Adapting Locally for Changes Globally

Posted April 12, 2011 on Centerlines Blog by Liying Gu

I attended the JFK Air Cargo Expo 2011 the end of March, which is the 12th Annual Air Cargo Exposition held at New York's premiere gateway. This year’s event attracted over 300 attendees and 44 exhibitors. The event was organized by the JFK Air Cargo Association and sponsored by the Port Authority of New York and New Jersey.

This year’s expert panel features Dan Muscatello, managing director, cargo and logistics of Landrum & Brown, who presented on the state of the industry.  According to Muscatello, 2008 and 2009 period was the first time air cargo traffic declined for two consecutive years. However, cargo volumes in 2010 were up significantly thanks to economic recovery. Asia is still expanding. Dubai, O’Hare, Ontario and Mumbai all reported cargo expansion projects. In the longer run, both Boeing and Airbus estimated 5.9 percent average annual growth over the next 20 years.

Changing distribution systems, repatriation of manufacturing, re-evaluating inventory controls, shortfalls in airport revenues, expanded airport land use, create partnerships, realistic fleet utilization and truck substitution are driving the changes in business models. The challenges remain as global manufacturing and consumption are down, inventory supplies have stabilized reducing air cargo demand, and manufacturers are considering modal shifts. Airport cargo facilities have high vacancy rates and are facing increasing competition coupled with rising fuel prices and stringent 100 percent cargo screening requirements.

Muscatello pointed out that real yield declined during the 20-year period from 1990 to 2009. The U.S. domestic air freight suffered the most with 38.19 percent decrease followed by 21.43 percent decrease in Atlantic route. For the Port Authority airports, air cargo tonnage recovered in 2010 for Newark and JFK combined. However, the volume has not returned to the previous peak set in 2000.

Muscatello suggested that airports make full use of the total airport land envelop, preserve the aeronautical infrastructure and growth potential, have partnership discussions with tenants and users, create the development vision, integrate commercial concepts on to the airport, and coordinate with off-airport community.

Bruce Campbell, chairman, president and CEO of Forward Air, spoke on the good news and bad news of the trucking industry. According to Campbell, some shifts are permanent, such as shifting to truck load for short/medium-haul route, and the disappearing heavy lift. He believes five critical factors cause the modal shift – economy, available capacity, distribution patterns, supply chain expertise, and emergencies. He foresees many challenges ahead: by fall 2011 – trucking will experience severe capacity shortage; more carriers will shut down; trucking rates will increase perhaps at double digit, and driver shortage will worsen. Campbell also questioned if we need that many gateway cargo airports. He believes that gateway cities are driven primarily by the passenger side. Gateways can reduce costs and have more frequencies. 

Doug Britten, head of cargo security of TSA, admitted that while things moved smoothly last year with the August deadline for 100 percent cargo screening, challenges remain significant on the international side as not every country implements standards in the same way. A lot depends on good data and how things are tracked and reported, he said.