Report: Panama Canal expansion will slash U.S. cargo hubs

By John McCurry

An expanded Panama Canal will result in a smaller number of North American air cargo centers, according to the recently released North American Port Analysis by commercial real estate firm Colliers International. The report, titled “CapEx or Capsize,” says air cargo’s role in global trade will be defined by the tug-of-war between energy/infrastructure costs and e-commerce growth in the first post-Panamax decade (2015-2025).

“What we are trying to do is evolve the understanding of what’s going on,” K.C. Conway, the Colliers economist who authored the report, says. “The real story now is what is the inland story and from that who wins and who has the opportunity to participate the most. If we move a lot of cargo into ports, but we can’t move it inland because the airports don’t have the infrastructure, growth will be impeded in that particular region.”

The Colliers report states that within three to five years, there will be just a half dozen dominant U.S. air cargo markets. Candidates include Memphis, Louisville, Columbus, Ohio, Miami, New York, Miami, Los Angeles, Seattle and Denver. Because of the costs involved, air cargo in the U.S. will follow the same hub-and-spoke model adopted by passenger air carriers to maximize traffic. Airports that lack a port partnership won’t be a dominant air cargo market in five years.

The Colliers report cited Memphis as being North America’s top air cargo port. Conway says e-commerce has made Memphis the king of air cargo. He says Nike’s recent decision to move a key distribution center to Memphis was based on the city’s air cargo and intermodal advantages.

“The ports that get it and have the air cargo linkage will be much more valuable because cargo doesn’t have to be delayed,” Conway says. “That is one of the advantages that is developing in the Southeast and Mid-Atlantic states. Louisville and Memphis are good examples. There are also opportunities that exist with manufacturing returning to the U.S. Medical devices, pharmaceuticals and other lighter-weight cargo are well-adapted to move by air.”

There is potential for development of some smaller air cargo hubs. Conway says Charlotte is trying to develop air cargo and intermodal capacity, but it’s a little “late to the game.” He says the Greenville-Spartanburg area has a good opportunity to develop air cargo as a result of the inland port in nearby Greer planned by the South Carolina State Ports Authority.

“There is a huge opportunity in Greenville-Spartanburg. It will see a lot of cargo, both manufactured in the U.S. and imported,” Conway says. “It will be consolidated and end up in Greenville-Spartanburg.”

Other cities with opportunities for air cargo growth include Mobile, Ala., and Birmingham, which Conway says can be used to provide relief from the Atlanta airport and also capitalize on cargo coming into the Mobile port. Mobile will also get a boost from the new Airbus plant, which recently broke ground. St. Louis also has potential, Conway says, as another “relief valve” for logistics in the Midwest. He says St. Louis probably has the best opportunity to develop air cargo, but must move quickly.

“From a technology standpoint, Atlanta, Denver, Dallas and Houston are all doing a lot to build up their facilities,” Conway says.

Another issue that affects air cargo development is whether or not a location is in a right-to-work state. He says there is a lot of potential for development in Indiana and Michigan, which recently passed laws to become right-to-work states.

“The right-to-work state issue frequently comes up,” Conway says. “When you look at states that are more unionized, companies won’t tell you that it’s an early disqualifier, but it is. One of the sad things is that there is a general assumption that right-to-work states have lower wages and poorer jobs. You find that is not the case with companies like Volkswagen and BMW that have located in the Southeast.”

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