chapter iv air cargo forecast
CHAPTER IV AIR CARGO FORECAST This chapter presents the historical and forecast air cargo volumes and operations for the central Puget Sound region. The chapter focuses, in particular, on air cargo activity handled at Seattle-Tacoma International Airport (Sea-Tac or SEA) and King County International Airport (Boeing Field or BFI), which have historically handled virtually all the air cargo in the region. 1 Forecasting any type of aviation activity is not an exact science in which the same approach can be applied at all airports (or group of airports). Each airport or region presents its own unique set of variables that need to be considered. Air cargo has its own set of challenges, not least of which is the availability of data, which by comparison to passenger data, is very limited. A number of approaches to forecasting air cargo for the central Puget Sound region were evaluated. A traditional econometric approach where air cargo volumes are correlated with independent variables such as employment, per capita income, and gross domestic product produced unsatisfactory results both at the regional and individual airport level. The Puget Sound region has seen its air cargo volumes recover much more slowly than the rest of the country following the economic downturn and attacks of 2001. An overview of regional activity is also somewhat distorted by the shift of the mail contract to FedEx in August of 2001, and the move of DHL and Airborne from SEA to BFI. These variables further exacerbate the traditional forecasting process and dictate a need to carefully identify relevant assumptions and factors that have the potential to impact future growth.
1
In reviewing potential options for the accommodation of forecast growth, the Team identified all regional airports at which commercial air cargo volumes were reported to the Airports Council International (ACI), which tracks airport statistics, in the past three years. Only King County International and Sea-Tac reported cargo activity in that time period. While it is possible that some freight was moved through Bremerton and Paine Fields, any such cargo would have been privately carried and not show up in national statistics. In 2004, 136 airports reported cargo volumes to ACI. Number 136 reported only 17 tons over the course of the year. This is less volume than could be carried in one operation of a 727 and would have no impact on planning airport capacity.
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I.
NORTHWEST REGION AVIATION ACTIVITY
As part of the forecasting process, historical trends in aviation activity were analyzed for Sea-Tac and Boeing Field along with trends for Portland International Airport (PDX), Vancouver International Airport (YVR), Paine Field (PAE), and Spokane International Airport (GEG). Collectively, these airports are referred to as the Northwest region. These other airports were chosen due to their geographic proximity to SEA and BFI and their overlapping cargo markets (the market overlap for each of these airports, based on a 200-mile Air Trade Area radius, is illustrated on the following page). The purpose of analyzing trends at these other airports is to provide a context for the recent trends in activity at Sea-Tac and Boeing Field and determine whether these trends are unique to each airport or are indicative of broader regional trends. For a discussion of how these airports compete with each other see Chapter III, subsection 4. Enplanement Trends Passenger airlines are, by definition, in the business of transporting passengers. However, they often use the capacity of belly compartments of their aircraft not used to transport passenger baggage to generate incremental revenue through the transportation of air cargo. Passenger flight activity at an airport generally moves in the same direction as passenger traffic volumes. Consequently, positive growth in enplanements generally correlates with increased flight frequencies or larger aircraft, often resulting in increased lift capacity for air cargo (and vice versa). However, increased belly capacity is also closely tied to passenger load factors and size of aircraft. Airlines will typically increase load factors and, on appropriate routes, move to larger aircraft in an effort to drive down unit costs. As a result, the growth rate of operations will lag that of passengers. As Figure IV-1 shows, 30.3 million passengers were enplaned on flights from the region’s airports in 2004. Sea-Tac has historically accounted for the largest share of enplanements from these airports (47 percent in 2004). The most recent economic recession beginning in early 2001 and subsequent events (primarily the 9-11 terrorist attacks, SARS, and the Iraq War) resulted in declining passenger enplanement volumes in the Northwest region between 2001 and 2003. In 2004, passenger enplanement volumes returned to an upward trend, increasing almost 8 percent over the previous year. Analyzing each of the airports individually, it is evident that passenger enplanement volumes at Sea-Tac have been less affected by recent events, than at many of the other airports. As illustrated in Figure IV-2, Sea-Tac and Spokane are the only airports in the Northwest region to have handled more passengers in 2004 than in 2000. Boeing Field and Paine Field were not included in the review of passenger activity.
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Figure IV-1 NORTHWEST REGION—ENPLANEMENT TRENDS
Enplanements (in millions)
(CALENDAR YEARS) 35.0 30.0 25.0 20.0 15.0 10.0 5.0 0.0
2000
2001 SEA
2002 YVR
2003
PDX
2004
GEG
Source: Airport Records.
Figure IV-2 INDEX OF NORTHWEST REGION PASSENGER ENPLANEMENT TRENDS (CALENDAR YEARS; 2000=100) 102 100 98 96 94 92 90 88 2000
2001 SEA
GEG
2002 PDX
2003 YVR
2004 NW Region
Source: Airport Records.
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Air Cargo Volumes Approximately one million metric tons of air cargo were handled at the Northwest region’s airports in 2004 (see Figure IV-3). 2 Sea-Tac and Boeing Field accounted for 34 percent and 12 percent of the Northwest region’s air cargo, respectively. Unlike passenger volumes, air cargo volumes in the Northwest region have not recovered to pre 9-11 levels. In 2004, air cargo tonnage for the Northwest region was still 13 percent below 2000 levels. It is worth noting, however, that 2004 marked the first year of air cargo tonnage growth since 1999, increasing 5 percent over 2003. Figure IV-3 NORTHWEST REGION—AIR CARGO VOLUMES (CALENDAR YEARS; IN METRIC TONS) 1.4
Air Cargo (metric tons)
1.2 1.0 0.8 0.6 0.4 0.2 0.0 2000
2001
SEA
2002
PDX
YVR
2003
BFI
2004
GEG
Source: Airport Records.
