U.S. Freight Flows Seen Increasingly Bypassing Airports

With shift in domestic shipping patterns, air facilities must rethink strategies to attract cargo business, Colography Group executive says

With shift in domestic shipping patterns, air facilities must rethink strategies to attract cargo business, Colography Group executive says

Atlanta, GA — February 18, 2005 — Warning that the nation's freight flows are increasingly "bypassing" U.S. airports, a top executive at logistics analyst firm The Colography Group told an industry conference last month that the airport community faces enormous challenges to compete for commerce amid a change in domestic shipping patterns.

At the same time, however, airports have excellent opportunities to capture new business if they re-orient their strategies and execution to fit the new and dynamic shipping environment, according to William Liddicoet, manager for applied research and analytical services at Colography.

Liddicoet told the Airports Council International North America's Cargo Symposium that airports have been losing cargo business because the nation's supply chain has morphed from a national, centralized distribution model that demanded long-haul transportation services such as airfreight, into a regional, de-centralized model that has made trucking and ground parcel services the preferred mode of shipping.

"Nearly 75 percent of the nation's freight travels 750 miles or less, distances that allow businesses to meet their delivery commitments by relying on regional truck services that cost less than airfreight," Liddicoet said.

Liddicoet, who served as manager of air cargo development at Seattle-Tacoma International Airport during the 1990s, said: "The explosive growth of regional distribution centers and short-haul transport systems to support them poses a serious competitive threat to the nation's airports. Airport executives who've long relied on air cargo as a key revenue source must recognize that an increasing percentage of the traditional cargo base is bypassing their facilities."

Liddicoet said that tighter air security regulations following the 9-11 terrorist attacks have resulted in some diversion from air to ground. But he said the migration actually dates back to the late 1990s, when UPS and FedEx introduced money-back guarantees on their ground delivery services. The shift from air to ground gained momentum during the 2000-2001 economic downturn as value-conscious businesses opted for more cost-effective means of getting their goods to market.

"The conversion from air to surface would have continued apace had September 11, 2001, passed as just another date on the calendar," Liddicoet said. "The terrorist attacks served only to accelerate a trend already in place."

Despite the challenges, Liddicoet said airports remain well-positioned to play an important and growing role in America's new face of commerce.

"Decentralized distribution will attract businesses and their transport partners to regional distribution centers," he said. "Airports should consider strengthening partnerships with freight forwarders and logistics firms that operate at or near their facilities, earmark landside acreage for distribution center development, and invest in improving adjacent or nearby highway networks to encourage connectivity with surface transport operations. The bottom line is that airports need to align themselves with the secular trends, not swim against the tide."

Liddicoet spoke January 21 in New Orleans. His presentation was entitled, "It's a Ground Game, Are Airports Ready to Play?" The presentation is available on the Colography Web site at http://www.colography.com/press/pdf/aci%20-%20020805.pdf

For more information on the latest trends in the logistics space, see the article "The Analyst Corner: Fulfillment & Logistics" in the October/November 2004 issue of Supply & Demand Chain Executive.