US airports need subsidies for cargo modernization, groups say

Date: Wednesday, October 26, 2022
Source: FreightWaves

Logistics businesses involved in air transport are urging states and the federal government not to shortchange cargo when dispersing funds for airport infrastructure upgrades.

The Airforwarders Association (AfA) and a group representing customs brokers released a position paper last week calling for the establishment of a dedicated investment fund for cargo facilities because air cargo is a critical driver of economic growth, especially e-commerce, and modernization is needed to keep airports from being bogged down by shipment growth.

U.S. airports and airlines lost tens of billions of dollars because of air travel shutdowns during the pandemic and are not equipped to finance an estimated $115 billion in needed upgrades over five years. The Infrastructure Investment and Jobs Act enacted late last year includes $25 billion for airports, but the cargo advocacy groups said localities and airports will prioritize passenger accommodations, safety and security over cargo due to the revenue shortfalls of the past two years.

The report didn’t specify how much seed money state and federal governments should contribute to local airport initiatives.

Brandon Fried, executive director of the AfA, said a cargo fund would be in addition to the amount set aside for airports under the Biden administration’s rebuilding initiative.

“A target figure of $3 billion to $5 billion would serve as a substantial stimulus to private investment while creating enhanced throughput and cost savings throughout the logistics chain,” Fried said in an email message.

Airports, with only a trickle of normal revenues from landing fees, taxes and retail concessions during the COVID-19 crisis, deferred most capital improvements. The heaviest airport activity often came from increased arrivals of large freighters carrying medical equipment to combat COVID, vaccines, food, critical components for manufacturing lines and online orders. The pandemic thrust air cargo into the spotlight at a time when the ocean shipping and supply chain crunch put economies at risk.

If the financing burden for rehabilitating outdated and crowded cargo zones is left to the industry, it will take too long to implement and impose a burden on local economies and consumers, according to the report by the AfA and National Customs Brokers and Forwarders Association of America.

“Targeted federal dollars for air cargo would be helpful because cargo is an afterthought in most infrastructure conversations, compared with passenger operations,” said Michael Webber, an airport planning expert in Austin, Texas, who sits on the AfA’s Airport Congestion Committee.

“The cargo industry needs to break ground and advance as many cargo-oriented projects as quickly as possible while cargo still has this halo around it from the pandemic because inevitably that shine will disappear and the biggest cargo priority will become many airports’ 200th biggest priority — way behind better fast food in the terminals and ridesharing,” Webber told FreightWaves.

Outdated infrastructure

Increased deployment of widebody aircraft and strong global trade have contributed to shipping delays during peak periods in recent years, but the pandemic exacerbated the problems.

Significant cargo congestion at major international gateways has been a constant theme the past three years as cargo volumes ballooned and more shipments arrived in large bunches on freighters instead of staggered batches on passenger aircraft. That overwhelmed cargo terminals poorly sized for today’s demand that are also coping with labor and equipment shortages.

The inability to quickly sort shipments means it can take days to recover inbound freight. At many mature airports, roadway geometry and terminals were not designed to accommodate modern tractor-trailers, resulting in long queues. Meanwhile, there has been a proliferation of vans used for express mail and e-commerce that have difficulty accessing truck bays designed for larger vehicles.

Many logistics providers and all-cargo airlines have increased operations at secondary airports away from large metropolitan areas where service levels are high and customers can pick up loads within a couple hours of arrival. And some third-party specialists hired by airlines to process their cargo are even adding overflow capacity outside the airport fence amid increasing rents for near-airport warehousing.

Officials at Los Angeles International Airport recently revealed plans for comprehensive overhaul of cargo operations, while airport authorities at New York JFK, Philadelphia, Chicago and Atlanta have targeted cargo projects underway at various stages of development.

The report says that states should create cargo-centric funding centers to help bankroll infrastructure projects, technology and automation initiatives, equipment acquisition, enhanced access to sustainable aviation fuel, truck marshaling yards and other improvements. Programs would be funded through a combination of state and federal dollars and complement private-sector investments. A panel of public-private stakeholders would evaluate projects for funding based on common criteria.

Without government intervention on air cargo, shippers could migrate to trucking or other modes of transportation, terminals will increasingly become less efficient, private companies will lose incentive to invest on their own, and local economies will lose jobs and tax revenue, according to the position paper on safeguarding the future of air cargo.

A new cargo facility with capability to handle cold storage, hazardous material, live animals and high-value goods can cost from $150 million to $300 million, the report said. Demolition and extensive environmental mitigation can substantially add to project costs. The estimated costs for a recently planned cargo development at a gateway airport ranged between $300 million and $500 million dollars.

State-level airport funds would help subsidize nonrevenue producing infrastructure, such as restricted service roads, cargo staging areas, truck parking and ramps to loading docks. They should also help offset ground lease costs so that airlines and other tenants can afford building rents, as well as modification costs incurred after development to meet unanticipated sustainability, safety or security requirements.

When airports have no room for growth, governments should consider building cargo-centric airports near major cities, the stakeholder groups said.


[Read from the original source.]