Sea-Tac’s cargo volumes have been particularly affected in recent years. As Figure IV-4 shows, air cargo handled at Sea-Tac has declined in each year since 2000. In 2004, air cargo tonnage (freight and mail) at SEA was down 25 percent compared to 2000 levels. By contrast, air cargo volumes at Boeing Field in 2004 were up 15 percent over the same period. The reasons for these changes will be explored in more detail in the next three subsections.
2 A metric ton is a weight measure equal to 2,204 pounds as opposed to a U.S. ton (or short ton) which is equal to 2,000 pounds. All data shown throughout the forecast chapter are expressed in metric tons.
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Figure IV-4 INDEX OF NORTHWEST REGION AIR CARGO TRENDS (CALENDAR YEARS; IN METRIC TONS, 2000=100)
Air Cargo (metric tons)
120 110 100 90 80 70 2000 SEA
2001 GEG
2002 PDX
YVR
2003 BFI
2004 NW Region
Source: Airport Records.
II.
AIR CARGO FORECAST CENTRAL PUGET SOUND REGION
The central Puget Sound region is comprised of King, Kitsap, Pierce and Snohomish counties. Its major aviation facilities include Seattle-Tacoma International Airport, King County International Airport (Boeing Field), and Snohomish County Airport (Paine Field). Historically, air cargo in the region has been handled almost entirely at SEA and BFI. A bottom-up approach to the forecasts was used due to the lack of overlap in airlines’ operations at the two main air cargo airports in the region. This approach allowed for a detailed segmentation of the data into domestic and international segments and by carrier type. Corresponding assumptions were then developed for each segment to forecast activity at both SEA and BFI. The forecasts of air cargo and flight operations for Seattle-Tacoma and King County International airports were combined in order to develop an aggregate regional forecast (see Figure IV5 and Table IV-1). The aggregated forecast was subjected to a number of reasonableness checks based on the assumptions laid out in this chapter of the report and the information presented in the previous chapters. These checks included review of peer airport forecasts and broader national and global forecasts. Historical market share trends for SEA and BFI were also reviewed. The air cargo forecasts for SEA and BFI are presented in the subsequent two subsections. Air cargo handled in the region is forecast to average growth of 3.4 percent per year over the forecast period. By 2025, air cargo volumes in the region are forecast to reach 950,000 tons, more than double the 2004 level (473,000 tons).
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Figure IV-5 AIR CARGO FORECAST (FREIGHT & MAIL) CENTRAL PUGET SOUND REGION (CALENDAR YEARS; IN METRIC TONS)
1,000 ACTUAL
Air Cargo (000s tons)
900
FORECAST
800 700 600 500 400 300 SEA
200
BFI
100
SEA 456,920 401,535 374,753 351,418 346,966
2010 2015 2025
428,300 156,900 585,200 512,900 182,300 695,200 707,600 242900 950,500
3.6% 3.7% 3.3% 3.5%
3.7% 3.0% 2.9% 3.2%
Total 566,724 492,253 479,191 456,732 472,830
2024
2022
2020
2018
2016
2014
2012
2000 2001 2002 2003 2004
AACGR: 2004-2010 2010-2015 2015-2025 2004-2025
BFI 109,804 90,718 104,438 105,314 125,864
2010
2008
2006
2004
2002
2000
0
% of Total SEA BFI 80.6% 19.4% 81.6% 18.4% 78.2% 21.8% 76.9% 23.1% 73.4% 26.6%
Total 100.0% 100.0% 100.0% 100.0% 100.0%
73.2% 73.8% 74.4%
100.0% 100.0% 100.0%
26.8% 26.2% 25.6%
3.6% 3.5% 3.2% 3.4%
Sources: Historical—Airport Records. Forecast—Landrum & Brown, Inc.
Unlike passenger volumes, which more often than not involve a round trip itinerary, air cargo volumes can be significantly unbalanced (i.e., more tonnage can be enplaned than deplaned and vice versa). Understanding the balance of air cargo
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can give a better understanding of risk associated improvements and the potential for air cargo diversion.
with
planned
capital
At SEA air cargo volumes have been evenly balanced with 50 percent of air cargo enplaned and deplaned. When segmented by flight orientation, international air cargo is somewhat more heavily weighted by enplaned air cargo (55 percent in 2004), while domestic air cargo split evenly between enplaned and deplaned volumes. At BFI, air cargo volumes are more heavily weighted by deplaned air cargo (64 percent in 2004).
