Guidebook for Air Cargo Facility Planning and Development (2015)

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1 1.1 Purpose and Organization of the Guidebook 1.1.1 Purpose The purpose of this guidebook is to provide general guidelines regarding the planning and development of airport air cargo buildings, apron areas, and support facilities in the United States. This guidebook’s intended audience includes airport managers and their staff, airport planners, consultants, third-party airport facility developers, and the air cargo industry in gen- eral. This guidebook represents a snapshot in time within continuously evolving air cargo indus- try practices and federal regulations affecting planning and cargo operations. 1.1.2 Organization of the Guidebook This guidebook is organized to provide the user a thorough understanding of air cargo demand, airport facilities needed to meet the demand, and best practices for planning facilities to meet current and future demand. This guidebook’s organization flows from a high-level view of air cargo activity on airports and air cargo facilities to a broad discussion about airport and air cargo facility planning. The guidebook then focuses on specific guidance for cargo facility develop- ment on the airside and landside of the airport’s cargo areas. The guidebook can be used by the airport planner to assist in going through the steps involved in the air cargo element of a master plan and provides guidance for a stand-alone air cargo facility strategic development plan. More specifically, the guidebook includes the following: • Chapter 1: Introduction provides the airport planner with an overview of the purpose and organization of the guidebook. This overview is followed by a brief retrospective of air cargo facility trends. • Chapter 2: Airports and Air Cargo—Overview provides a general overview of the role the airport plays in the transport of air cargo. The chapter identifies the types of cargo carriers operating at airports and provides a high-level view of airports and how they contribute to air cargo transport. • Chapter 3: Air Cargo Planning Approach and Process provides a general overview of the airport master planning process as it relates to air cargo. The chapter focuses on inventory data collection and air cargo data sources. Data collection challenges are identified, and data gathering techniques are presented. Tools useful to airport planners for collecting air cargo information and examples are discussed. • Chapter 4: Planning Considerations and Metrics provides airport planners with a framework that can be used to guide airport decision makers in planning and developing air cargo facili- ties. This framework is intended to be applicable to a range of airports and facility types based on current conditions at airports and forecasted change. Air cargo building throughput met- rics are presented to provide guidance on future facility requirements. C H A P T E R 1 Introduction

2 Guidebook for Air Cargo Facility Planning and Development • Chapter 5: Air Cargo Forecasting provides an overview of the techniques for forecasting future cargo traffic demand with emphasis on how this relates to the air cargo facility requirements. • Chapter 6: Air Cargo Facility Planning—Sustainability Considerations provides an overview of sustainable air cargo facility design and gives an example. The Sustainable Aviation Guid- ance Alliance is discussed, and the chapter provides information on its application to air cargo facilities. • Chapter 7: Air Cargo Facility Planning—Security Considerations is an overview of security trends as they relate to airside and landside cargo facilities. • Chapter 8: Air Cargo Facility Planning—Funding Strategies considers the development and financial alternatives available to the airport planner. An example pro forma plan related to the development of an air cargo building is provided. • Chapter 9: Air Cargo Facility Planning Model discusses a key component of these guidelines, the Air Cargo Facility Planning Model, which provides airport planners a single source for calculat- ing space and facility utilization for future air cargo buildings, apron area, and parking space. The guidebook also contains a resource listing and a listing of terms and abbreviations related to air cargo facility planning. 1.2 Retrospective on Air Cargo Trends The air cargo industry experienced significant growth in the 1990s that was driven by several factors, including an expanding global economy, the development of the Internet, the dot-com boom, and industry reliance on air cargo utilization for supply-chain management and just-in- time business models within the manufacturing sectors. In the 1990s, the compounded annual growth rate (CAGR) for U.S. international air cargo was measured at 8.2% for the period. From 2000 to 2010, the CAGR for U.S. international air cargo was measured at just 2.5%, which is reflective of a difficult economic period that included the September 11, 2001 (9/11) attacks, the severe acute respiratory syndrome (SARS) pandemic, and the spike in fuel prices and economic recession beginning in the autumn of 2008. The difference in the growth rates for the last two decades is also reflective of changes in shipper demand and a maturing air cargo market within North America. For the vast majority of U.S. airports, the period from calendar year (CY) 2000 through CY 2010 was marked by double-digit losses in annual tonnage. 1.2.1 Cargo Facility Occupancy Trends U.S. integrator hub airports accounted for at least 40% of the air cargo processed at U.S. airports in CY 2010 and experienced a group total of 6.4% growth during the period CY 2000 through CY 2010. However, individual performances were asymmetrical in that the two national hubs, Memphis, TN (FedEx) and Louisville, KY (UPS), enjoyed 57.4% and 42.6% growth, respectively, while double-digit losses were experienced at almost all of the FedEx Express and UPS regional hubs. The exception is Greensboro, NC, which benefitted from having its hub begin operations during the period. Several carriers—including Airborne Express, BAX Global, DHL, Emery Worldwide, and Kitty Hawk—terminated their domestic air cargo operations (DHL) or disappeared altogether. As a result, both hub airports and airports serving as spokes have been left with significant vacancy rates. Consequently, FedEx Express and UPS form a duopoly of domestic express air cargo, and many U.S. airports have only one or two air cargo tenants. DHL is still in the U.S. market but transports international air cargo only. Vacancy rates have also been affected by the proliferation of third-party ground handlers that gain labor and equipment efficiencies to accommodate a variety of carriers in the space previously

