growth that air cargo has seen lately, it still presents challenges.

The Transportation Security Administration is looking at ways to effectively screen cargo, especially for passenger airlines.

In 2004, an estimated 23 billion pounds of air cargo flew within the United States, and about a quarter of that rode on passenger airlines, according to an report from the Government Accountability Office.

The challenge is twofold: screening cargo fast enough without slowing down the loading process and deciding what boxes should be inspected, Brooks said.

"We would go broke and the world's economy would collapse if we had to open every shipment and inspect it," he said.

Another challenge for air cargo is its declining domestic market.

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