III. SEATTLE-TACOMA INTERNATIONAL AIRPORT According to statistics published by Airports Council International, SEA ranked 21st among U.S. airports in terms of total air cargo handled in 2004. Of the 347,000 metric tons of air cargo handled at the airport in 2004, 77 percent was carried on domestic flights, with the remaining 23 percent carried on international flights. Sea-Tac staff provided air cargo and aircraft landings data for 2000 through 2004 by segment (domestic and international) and by airline. As a result, data could be grouped into meaningful categories in which to analyze historical air cargo activity at SEA. After disaggregating the data by domestic and international activity, historical data were developed, when appropriate, for the three primary modes of transporting air cargo at SEA: Integrated all-cargo carriers use dedicated air cargo aircraft to transport air cargo and have a vertically integrated trucking system which provides door-to-door freight services to its customers. The three primary “integrators” are FedEx, UPS, and DHL/Airborne. Non-integrated all-cargo carriers also operate dedicated air cargo aircraft but provide airport-to-airport freight services. These all-cargo carriers rely on freight forwarders to deliver outbound shipments to the airport from the shipper’s location and transport inbound freight from the airport to their final destination. Passenger airlines transport air cargo in the belly compartments of passenger aircraft. Domestic Air Freight As discussed in Chapter II, the volume of domestic air freight handled at SEA has been subject to both economic factors, strategic airline decisions, and unforeseen events such as the 9-11 terrorist attacks. In 2004, 31 airlines reported handling domestic air freight at SEA. However, a relatively high percentage of domestic freight is handled by just a small number of
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carriers (see Table IV-1). FedEx (an integrated all-cargo carrier) accounted for just over 50 percent of all domestic air freight in 2004, followed by Alaska (16 percent) and Delta (6 percent). In total SEA’s three largest carriers (ranked by domestic freight) accounted for almost 73 percent of domestic air freight at SEA.
Table IV-1 SHARE OF DOMESTIC AIR FREIGHT BY CARRIER GROUP SEATTLE-TACOMA INTERNATIONAL AIRPORT (CALENDAR YEAR 2004) Passenger Carrier % of Tot. Alaska* 42.1% Delta 15.4% United 12.0% Other 30.5% Total 100.0% Source: Note:
Integrators Carrier % of Tot. FedEx 95.7% DHL/ABX 3.9% UPS 0.4% Other 0.0% Total 100.0%
Other All-Cargo Carrier % of Tot. Emery 43.4% Kitty Hawk 38.4% Empire 12.7% Other 5.5% Total 100.0%
Total—All Carriers Carrier % of Tot. FedEx 50.9% Alaska* 16.0% Delta 5.9% Other 27.2% Total 100.0%
Airport Records. Data excludes mail volumes. *Data for Alaska includes air freight handled by regional affiliates Horizon and Mesa. DHL/Airborne Express and UPS now schedule all flights through BFI.
As Table IV-2 shows, SEA has experienced declining domestic freight volumes in each year since 2000. In 2004, approximately 205,000 tons of domestic air freight were handled at SEA, 13 percent below 2000 levels and on par with 1991 levels. While each group of carriers has experienced reduced domestic freight volumes, since 2000, there has been a shift in the distribution of domestic freight among the carrier groups. It should be noted, however, that if DHL had not relocated from Sea-Tac to Boeing Field in April 2004, Sea-Tac would have demonstrated positive growth in domestic air freight over 2003. While Boeing Field benefited from DHL’s relocation, BFI would have still posted year-over-year in gains in 2004 due to gains in domestic freight volumes recorded by UPS. Since the mid-1990s, FedEx, UPS, and DHL have relocated their operations from either SEA or BFI. UPS and DHL relocated and concentrated their operations out of Sea-Tac to Boeing Field in order to be as close as possible to their primary markets in the central business district. This is a critical concern to integrated carriers who build their business models around time definite delivery. At the same time, FedEx, seeking more space for their larger operation, relocated to Sea-Tac where it is planning further growth. These moves have altered what would have been the anticipated growth for both facilities. However, all three integrators have now indicated that they are where they want to be, and future growth should settle into normalized patterns at both airports.
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Passenger Airlines The performance of domestic air freight handled by passenger airlines at SEA has generally been more favorable than that for integrated and other freighter operators. Domestic freight volumes for passenger airlines declined 13 percent in 2001, primarily due to a national economic recession and the aftermath of the 9-11 terrorist attacks. Over the subsequent three years, passenger airlines at SEA recorded positive growth in domestic air freight at SEA. In 2004, passenger airlines’ domestic freight tonnage at SEA was 7 percent below 2000 levels versus an airport average of 13 percent less. As a result, passenger airlines’ share of total domestic freight increased from 36 percent in 2000 to 38 percent in 2004. Table IV-2 TRENDS IN DOMESTIC AIR FREIGHT BY CARRIER GROUP SEATTLE-TACOMA INTERNATIONAL AIRPORT (CALENDAR YEARS; IN METRIC TONS) Type 2000 2001 2002 2003 2004
Psgr. Feighter Operators Carriers Integrator Other 84,383 129,365 22,779 73,452 122,393 22,668 73,839 120,446 21,261 77,541 113,101 15,196 78,117 109,235 17,981
Total 236,527 218,513 215,546 205,838 205,333
% Change: 2000-2001 2001-2002 2002-2003 2003-2004 2000-2004
-13.0% 0.5% 5.0% 0.7% -7.4%
-5.4% -1.6% -6.1% -3.4% -15.6%
-0.5% -6.2% -28.5% 18.3% -21.1%
-7.6% -1.4% -4.5% -0.2% -13.2%
AACGR: 2000-2004
-1.9%
-4.1%
-5.7%
-3.5%
Psgr. Feighter Operators Carriers Integrator Other 35.7% 54.7% 9.6% 33.6% 56.0% 10.4% 34.3% 55.9% 9.9% 37.7% 54.9% 7.4% 38.0% 53.2% 8.8%
Total 100.0% 100.0% 100.0% 100.0% 100.0%
Source: Airport Records. Note: AACGR=Average annual compound growth rate.
