Market Overview

New Logistics Center To Benefit Alaska Air Cargo Transfer Program

New Logistics Center To Benefit Alaska Air Cargo Transfer Program

At Ted Stevens Anchorage International Airport (ANC), geography is all.

The airport is located roughly halfway between Tokyo and New York City, and those coordinates translate into a booming cargo business. Anchorage is the fifth-largest in volume cargo airport in the world, after Dubai. About 80 percent of all air cargo traffic between Asia and North America passes through ANC, where carriers stop en route to fuel up.

Planes that layover in Alaska can reduce the amount of fuel they have to stow, said Darren Prokop, a professor of logistics at the University of Alaska, enabling airlines to "carry more revenue freight than cost-inducing fuel."

Alaska has built its reputation on location, location, location. But the airport also boasts an operations advantage that many carriers don't know about. That would be its unique cargo transfer program, which allows foreign airlines to offload cargo onto another foreign carrier for delivery to another city in the U.S.

In other states, the practice is strictly illegal. The Jones Act, passed in 1920, prohibits foreign airlines (and ships) from transporting cargo from one United States city to another.

Congress granted an exception to Alaska and Hawaii in 1996. The idea was to give these "outlier" states an edge over competitors in the lower 48, said Prokop. (The program doesn't make as much sense in Hawaii, he said, as the Central Pacific island doesn't enjoy Anchorage's strategic location.)

With e-commerce and international trade booming, ANC boosters hope more cargo airlines will begin to take advantage of the air transfer opportunity. Only a handful use it now, said Prokop, largely because many Asian carriers find it hard to believe it's legal.

New projects, and better marketing, are expected to raise awareness of Alaska's special status.

In 2018 air cargo at the Anchorage airport grew by 2.52 percent to 2.79 million metric tons. That's less than the 7 percent growth the airport saw in 2017, but is still solid, said ANC manager Jim Szczesniak.

To keep the airplanes coming, the facility reduced landing fees in 2018 for tenants by 17 percent, a sizable amount of savings for the airlines, but offset by solid revenue, and some financial engineering on the bond debt.

The airport also added several new carriers, including SF Airlines, the Chinese version of UPS. The airport is building three to five new 747-8 parking positions, and is planning new e-commerce and cargo handling facilities.

"Our goal is to make sure we can serve the market and do anything we can to make sure airplanes leave here full," Szczesniak said.

When it comes to the air cargo transfer program, the handling center could be the real game changer.

First, a quick primer on that program. Consider, for example, two Air China flights landing in Anchorage at the same time – one from Tokyo, the other from Shanghai. One is headed to John F. Kennedy International Airport, the other to Dallas-Fort Worth International Airport. Air China can exchange its load of iPhones from the airplane inbound from Shanghai with the Air China flight inbound from Tokyo. Or both planes can swap with another foreign carrier. "They come in from Asia, land here and can swap among themselves," Szczesniak explained.

The efficiencies are obvious. Carriers can load up in Asia with electronics, toys and clothes destined for buyers in different U.S. cities, regardless of where in the country a given plane is headed.

The ANC logistics center would make the system even more efficient. Under the existing system, two carriers wanting to drop-off or pick-up cargo have to land in Anchorage around the same time, Prokop explained. "But they may not be dispatched that way or coordinated."

With the new warehouse, a carrier bound from South Korea to Los Angeles, for example, will be able to drop and store pallets headed for New York in Anchorage. Another carrier can pick them up later and head for the East Coast.

"It is very similar to less-than-truckload (LTL) trucking," Prokop said. "It will change the importance of the Anchorage airport. It not only becomes a ‘gas-and-go' facility but a true hub- and-spoke network."

The center will be located on a parcel of land next to the new parking positions, adding another level of convenience, Szczesniak said. A request for project proposals will be released in late spring, he said.

Other factors are driving growth at the Anchorage airport, – notably, an exploding perishables market between Latin America and Asia. Planes bearing cherries, blueberries and asparagus from Chile and Peru land in Chicago (a destination for LATAM, Latin America's largest cargo carrier), then head to Asia, with the requisite stop in Anchorage.

"We give them king crab or salmon to take along with them," Szczesniak said.

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Posted-In: Alaska Freight Freightwaves Logistics Supply ChainNews Markets General


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