Tag Archives: Logistics

Growing cargo traffic at Dulles – the challenges of realizing the value of an aerotropolis

Dulles International Airport - from Google Maps

Dulles International Airport – from Google Maps

In DC’s western suburbs, two related battles concerning growth are at the forefront. One is a plan for a new highway, the other is the desire to expand air cargo operations at Dulles International Airport. Both concepts seem to be hitched to one another, but they ought to be considered separately on their own merits.

The Metropolitan Washington Airports Authority has expressed a desire to grow cargo traffic at Dulles. At the same time, sprawl interests are pushing the bi-county parkway, pitching the road as a benefit to Dulles. Jonathan O’Connell’s profile of several road advocates in the Washington Post shows how much of the advocacy is another verse of the same song.

Looking to untie the road interests and airport interests David Alpert asks why MWAA is pushing all things Dulles in a Washington Post op-ed, when passengers seem more interested in DCA:

Virginia and airport officials seem to behave as though their mission is to make more stuff happen at Dulles, whether that stuff wants to happen there or not.

A quick glance through an MWAA powerpoint from their strategic planning exercises explains the logic of focusing growth on Dulles. DCA is constrained (physically, legally) with room to grow only on the margins. DCA can never be the full-service International airport that IAD can; and MWAA fears maximizing value at DCA would hurt IAD’s currently fragile position – the FAA’s recently approved slot-swap gave JetBlue a foothold at DCA, with a corresponding reduction in flights at IAD (slide 16).

MWAA revenues 2012

Dulles relies on air traffic for approximately 75% of its revenues. While Dulles has tremendous capacity to grow, realizing that potential requires additional capital investment, such as Dulles’ Aerotrain and other elements of the recent D2 program. Now, Dulles finds itself trapped with a higher cost per enplanement than other airports due to the capital program, and a revenue stream overly reliant on aviation revenues.

Increased air cargo has the potential to help on both counts. More freight means more flights, boosting aviation revenues without requiring new airport facility investments. More freight also means increased demand for revenue-generating uses of airport land that currently lie fallow.

The catch is this: it’s not easy creating a freight business out of nothing. Dulles does not have the central location like Memphis or Louisville, the central US hubs for FedEx and UPS, respectively. The area does not have a huge manufacturing base, either – air cargo shipments originating or terminating in IAD would need to focus on consumer goods. Likewise, the airport does not currently have a major cargo presence that would lure the manufacturing that does exist in the area to cluster around the airport. Chickens and eggs are both missing.

There are opportunities, however. Dulles does have huge tracts of land, the ability for 24 hour operations, and lots of airfield capacity. Both FedEx and UPS operate regional hubs in the US to avoid the need to route all cargo through their core hubs in Memphis and Louisville. On the east coast, FedEx operates out of Newark while UPS operates their east coast hub in Philadelphia. Linda Loyd profiled the UPS operation in the Philadelphia Inquirer: 

Starting at 7 a.m. each day, UPS planes arrive in Philadelphia from Cologne, which is UPS’s European hub, and from England and Paris. International flights from Louisville, Ky., stop in Philadelphia heading to Europe, and planes leave Europe, stopping in Philadelphia, bound for Louisville, which is UPS’s air headquarters. Each afternoon, flights arrive here loaded with packages from Dallas and Southern California.

UPS is the world’s largest transportation company, and the Philadelphia facility – second in size only to Louisville – handles 70,000 parcels and documents per hour. That number reaches 95,000 at peak times like Christmas, with parcels headed to and from 18 states, as far west as California.

…

Just before midnight, as passenger terminals and commercial flights are winding down, operations are heating up at UPS. Package sorting largely happens at night. More than 1,000 UPS workers report at 11 p.m. for the “night sort,” which continues until about 3 a.m., or until all packages are unloaded and sorted and put back into trucks, trailers, and planes to leave again.

Cargo moves around the world in multiple stops, not one long journey.

At each stop, planes and trucks are emptied, and packages are sorted and scanned, and reloaded on other flights. The network tracks packages on each leg of the trip, in order to maximize the weight and loads, through constant sorting and resorting. While a lot of the work is automated, it requires an army of people, along with bar-code scanners and a city of conveyor belts that crisscross like freeways.

Philadelphia’s UPS facility might be ripe for poaching: As Loyd’s article notes, the 212 acre site lies in the way of a proposed runway expansion at PHL. The airport’s proffered alternative location is smaller, closer to residential neighbors, and without room for expansion. Unsurprisingly, UPS does not favor the expansion (nor does PHL’s anchor tenant, US Air – fearing the increased fees that currently hurt an airport like Dulles).

In the case that UPS is looking for alternative airports, MWAA Board Minutes show the courtship in progress. Dulles can offer an east-coast location with room to grow and unconstrained flight operations, and hooking an anchor cargo integrator like UPS would be attractive to other air cargo operators, as well as businesses with lots of air cargo shipments.