Available belly capacity for domestic air freight has declined at SEA, largely as a result of a 13 percent reduction in passenger operations at the airport between 2000 and 2004. Additionally, passenger airlines currently face significant upward pressure on unit costs due to high fuel prices coupled with downward pressure on yield (passenger fare paid per mile) resulting from intense competition within the domestic system. In order to better balance these variables, passenger airlines are “right-sizing” their fleet mix, utilizing capacity more efficiently, resulting in higher load factors. This is certainly evident at SEA where load factors have increased from around 72 percent in 2000 to 77 percent in 2004. With passenger aircraft operating with higher passenger loads, on average, there is also less room available for air cargo on a per operation basis. Estimates indicate that available belly
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capacity (before passenger baggage) on outbound and inbound domestic flights at SEA declined 16 percent from 559,000 tons in 2000 to 467,000 tons in 2004. With regard to utilization, it is estimated that passenger airlines used only 17 percent of capacity available for air cargo on domestic flights at SEA in 2004, despite the drop in operations and higher load factors. Consequently, from a capacity perspective, passenger airlines have potential to grow air cargo volumes in excess of the rate of growth in operations. This is not atypical. Studies at other airports indicate utilization rates between 14 and 20 percent for domestic passenger flights. Integrated All-Cargo Carriers Integrated carriers account for the largest share of domestic freight handled at SEA due almost entirely to the size of FedEx’s operation at the airport (see Table IV-1). Domestic freight volumes handled by integrated carriers declined in each year between 2000 and 2004, primarily due to strategic airline decisions (see Figure IV-6). Figure IV-6 TRENDS IN DOMESTIC FREIGHT—INTEGRATED ALL-CARGO CARRIERS (CALENDAR YEARS; IN METRIC TONS)
Air Freight (in tons)
140,000 120,000 100,000 80,000 60,000 40,000 20,000 0 2000
2001 FedEx
2002
2003
2004
DHL/Airborne Express
Source: Airport Records. Note: UPS reported air cargo accounting for less then 0.05% of domestic freight handled by integrated cargo carriers in any given year and is not shown on the chart.
In 2000, Airborne Express (ABX) operated from both SEA and BFI, but has since consolidated its entire operation at BFI (minus the occasional diversion to SEA). DHL relocated its entire operations to Boeing Field in April 2004. Previously, DHL operated approximately four daily operations at SEA and, as recently as 2003,
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accounted for 10 percent of domestic air freight carried by the integrators. In 2004, DHL acquired ABX and is in the process of integrating route structures and stations. Although the numbers of operations in the Puget Sound region may decrease, it is not anticipated that total cargo volumes will decline. Utilization of Sea-Tac by UPS is on an unscheduled basis, usually due to weather or unusual peaking, and is not a factor in the Sea-Tac forecast. Indeed, UPS operations are located entirely at BFI. FedEx handled 105,000 tons of air cargo at SEA in 2004, accounting for 96 percent of all domestic freight handled by integrated carriers. FedEx’s cargo volumes have declined in recent years (down 4 percent in 2004 compared to 2000) albeit to a lesser degree than for integrated carriers as a group (down 16 percent). This occurred in spite of the absorption of the USPS mail contract in August 2001. FedEx has since that time reported all mail as freight, which artificially inflated the carrier’s reported cargo volumes. Encouragingly, data reported by FedEx for the first five months of 2005 indicate that its domestic freight handled at SEA will likely return to an upward trend, with FedEx’s cargo volumes and operations up 3 percent and 10 percent, respectively. Data reported by FedEx to SEA and the U.S. Department of Transportation suggest that over the past year it has downsized the average size of aircraft operated at SEA and added frequencies to compensate for a lower payload per flight. Other All-Cargo Carriers The remaining freighter operators at SEA account for a relatively small portion of domestic air freight at SEA, ranging between 7 and 10 percent of total domestic freight over the past five years. This group of carriers experienced the largest reduction in domestic freight at SEA, declining 21 percent between 2000 and 2004. Two airlines, Emery and Kitty Hawk, accounted for 82 percent of domestic freight handled by this group of airlines. These carriers typically carry products that are less time sensitive than those handled by the integrators and are more susceptible to trucking substitution. Table IV-3 illustrates trends in air freight for the all-cargo carriers, both integrated and non-integrated all-cargo carriers.
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Table IV-3 TRENDS IN DOMESTIC AIR FREIGHT—FREIGHTER OPERATORS ONLY SEATTLE-TACOMA INTERNATIONAL AIRPORT (CALENDAR YEARS; IN METRIC TONS) Carrier Type Carrier Integrated All-Cargo Carriers FedEx DHL/Airborne Express UPS Total Non-integrated Cargo Carriers Emery Kitty Hawk Empire Ameriflight Other Total
2000
2001
Year 2002
2003
2004
109,203 110,386 108,195 100,993 104,508 19,988 11,840 11,809 11,951 4,286 174 167 442 157 441 129,365 122,393 120,446 113,101 109,235
14,557 209 1,105 2,140 4,768 22,779
13,327 2,736 819 2,147 3,639 22,668
9,769 4,195 1,684 2,086 3,527 21,261
7,369 4,082 2,201 1,192 352 15,196
% Change 2000-04 -4.3% -78.6% 153.4% -15.6%
7,799 6,905 2,283 112 882 17,981
-46.4% n.c. 106.6% -94.8% -81.5% -21.1%
152,144 145,061 141,707 128,297 127,216 Total—Freighter Operators Source: Airport Records. Note: Data do not include air freight handled by passenger carriers.
