LAX reigns supreme
19 / 10 / 2015
All over the world freighter operations seem to be losing ground to belly cargo, but one could be forgiven for thinking the trend had passed Los Angeles by.
A list of the top freight carriers at LAX shows the largest as Korean, China Airlines, Cathay Pacific, China Cargo Airlines, NCA, EVA Air and China Southern – all major freighter operators. It is a roster to make any airport cargo manager drool.
Envy is also doubtless aroused by the 12.5% year on year rise in cargo that the airport saw from January to July this year. Once, such a performance was routine at major cargo hubs: now it is increasingly a nostalgic memory.
Special circumstances were at work, of course. The nine month dispute between the Pacific Maritime Association (representing US west coast port owners) and the International Longshore and Warehouse Union reached its climax in the early part of the year, causing lengthy delays at the port of Long Beach and leaving Asian exporters and manufacturers scrambling for airfreight alternatives to seafreight.
But in fact, says Michael Webber, an independent consultant who acts as an advisor on cargo to Los Angeles World Airports, it was mostly other US airports that benefited. “There was far more propensity to overfly the west coast and go straight to the hinterland,” he says. “For LAX I would say the contribution from sea to air was relatively minor. I have talked to the truckers who would have carried the cargo inland and they did not see a big boost in business.
”Webber also points out that the growth continued beyond the end of the port dispute in February, something he attributes to the overall recovery in the US economy.
Whether that will continue, given the recent signs of weakness in China and other parts of Asia, is an open question but Webber is optimistic that 2015 might finally see the airport top its 2000 peak, when cargo tonnage reached 2,078,384 tonnes (or indeed 2005 when it peaked at 1,938,430 tonnes). The volumes for 2014 were 1,818,766 tonnes.
In LAX’s favour is that its rivals for west coast air cargo seem to have faded. In the 1990s, Seattle, San Francisco and even Vancouver were touted as alternatives, while Ontario International – also owned by the city’s Los Angeles World Airports (LAWA) department and a key hub for UPS – was seen as a potential freighter airport.
But Webber says that, since 2008, carriers have been focusing on the bigger gateways. “Seattle has had some good growth lately because Delta is making it its transpacific hub. But none of these airports really rivals LAX. There is never any reason to truck to these other airports as there are freighters from LAX to anywhere on the transpacific that is served by freighter operations. Forwarders also by and large don’t want to split loads.
”Thus the next four west coast airports – Oakland (a FedEx hub), Ontario, San Francisco and Seattle – combined can manage only about the same tonnage as LAX.
“And everyone who serves the west coast serves LAX,” Webber points out. “In the whole western region there is not one market that is served by belly or freighter that is not also served by LAX."
This is not to say that there is no competitive pressure on the airport. Atlanta, Houston and Dallas also compete for transpacific freighter business, though Webber says they still tend to call at LAX on the way back due to the shortage of westbound cargo to Asia.
These new entrants may dilute LAX’s share on particular lanes, but that doesn’t necessarily mean the airport loses volume. “If you go from being the only airport a carrier serves to being one of thirteen then your market share goes down, but you have done nothing wrong,” Webber notes. “What is interesting is that LAX never loses a service.
“No one ever decides that they don’t want to serve it anymore.
”One market where Los Angeles has perhaps not lived up to expectations is Latin America. In theory the growing connections between that region and Asia should favour transhipment via LAX, and predictions have been made in the past that it will become an increasingly important Latin American hub.
It does have some freighter connections to the region, but Webber calculates that Miami still has 80% to 90% of the Latin American market. “There is a trucking company in LA – Sterling Transportation – and all they do is truck cargo from LAX to Miami,” he says.
“That speaks to the competitive advantage of these two hubs in their respective markets.
”LAX has a much more diverse range of routes and carriers than Miami, however. It remains, along with JFK, one of the two airports that any carrier starting service to the US will inevitably choose to call. The only other US airport that compares to it is O’Hare, once integrator hubs such as Memphis and Louisville are stripped out.
Its international growth has also helped to insulate it from the most striking trend in US air cargo in the past fifteen years – the collapse in domestic volumes.
Several factors have been responsible for this, including the removal of widebody planes from domestic passenger routes, the increased efficiency of trucking and the requirement for 100% screening of belly cargo.
On the latter point, Webber says that most forwarders don’t want the hassle and expense of training staff and buying equipment to screen domestic cargo, so have switched to trucking instead. This affects not just purely domestic shipments but the domestic portion of international ones. “Fifteen to twenty years ago if you shipped from Bangkok to Kansas via Los Angeles, the domestic segment used to be by air. But that went away.”
For this reason cargo volumes peaked in 2000 for the overwhelming majority of US airports. Webber says of the top 25, 20 are down since 2000, the majority in double digits. Domestic freighter operators such as BAX, Airborne and Kitty Hawk simply disappeared.
LAX also saw a 11% decline in tonnage from 2000 to 2014, but international was up 16% over that period while domestic was down 23%. So in the medium term prospects for the airport seem promising.
What the airport needs to do to prepare for growth on the cargo side is something that is currently under discussion. It is perhaps not surprising given the strong growth in the passenger business that capital expenditure by LAWA has focused on that recently: the new Tom Bradley International passenger terminal is an example.
But with the appointment of Deborah Ale Flint as executive director of LAWA in July – a woman who was previously director of aviation at Oakland, with its FedEx hub – Webber is optimistic that attention may now turn to cargo facilities.
“There are big changes, with domestic down and international up, and with belly cargo increasing versus freighters, and this does require some changes to facilities,” he says. “For example, belly cargo wants the handling terminal to be as near as possible to the passenger terminal.
”LAX, like JFK, also suffers from being a long-established hub, with old facilities in a now constrained airport space. “This means that there is not a lot of surplus capacity and everything to do impacts on something else,” Webber says.
But with the new director there are promising signs. “We have had meetings in recent months where we have invited the cargo community to give their views about what they need. So they are listening.”