While increased cargo is one option to grow non-aviation revenues through land development, it is not the only option. Increasing non-aviation revenues is important to provide a counter-cyclical revenue source for airport operations. It also represents a change in MWAA’s practices – while most airports have been increasing their share of non-aeronautical revenues, MWAA has been going in the opposite direction (page 28).

The options under immediate consideration, however, sound awfully uninspiring (if functional): more parking, another gas station, and an additional hotel (page 29). On the western side of the airport, near the proposed highway expansion, MWAA envisions industrial development that can benefit from direct access to the airport’s ramp.

MWAA supports road expansion near the airport because MWAA is not in a position to argue against improvements to airport access. However, that doesn’t mean the shape of development on and around the airport can’t move in a more sustainable direction. There are a great deal of opportunities to green the airport, but perhaps the most promising would be re-thinking the shape of airport development with the arrival of Metro into something akin to other ‘airport city’ concepts around the world – capitalizing on the real estate value Metro will bring, the on-airport location, and the virtuous cycle of improving IAD’s airport experience – certainly more ambitious than a second convenience store.

MWAA forecasts slide

Part of the challenge is in counting on growth – the accuracy record of forecast traffic doesn’t exactly build confidence, but the future for more urban development, walkable places, and transit-oriented development in the region is promising. The challenge will be in taking the city approach to the airport; thinking beyond just infrastructure, cargo, and agglomeration economies. Airport terminals are already, by necessity, pedestrian-oriented environments between drop-off and the gate. Extending that mindset beyond the terminal is the next step.

Global transit logistics

Matt Johnson at GGW has a short post with a wonderful video documenting the logistical process of delivering a new dual-mode Bombardier locomotive to NJ Transit after manufacture in Germany.  The video raises several interesting issues:

Logistics – the ALP-46, being built for North American rails, is too heavy to use existing rails for transport from the manufacturing plant in Kassel to the port in Hamburg.  As a result, a coordinated ballet of precise movements is needed to get the locomotive to the dock.

The coordination is fascinating to watch.  I’m reminded of some of mammoth’s recent posts on the global logistics supply chain, ranging from the world’s new largest vessel, the shape of infrastructure without architects as exemplified by a rail and container yard in Illinois, and commentary on the concept of the aerotropolis (breaking down the BLDGBLOG interview with Aerotropolis author Greg Lindsay).

The precision involved in moving cargo like this is always fascinating.  The connection/competition between seaports and airports (obviously, you’re not going to fly a locomotive like this for delivery) is also interesting, particularly in the vein of the role of just-in-time delivery and potential disruptions of supply chains from Japan’s recent earthquake/tsunami.

Manufacturing – The fact that such a journey for an American commuter railroad locomotive is even necessary is puzzling.  The vehicle is manufactured in Germany by Bombardier, a Canadian company.  It reminds me of the somewhat perverse consequences of Buy America provisions for US Transit systems, as well as the general lack of investment in transit.

Market Urbanism has commented on the impacts of these types of regulations, citing frequent commenter Alon Levy:

What happened in the 1970s was that the rolling stock market shrank, leaving American transit agencies with just a few US vendors. St. Louis and Pullman were fully protected by Buy American. As such, New York City Transit had no choice but to buy trains from them; the trains turned out to be defective, leading to breach of contract lawsuits that bankrupted both companies. Since then, NYCT has bought from foreign companies, following Buy America to the letter but not to the spirit. The first order after the St. Louis and Pullman disasters was imported from Kobe, as Reagan cut all federal funding, and went without a hitch. Subsequent orders required the vendors to establish US plants, but often only the final assembly is done in the US. In the most recent order, the car shells were made in Brazil.

Buy America does the opposite of leveling the playing field for foreign firms. It favors big players, which can land big contracts and establish US plants. The same is true for the regulatory structure: the various globally unique [Federal Railroad Administration] rules benefit companies that are big enough to be able to modify trains for the American market. Just recently, Caltrain’s request for an FRA waiver involved consultation with just the largest companies in the industry. There are a lot of smaller manufacturers that are shut out of the US market; they don’t have the capital to establish new overseas factories or pay lobbyists to write rules in their favor. Those include Switzerland’s Stadler, Spain’s CAF, the Czech Republic’s Skoda, all Chinese firms, and all Japanese firms other than Kawasaki. Those can occasionally land a US contract, but are usually unable to compete with Kawasaki, Alstom, Siemens, and Bombardier, whose US market shares far exceed their global market shares.

Transportation – As noted in the video, these locomotives are far too heavy to travel on German rails.  The fact that they can do so on American rails is a testament to the strength of our robust freight network, but it is also indicative of the unnecessary ‘tank’ mentality of US rail vehicles.  This kind of excessive weight (and the regulatory perspective that requires it) is biased towards heavy freight and detrimental to passenger rail of all kinds in the United States.