-16.4%
International Air Freight International air freight accounts for a small but growing component of air cargo at SEA. Over the past five years, SEA experienced a net gain in international air freight of 6 percent, with international freight volumes increasing from 75,000 tons in 2000 to 79,000 tons in 2004. Figure IV-7 TRENDS IN INTERNATIONAL FREIGHT BY MAJOR WORLD MARKET (CALENDAR YEAR 2004)
Asia 45% Canada & Other 2%
Europe 53%
Source: Airport Records. Data are for enplaned and deplaned freight for both passenger and all-cargo operators.
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International freight handled at SEA is primarily from either Europe or Asia, with Canadian freight accounting for most of the remaining tonnage (see Figure IV-7). Between 2000 and 2004, air freight transported between SEA and Europe and Asia increased 8 percent to each market. For purposes of analyzing historical trends, international freight data was further segmented for each world market into freight transported in the belly of passenger aircraft and dedicated all-cargo aircraft. No distinction between the service characteristics of all-cargo carriers was made as integrated carriers do not operate on international routes from SEA. The final segmentation was to group the airlines transporting air cargo into U.S. flag carriers and foreign-flag carriers. Europe Air Freight Air freight on the European trade route accounts for the largest share of international freight at SEA (53 percent in 2004). Air freight traveling on the European trade route increased from 40,000 tons in 2000 to 43,000 tons in 2004 (up 8 percent). Passenger airlines have driven growth in air freight on the European trade route, up almost 30 percent over the five year period (see Figure IV-8). In absolute terms an additional 4,000 tons of air cargo were handled by passenger carriers on the European trade route in 2004 versus 2000, with the increase being split evenly between U.S. and foreign flag airlines. Figure IV-8 TRENDS IN AIR FREIGHT—EUROPEAN TRADE ROUTE BY CARRIER TYPE (CALENDAR YEARS; IN METRIC TONS) 50,000 45,000 Freight (in tons)
40,000 35,000 30,000 25,000 20,000 15,000 10,000 5,000 0 2000
2001
2002
Passenger
2003
2004
All-Cargo
Source: Airport Records.
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In 2004, all-cargo freight volumes on the European trade route were still 6 percent below 2000 levels. The entire decline occurred in 2001 and 2002 with all-cargo volumes on the European route rebounding somewhat over the subsequent two years. In fact, in 2004, all-cargo carriers experienced an 11 percent increase in air freight volumes on the European trade route over the previous year. Asia Air Freight In 2004, the Asia trade route accounted for 45 percent of total international freight handled at SEA. Since 2000, Asia air freight has increased 8 percent at SEA from 33,000 tons in 2000 to almost 36,000 tons in 2004. All-cargo carriers have accounted for the entire increase in Asia freight at SEA, experiencing more than a tripling in freight volumes over the past five years (see Figure IV-9 and Table IV-4). In 2004, all-cargo carriers accounted for 28 percent of Asia freight, up from just 9 percent in 2000. Foreign-flag carriers have driven growth in Asia freight handled by all-cargo airlines at SEA, more than offsetting declines in Asia freight volumes experienced by U.S. all-cargo carriers. In contrast, passenger carriers’ freight volumes on the Asia trade route were still 15 percent below 2000 levels in 2004. However, much of this decline occurred in 2001 and 2002, with Asia freight on passenger airlines remaining relatively unchanged thereafter. Notably, U.S. carriers have accounted for the entire decline in Asia freight transported by passenger carriers over the five year period. Figure IV-9 TRENDS IN AIR FREIGHT—ASIA TRADE ROUTE BY CARRIER TYPE (CALENDAR YEARS; IN METRIC TONS) 40,000
Freight (in tons)
35,000 30,000 25,000 20,000 15,000 10,000 5,000 0 2000
2001
2002
Passenger
2003
2004
All-Cargo
Source: Airport Records.
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Table IV-4 TRENDS IN AIR FREIGHT—ASIA TRADE ROUTE BY CARRIER (CALENDAR YEARS; IN METRIC TONS) Carrier Type Carrier 2000 2001
Year 2002
2003
2004
% Total 2004
Passenger EVA Northwest United Asiana American Total
6,023 7,630 5,938 3,951 6,708 30,250
7,438 6,708 4,450 3,627 4,880 27,103
7,908 8,814 5,411 2,410 24 24,567
8,715 8,563 5,715 1,570 24,563
9,164 8,119 6,242 2,282 25,807
25.6% 22.7% 17.4% 6.4% 0.0% 72.0%
836 191 1,906 1 2,934
2,980 1,873 2,199 1,983 303 9,338
4,492 1,630 1,381 1,274 89 8,866
5,000 1,305 1,886 385 8,576
6,171 2,075 1,215 553 10,014
17.2% 5.8% 3.4% 1.5% 0.0% 0.0% 28.0%
33,184
36,441
33,433
33,139
35,821
100.0%
Cargo China Airlines China Cargo Airlines Polar Air Cargo Gemini Air Cargo China Eastern Other Total Total—Asia Trade Route Source: Airport Records.