Introduction 3 required by only one carrier’s operations. In fact, carriers at many airports, both passenger and cargo, may have no local management but rather outsource these services to handlers. 1.2.2 Modal Shift At many airports, vacancy was also created by the shift of U.S. mail from the U.S. Postal Service to private carriers such as FedEx, from air to trucks, and in the case of bills and payments, from air to electronic communications. Increasingly, the U.S. Postal Service has moved off airport. Modal shifts from air to sea negatively affected transpacific volumes, while trucks replaced aircraft for many shipments that were either entirely domestic or the domestic segment of inter- national shipments that were previously flown between secondary U.S. cities and international gateways. As early as the 1990s but continuing through the next decade, shift in traffic also occurred as the United States and Europe favored increased trade with Asia over trade with one another. Modal shifts from air to trucks also occurred simply because faster growth rates are priorities for new aircraft utilization compared with mature, slow-growing U.S. markets that can often be served by truck. Another incentive for trucking to international gateways has arisen from security screening requirements that require 100% screening of enplaned belly cargo. Given the need to capitalize investments in technology and training, many freight forwarders and air carriers have maxi- mized the use of gateway resources rather than screening at the point of origin. Simultaneously, carriers increasingly used ground transport to offset the cost of air cargo. Truck- ing replaced air cargo to and from many destinations. Time-definite ground transport is a wonder- ful product for consumers and producers alike, but not for airports, since ground product does not typically move through airport facilities. Compounding the situation is the general consolidation of air cargo and logistics industries, from the carriers on down through the handlers as well as the forwarders and third-party logistics providers. The result has been a reduction in the need for on- airport building space because of facilities redundancies, tenant financial stresses and mergers, and the utilization of fewer consolidation points to the large international hubs. 1.2.3 Planning Implications—Cargo Buildings The effect of these industry trends on capacity utilization has been more derived than direct. Cargo building utilization rates—measured by annual tons per square foot handled—have often fallen precipitously due to severe drops in throughput rather than inefficiencies. The ACRP Project 03-24 researchers have attempted to reconcile that issue in this guidebook by using occu- pied rather than total capacity—netting out vacancies—but often cargo operators have retained excess space either due to long-term leases or because of the hope for a near-term improvement that has not occurred to date. In addition to the effect of the drop in annual tonnage (with throughput being the numerator in measures of utilization), the shift in market share between belly carriers and all-cargo carriers— particularly integrators—has also affected utilization. For operational reasons, belly carriers have relatively lower utilization rates than all-cargo carriers, so the migration of market share from relative parity between belly and all-cargo tonnage in the early 1990s when many cargo facilities were built versus the present dominance by integrated carriers necessarily affects expectations for cargo building utilization. That change would be less evidenced by changes within the utilization matrix than in how market shares have been reapportioned between types of carriers. As has been previously noted, the most negative effect of this migration of market share for most U.S. airports has been the obsolescence of some legacy cargo facilities. These facilities may

4 Guidebook for Air Cargo Facility Planning and Development not have exhausted their engineered lifespan but have no near- to mid-term prospects for their designed utilization, given the dearth of air cargo carriers left in the U.S. domestic market. In building their dominant market shares, FedEx and UPS were most likely to move into dedicated single-tenant facilities, which only exacerbated the vacancies in legacy multi-tenant facilities where the remaining tenants had plummeting cargo tonnage. With such chronic shortages of tenants and no relief in sight, airport operators may need to confront whether some existing legacy facilities should be either designated for reuse or even razed. In terms of cargo building utilization ratios, the net effect would be to decrease the denomi- nator (square footage). However, the driver would not be a gain/loss in operating efficiency but rather the elimination of unneeded capacity. While much of the preceding discussion has applied to the vast majority of U.S. commercial airports at which at least 90% of annual tonnage is now carried by FedEx and UPS, other shifts have been common at international gateways. The outsourcing of cargo handling has commonly resulted in higher utilization rates as multiple carriers may be handled in the same space formerly occupied by one or two—often by handlers’ adding of labor and shifts. The same basic efficiency gain has also accrued to arrangements in which carriers (often a passenger hub carrier) leverage their staff and facilities to handle other carriers’ cargo needs. 1.2.4 Air Cargo Market Realities and the Role of This Report The net result of the preceding developments is that there is an unprecedented surplus of exist- ing on-airport air cargo facilities at both hubs and non-hub terminals. Consequently, an airport planner’s cargo facilities analysis must begin with realistic assessments of market demand. In some markets, the principal need may be for replacement of outdated facilities, while in others, considerable economic recovery may still have to occur before any new or improved facilities can be justified. The primary goal of this report is to assist airport planners and consultants in the development of air cargo facilities on airports given today’s market dynamics. This report takes the airport plan- ner through the air cargo data collection effort, forecasting techniques, and cargo facility require- ments modeling. This report will point the way for airports, both large and small, to estimate the facilities they need to meet future demand. Airports may find that they have excess capacity and need not expand facilities, while others will find that, while their facilities have adequate space, they may want to update their airport layout to include relocating current cargo facilities to better accommodate the air cargo industry. Another goal of this report is to point out to the airport plan- ning community the importance of air cargo facility planning in the entirety of the airport master planning process. The Airport Cargo Facility Planning Model, on the CD-ROM that accompanies this report, is a single source for calculating space and facility utilization for future air cargo build- ings, apron area, and parking space. The model is flexible in that it can estimate spatial utilization for all cargo areas and specific facilities at an airport. It is designed with two types of airports in mind: airports serving primarily domestic air cargo demand and airports serving international air cargo demand.