Growth opportunities: US air cargo infrastructure needs investment for the future

The sight of dozens of container ships waiting off the coast of California for eventual entry into port might, in a normal year, be a boon to airfreight. Problems in ocean shipping tend to push the more urgent freight to air, as shippers and freight forwarders decide a quick cargo jaunt by air, even with a heftier price tag, is worthwhile to avoid weeks of waiting. Many problems plaguing ocean ports, including labor shortages and infrastructure that is decades out of date, can also be found at the nearest airport. The move to make sure airfreight isn’t languishing for weeks off the coast of Long Beach could instead place it in a cargo handler’s backlog, leaving it in limbo in a ground handler’s warehouse. While ports and airports around the world are facing many of the same issues, the United States has been particularly affected thanks to a perfect storm of increased express and e-commerce traffic, heavy freighter utilization on trans-Pacific and trans-Atlantic trade lanes, and outdated transportation infrastructure. In terms of transportation infrastructure spending as a percentage of gross domestic product, the Organisation for Economic Co-operation and Development reported that the United States ranks at No. 13 globally, with only 0.52% of U.S. GDP spent on transportation infrastructure. Despite the current state of U.S. infrastructure contributing to slowdowns in air and ocean shipping, industry executives are confident that, with certain upgrades and design changes, U.S. airports can be brought up to speed. The question is: Will the U.S. foot the bill? 2019’s preview, 2020’s revelation Since cargo demand has remained elevated relative to capacity since April 2020, it’s easy to forget that, as recently as 2019, airfreight demand waxed and waned seasonally, with a heavy increase heading into the fourth quarter. Peak seasons in prior years were a preview of higher prices and rates around the holidays — now permanently elevated from pre-pandemic levels with supply and demand unbalanced — and also of the cracks in the foundation of U.S. airport infrastructure. “Peak season in certain markets, historically, there’s always been a few months that have been challenging in the [Los Angeles] market, just really around the available space for the influx of demand that’s coming in,” Matt Castle, vice president of air freight products and services at C.H. Robinson, told Air Cargo World . “You would see it bubble up during very isolated times of the year and in really most markets — if it’s Miami and you have an influx of perishables coming through based on the season, or Chicago just being a central location.” In 2019, though, the pain points were isolated to times and locations of heavy demand, “and the recovery has generally been fairly smooth, or there’s been a path forward that has gotten things back on track,” Castle said. That changed early in the pandemic, when trade demand picked up after an initial lull but passenger aircraft belly capacity was still absent from the market. With cargo demand at full throttle throughout the year, backlogs on the ocean and in the air are piling up. “We really saw airports, finally, take a deeper look into the importance of cargo [in 2020] as a diversified revenue stream, as a job creator, and that it was something they needed to expand as all of the tenants are kind of busting at the seams in the buildings across most of the airports,” David Rose, managing director of real estate developer Aeroterm, told Air Cargo World . That is the case at virtually every major U.S. airport, according to freight forwarders. Whether dropping cargo off at the airport, which can require a wait of three to four hours , according to Bob Imbriani, vice president for international services at logistics company Team Worldwide, or trying to pick up cargo at its destination, which has freight forwarders like Unique Logistics avoiding on-airport facilities and their weekslong waits, many on-airport cargo facilities are not equipped to handle airfreight demands in 2021 or the expected growth in the years ahead. Cargo in the budget Local governments are frequent financial supporters of airports looking to expand or improve their passenger and cargo footprints as a driver of regional economic growth, and the U.S. government likewise has historically supported airports with funding. Rarely has there been economic support for improvements on the scale being discussed today, though. Among the funding initiatives for aviation and other businesses during 2020 and 2021, the Federal Aviation Administration in June announced nearly $7.4 billion in grants to be distributed to U.S. airports under the American Rescue Plan Act of 2021. Of the total amount, $227 million was earmarked specifically for cargo operations , to be distributed to 120 airports. Several of the largest cargo grant recipients are among those airports that have been most congested during the pandemic, including Miami International Airport (MIA), which received the fourth-largest cargo grant of $11.6 million; Los Angeles International Airport (LAX), which received the fifth-largest cargo entitlement of $9.4 million; and Chicago O’Hare International (ORD), which received the seventh-largest cargo entitlement of $8.2 million. The grant awards may