Air Mail Air mail tonnage growth at SEA averaged almost 8 percent per year between 1990 and 2000. In fact, air mail volumes peaked at SEA in 2000 at 144,000 tons, representing 32 percent of total air cargo handled at the airport. However, reported air mail volumes have declined dramatically at SEA in recent years. In 2004, reported tonnage was 60 percent below the 2000 peak, and accounted for just 18 percent of total air cargo volume at SEA. The decline in reported air mail tonnage at SEA has resulted primarily from the shift of mail to trucks and also due to mail substitutes such as e-mail. It is important to note while the decline in air mail at SEA is a fact, FedEx, which reports all mail as freight, distorts the magnitude of the decline. The USPS indicates that actual volumes of mail (as opposed to reported) are virtually identical to 2000 totals. The distortion of the true mail volumes by FedEx makes forecasting mail volumes accurately at SEA a very difficult task.
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FORECAST ASSUMPTIONS A set of assumptions was developed for each of the segments of air cargo activity presented in the preceding historical analysis. The key assumptions underlying the forecast of air cargo for SEA are laid out below. Domestic Air Freight Passenger Airlines The availability of air cargo capacity on passenger carriers is determined by the volume of operations, passenger load factors and resulting passenger baggage volumes, as well as the size of passenger aircraft being operated at a given airport. Passenger carriers will tend towards higher passenger load factors over the forecast period in order to utilize seat capacity more efficiently at SEA. As a result, it is assumed that belly capacity available per flight for air cargo will decline. Despite the expected reduction in available belly capacity for cargo, the current low utilization rates at SEA will allow for continued growth in belly cargo. Additionally, based on recent positive enplanement trends at SEA, it is reasonably assumed that passenger operations will increase to accommodate future air travel demand. The FAA’s Terminal Area Forecast issued in January 2005 for Sea-Tac calls for long term growth of 2.6 percent per year for enplanements and 2.1 percent per year for commercial operations. In order to better balance the variables of revenue and cost, passenger airlines are expected to increasingly look to air cargo to generate incremental revenues when aircraft size and frequency permit. At the time of writing this report (July 2005), Southwest Airlines had announced its intention to move its entire operation from Sea-Tac to Boeing Field, due to concerns regarding the future cost of operations at SEA. Subsequently, Alaska Airlines submitted a proposal for development of a new passenger operation at Boeing Field. In October 2005 King County turned down both airlines’ proposals. Consequently, all current operations by Alaska and Southwest Airlines were assumed to remain at SEA for purposes of the forecast.
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Integrated All-Cargo Carriers Integrated carriers operating at SEA are involved entirely in the shipment of domestic air cargo. As a result, it is assumed that over the long term, growth in air cargo tonnage at SEA will be influenced more by U.S. economic activity than by global economic activity. The Energy Information Administration currently forecasts growth in U.S. GDP ranging from 2.5 to 3.6 percent annually through 2025. While, it is virtually impossible to determine the true origin and destination of air cargo shipments, it is assumed that the central Puget Sound region will provide a solid base for the transportation of goods by air. As discussed in Chapter I, key economic variables such as population, employment, and personal income are forecast to match or exceed forecast growth rates for the state and the U.S. as a whole. The ground (i.e., trucking) component of integrated carrier’s operations will continue to increase over the forecast period. Moreover, the expected increase in time definite second and third day delivery could potentially temper growth in integrated all-cargo operations at Sea-Tac. FedEx, which accounts for approximately half of all domestic freight handled at Sea-Tac, is expected to maintain and expand the size of its operation over the forecast period. It is assumed that FedEx’s operations will grow at a somewhat slower rate than the corresponding air cargo tonnage volumes as, where possible, it accommodates more air freight on existing flights or moves to larger aircraft. Other All-Cargo Carriers Domestic freight handled by non-integrated carriers jumped 18 percent in 2004, but was still 21 percent below pre 9-11 levels. This group of all-cargo carriers has been particularly affected by the shift of air freight to trucks. While it is assumed that the non-integrated allcargo carriers will experience growth in domestic freight volumes over the forecast period, it will occur at a slower rate than either the passenger or integrated carriers because the basic product carried is more susceptible to trucking substitution.
