When playing a map-based development board game, it becomes increasingly apparent that each player approaches the game with their own strategy. Your sister likes to begin construction of a town on coastal cities, whereas your 13-year-old nephew may instead prefer to create a tentacle network of train tracks out from a central point. Your brother clearly didn’t enter with a strategy and may pay the price later. Despite personal approaches, certain strategies often work better than others in positioning a player to win.
Recently, Puerto Rico has made moves to position itself as a key player in the Caribbean regional market capturing traffic between the Americas and Europe. As it works to become a hub, a look at foundational building blocks present in existing North American hub strategies may provide insight for mindfully growing their own operations and winning stakeholders over.
On June 7 of this year, the Commonwealth of Puerto Rico filed an application to the U.S. Department of Transportation (DOT) on behalf of its international airports, which include Luis Muñoz Marín International Airport in San Juan (SJU), the Rafael Hernández International Airport in Aguadilla (BQN), and the Mercedita International Airport in Ponce (PSE). Although Puerto Rico’s vision to develop a cargo hub is not new, the application represents a step forward in the territory’s efforts to develop as a viable hub for air cargo stakeholders.
Since 2009, the country has worked to establish itself as a Carribean hub, and in 2012 successfully established a Foreign Trade Zone (FTZ) around Aguadilla Airport (BQN). The move was and still is intended to help capture traffic overflying Puerto Rico, as an FTZ offers benefits such as 25-30% cheaper fuel than in other Caribbean jurisdictions, largely due to the fact that there are often no local taxes on fuel in FTZs.
Despite these efforts and the growing popularity of Puerto Rican airports to service pharma ops at the time, volumes moving out of the airports in the 2010s have “lagged” compared to those seen in the early 2000s, according to Puerto Rico Airports Authority. Volumes have dropped from around 102,500 tonnes (or 205 million pounds) of cargo in fiscal year (FY) 2010, to around 36,000 tonnes in FY2018. The most recent drop is largely due to the merger that was announced last May, when Mexican private airport operator Grupo Aeroportuario del Sureste (ASUR) and Canadian pension investment manager Public Sector Pension Investment Board (PSP Investments) acquired 50% interest in Aerostar Airport Holdings, which has operated Puerto Rico’s Luis Munoz Marin International Airport (SJU) since 2013.
Beyond tensions arising from this acquisition that marked the beginning of highly contested moves by the government to privatize Puerto Rico’s airports, efforts to grow business faced a massive set back when Hurricane Maria demolished much of the island’s infrastructure in autumn of 2017, devastating operations out of the airport.
Following the hurricane, stakeholders have returned and relaunched operations from the island, which remains a pharma hot spot for carriers such as FedEx, Ameriflight, Emirates SkyCargo, Cargolux, and freight forwarders like Caibex, IFL Group and AIT Worldwide Logistics. Today, pharma continues to represent 25% of the territory’s GDP, as well as over 70% of Puerto Rico’s inbound and outbound air cargo.
Though resilient and passionate about rebounding from the situation, it is understandably taking the island time to come back from the catastrophe.
Given this, the Puerto Rican Commonwealth government’s recent application to the DOT explicitly states the role its transshipment hub status would play in “facilitating the rebuilding of the Puerto Rican economy” following Hurricane Maria.
Moreover, the document suggests transshipment hub status would also indirectly aid Puerto Rico’s pharmaceutical industry as the country’s 90 pharma facilities continue to recover from the damage wrought by the hurricane. The enhanced airline competition and lower supply chain costs will bolster Puerto Rican pharma industry against competitors based in China and India that offer cheaper manufacturing, the document argues.
In the long term, the Commonwealth of Puerto Rico says that its airports can offer a unique geographic location and available capacity to serve as a Caribbean and Latin American cargo hub and will inevitably generate new interline for U.S. carriers moving between Puerto Rico and the continental United States as well Central and South America and Europe.1 - Reader Likes This Post