help with cargo development projects, but representatives of Memphis International Airport (MEM) and Ted Stevens Anchorage International Airport (ANC) told Air Cargo World at the time that the funds would likely be utilized for COVID-related sanitation and personnel costs, or to make up for revenue lost as airports reduced landing fees, helping to keep airports in the black amid an extremely difficult year. The funding windfall that could pave the path to improvement is also on the horizon, in the form of the Infrastructure Investment and Jobs Act of 2021, passed by the U.S. Senate in August with bipartisan support and to be voted on in the House of Representatives this month . The infrastructure bill includes $1.2 trillion in funding, representing $550 million in new spending. Alongside funding for critical infrastructure such as bridges, tunnels and highways, the legislation includes $25 billion for major improvements and expansions at U.S. airports, with $5 billion intended for air traffic control tower and system upgrades over five years. This funding support could be the antidote the U.S. needs to treat its current airport woes, but with $0 of the $25 billion allocated specifically to cargo, airfreight needed to prove its worth to win funding that could otherwise be spent in service to passenger improvements. “The industry has, by and large, made a lot of really positive steps over the course of the last several years,” Castle said of the attitude toward improvements. “I think about Chicago, which is a key airport for us, and they’ve gone through a whole transformation of how they have positioned their cargo facilities on the airport.” LAX, too, is making some improvements already, “so I feel like there’s an acknowledgment that there is a need to improve in that area,” he added. The silver lining for aviation in 2021, is that airfreight has proven its worth to keep the global economy going. The modest rate of improvement today isn’t keeping up with demand, though. Time for an upgrade “There is more demand than I think could be met even with a full push on cargo development,” Aeroterm’s Rose told Air Cargo World . Even with cargo-focused airports, including Ontario (ONT), Chicago Rockford (RFD), San Bernardino (SBD) and others, accelerating their growth in support of integrators and e-commerce cargo, there is still demand for cargo demand at major airports that face the most congestion. Airports in major metro areas like Chicago may struggle to develop new facilities given geographic constraints of new development. However, airports in need of development inspiration can find it in designs from overseas, where space constraints have prompted high-tech, multistory building designs. “When I think about air cargo infrastructure improvement, I really come back to how we can think a little differently around technology and automation,” said C.H. Robinson’s Castle. “If you’ve had the chance to go through HACTL in Hong Kong, it’s a very highly automated, multilevel type of facility. Not that those have been perfect along the way, but you certainly see the direction they have taken and what they’re steering toward, which is providing a higher level of automation in how they’re managing the facilities.” With U.S. cargo facilities primarily designed as single-story buildings, “they’re not leveraging the vertical space that can potentially be used in many of these areas,” Castle said. The U.S. infrastructure bill also prioritizes investments to improve sustainability, which Aeroterm has seen emerge as a design priority in many new cargo facilities — and which can help operators realize efficiency improvements in their operations, Rose said. “When we think about how buildings were built, there’s column spacing, building depth, truck boards are all easy ones to factor in, as well as the two-story buildings, but where we’ve seen non-U.S. airports really lead the way is on the sustainability,” Rose said, adding that the cost structure of such design has not been fully realized in the U.S. “There have been a handful of airports that have looked at microgrids and other, much more efficient ways of using power that I think will become more normalized here over the coming years,” Rose said. But again, those ones that kind of lead the way there will see the highest benefit on cargo throughput because those buildings are more efficient and so that cargo throughput will increase with the same size footprint building.” Still, if Rome wasn’t built in a day, automated systems and sustainable cargo facilities certainly won’t be, either. Still, now is the time to begin construction. Preparing for future growth projections of U.S. airfreight will require investments to begin as soon as possible, and for operators to accept that some of the more disheartening trends — like labor shortages on the ground and in the warehouse — may be here to stay alongside the growth. “I think some of what’s compounded the current situation we’re wrestling with has been some of the labor challenges in the warehouse space,” Castle noted. “There’s still, again, a heavy dependence on personnel and people to support the process, so I do think adding or complementing [personnel] with some technology into how we think about ‘What does infrastructure 2040 look like?’ is very important.”

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