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International Air Freight Asia Air Freight In terms of world economic growth, Asia was the fastest growing world area in 2004 (up 5.2 percent). China is the primary driver of the Asian economy experiencing growth of 9.1 percent in 2004. Japan, which has been Asia’s largest and slowest growing economy in the past ten years, also experienced relatively strong economic growth in 2004 (up 4.1 percent). Global Insight, in its World Economic Outlook, November 2004, calls for long term growth of 3.6 percent in Asian economies. At the country level, Global Insight projects that Japan’s GDP will expand at 1.7 percent annually over the long term while China’s economy will grow at a significantly faster rate, averaging growth of 6.8 percent per year. Asia air cargo transported by all-cargo carriers is expected to grow at a faster rate than cargo carried in the belly of passenger aircraft. This is based on the assumption that all-cargo carriers will continue to transport Asia air cargo primarily between SEA and China while passenger carriers will likely have service split between China and Japan. It is estimated that passenger operations flying between SEA and Asian destinations utilize 50-60 percent of available belly capacity for air cargo. While this utilization is significantly higher than for domestic operations, it is assumed that current belly capacity utilization will allow for growth above the growth rate for operations. The relatively high concentration of Asians in the central Puget Sound region is expected to support growth in both passenger activity and freight activity between the region and Asian markets. European Air Freight Western Europe experienced relatively moderate GDP growth in 2004 (up 2.4 percent) while GDP growth in Eastern Europe expanded at a more robust rate (up 7.1 percent). Over the long term, based on projections published by Global Insight, the economies of Western Europe and Eastern Europe are forecast to expand at 2.2 percent and 4.6 percent per annum, respectively. Passenger airlines, particularly Northwest and British Airways, have driven growth in European freight from SEA (averaging 6.6 percent per year as a group between 2000 and 2004). The increase in belly cargo has been driven by increased utilization of belly capacity rather than increased lift due to additional passenger operations. In 2004,
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passenger carriers utilized approximately 58 percent of their belly capacity. While there is still room to accommodate additional belly cargo on European-bound passenger flights from SEA, it is assumed that the rate of growth for belly cargo will be slower than that experienced over the past five years. Cargolux and Martinair Holland have provided virtually all the lift for European all-cargo operations at SEA over the past five years. Both airlines have experienced a moderate decline in air cargo volumes at SEA over this period, but have added operations. It is assumed that the majority of European air cargo handled by all-cargo carriers at SEA is destined for Western Europe and will experience relatively moderate growth over the forecast period. Other International Markets International freight handled on flights other than those destined for Europe or Asia accounted for just 2 percent of international freight at SEA. Historically, most of this freight was transported between SEA and Canada. This segment of international freight has declined in each year since 2000 and, in 2004, was estimated to be 25 percent below 2000 levels at SEA. Due to the geographic proximity and easy access to Canada via ground transportation from the region, trucking freight into Canada has become an increasingly attractive option. In the event the TSA imposes strong screening requirements for belly cargo, it is anticipated that this market segment will be affected more than most in the form of additional diversion to trucks. While forecasts call for long-term growth of 2.8 percent annually for the Canadian economy, it is assumed that the trend to trucking will continue over the forecast period, resulting in relatively slow growth for air freight transported between SEA and Canada. Given the geographic positioning of the region, growth in cargo traffic to the emerging markets of Latin America and the Middle East is considered to be limited. Air Mail Air mail volumes at SEA have fallen sharply in recent years and this trend shows no sign of reversing in the near term. Mail volumes reported by airlines (other than FedEX) indicate that mail is down a further 4 percent for the first five months of 2005. Over the forecast period, it is assumed that air mail volumes will bottom out and return to an upward trend. However, the growth in air mail volume will be significantly lower than experienced during the 1990s.
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FORECAST RESULTS Air Cargo Total air cargo (air freight and air mail) at SEA is forecast to increase from 347,000 metric tons in 2004 to 708,000 tons in 2025, averaging growth of 3.5 percent per year. Growth in international freight is expected to drive growth in air cargo at SEA over the forecast period (see Figure IV-10). By comparison, preliminary air cargo projections published in the Sea-Tac Comprehensive Development Plan calls for long term growth of 3.6 percent per year, on average. Figure IV-10 FORECAST OF AIR CARGO (FREIGHT & MAIL) SEATTLE-TACOMA INTERNATIONAL AIRPORT (CALENDAR YEARS; IN METRIC TONS) 800
Domestic Freight International Freight Air Mail Total Air Cargo
Cargo (000's of Tons)
700 600 500 400 300 200 100
2025
2015
2010
2004
2003
2002
2001
2000
0
Sources: Historical—Airport Records. Forecast—Landrum & Brown, Inc.
Domestic freight is forecast to average growth of 3.5 percent per year, increasing from 205,000 metric tons in 2004 to 427,000 tons in 2025 (see Table IV-5). Domestic freight handled by passenger airlines and integrated all-cargo carriers are expected to drive growth, averaging gains of 3.9 percent and 3.4 percent per year, respectively. Domestic freight handled by non-integrated all-cargo carriers is forecast to increase at a slower rate, averaging growth of 2.5 percent per year. In
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comparison, the FAA’s forecast of domestic air cargo at the national level calls for growth of 3.3 percent per year between 2004 and 2016. 3 Table IV-5 FORECAST OF AIR FREIGHT (EXCLUDING MAIL) SEATTLE-TACOMA INTERNATIONAL AIRPORT (CALENDAR YEARS; IN METRIC TONS) Domestic Air Freight All-Cargo Integrator All Other 129,365 22,779 122,393 22,668 120,446 21,261 113,101 15,196 109,235 17,981
International Air Freight Total 74,854 75,773 71,048 73,664 79,278
GRAND TOTAL 311,381 294,286 286,594 279,502 284,611
2000 2001 2002 2003 2004
Passenger 84,383 73,452 73,839 77,541 78,117
2010
102,000
138,200
22,100 262,300
54,500
54,600
1,900 111,000
373,300
2015
124,400
164,200
25,000 313,600
73,900
63,300
2,200 139,400
453,000
2025
175,900
220,600
30,500 427,000
128,700
79,000
2,800 210,500
637,500
4.5% 4.1% 3.5% 3.9%
4.0% 3.5% 3.0% 3.4%
7.2% 6.3% 5.7% 6.3%
4.5% 3.0% 2.2% 3.1%
AACGR: 2004-2010 2010-2015 2015-2025 2004-2025
3.5% 2.5% 2.0% 2.5%
Total 236,527 218,513 215,546 205,838 205,333
Asia 33,184 36,441 33,433 33,139 35,821
Europe 39,685 37,521 35,789 38,736 41,969
4.2% 3.6% 3.1% 3.5%
Other 1,985 1,811 1,826 1,789 1,488
4.2% 3.0% 2.4% 3.1%
5.8% 4.7% 4.2% 4.8%
4.6% 3.9% 3.5% 3.9%
Sources: Historical—Airport Records. Forecast—Landrum & Brown, Inc. Note: AACGR=Average Annual Compound Growth Rate.
International freight is forecast to almost triple over the forecast period from 79,000 tons in 2004 to 211,000 tons in 2025, averaging growth of 4.8 percent per year. Air freight transported on the Asia trade route is forecast to grow at the fastest rate, averaging growth of 6.3 percent per year. By 2025, the Asia trade route is expected to account for 61 percent of international air freight at SEA, up from 45 percent in 2004. Air freight on the European Trade route is forecast to grow at 3.1 percent per year over the forecast period, approximately half the rate of Asia air freight. Mail volumes, for those carriers other than FedEx, are forecast to decline from 62,000 tons in 2004 to 55,000 tons in 2010. Thereafter, mail volumes are forecast to return to a moderate upward trend, reaching 70,000 tons by 2025. Commercial Operations Operations for passenger airlines and all-cargo carriers combined are forecast to increase 2.1 percent per year from 351,000 operations in 2004 to 542,000 3
The FAA’s current forecast of domestic cargo was published in March 2005 and was developed in revenue ton miles (RTMs) and includes both freight and mail volumes for the U.S. as a whole.
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operations in 2025 (see Table IV-6). The forecast of operations is in line with growth rates for SEA laid out in the FAA’s Terminal Area Forecast, published in January 2005, and is also consistent with operations forecasts published by the Port of Seattle. Domestic operations are forecast to average growth of 2.1 percent per year. Integrated all-cargo carrier operations are projected to experience the fastest rate of growth in domestic operations, based on the assumption that they will increase lift through adding frequency more than increasing cargo per operation. Passenger airlines are expected to be more readily able to accommodate additional air cargo through existing belly capacity and by up-gauging aircraft size. The remaining freighter operations are expected to experience the slowest growth in domestic operations, averaging growth of 1.8 percent per year. Table IV-6 FORECAST OF COMMERCIAL OPERATIONS SEATTLE-TACOMA INTERNATIONAL AIRPORT (CALENDAR YEARS)
Domestic All-Cargo Integrator All Other 6,450 13,504 5,078 11,946 5,286 8,738 4,958 7,390 3,798 5,216
International
2000 2001 2002 2003 2004
Passenger 365,340 344,078 302,830 297,968 302,704
2010 2015 2025
351,000 387,600 472,400
4,460 5,120 6,480
5,520 360,980 6,260 398,980 7,620 486,500
2.5% 2.0% 2.0% 2.1%
2.7% 2.8% 2.4% 2.6%
0.9% 2.5% 2.0% 1.8%
AACGR: 2004-2010 2010-2015 2015-2025 2004-2025
Total 385,294 361,102 316,854 310,316 311,718
Asia 5,084 5,390 4,734 4,698 4,590 6,380 7,940 11,260
2.5% 2.0% 2.0% 2.1%
5.6% 4.5% 3.6% 4.4%
Other 34,178 33,426 30,324 28,014 31,792
Total 42,332 42,016 38,268 35,952 39,516
GRAND TOTAL 427,626 403,118 355,122 346,268 351,234
3,720 34,240 4,060 36,380 4,680 39,920
44,340 48,380 55,860
405,320 447,360 542,360
1.9% 1.8% 1.4% 1.7%
2.4% 2.0% 1.9% 2.1%
Europe 3,070 3,200 3,210 3,240 3,134
2.9% 1.8% 1.4% 1.9%
1.2% 1.2% 0.9% 1.1%
Sources: Historical—Airport Records. Forecast—Landrum & Brown, Inc. Notes: AACGR=Average Annual Compound Growth Rate. Excludes data for general aviation and military operations.
International operations are forecast to increase from 40,000 operations in 2004 to 56,000 operations by 2025, averaging growth of 1.7 percent per year. Operations on the Asian trade route are expected to drive growth in international operations (up 4.4 percent per year). All-cargo operators will account for an increasing share of operations on the Asian trade route, accounting for 29 percent of Asia operations in 2025 versus 24 percent in 2004.
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European operations are forecast to increase 1.9 percent per year based on the assumption that there continues to be available capacity on passenger flights to accommodate European freight growth and that freight tonnage per flight for allcargo operators on the European trade route is currently down 24 percent over 2000 levels with no discernable change in aircraft gauge over the period. While the remaining international flight activity (i.e., air cargo not to and from Asia or Europe) currently accounts for just 2 percent of international freight, it represents 80 percent of international operations. The large majority of this activity is accounted for by scheduled passenger service to Canada. Currently the average gauge of aircraft operating to Canada is approximately 50 seats, and it is anticipated that airlines will move to larger aircraft on appropriate routes before increasing frequency. As a result, relatively moderate growth for this segment of operations is forecast, averaging 1.7 percent per year. The forecast of international operations for the freighter operators only is presented in Table IV-7. As the table shows, freighter operations on the Asia trade route are expected to drive growth in freighter operations at SEA, over the forecast period. Table IV-7 FORECAST OF INTERNATIONAL FREIGHTER OPERATIONS SEATTLE-TACOMA INTERNATIONAL AIRPORT (CALENDAR YEARS)
2004 2010 2015 2025 AACGR: 2004-2010 2010-2015 2015-2025 2004-2025
Asia 1,120 1,679 2,146 3,236
Europe 624 755 810 918
Other 622 668 710 752
Total 2,366 3,102 3,665 4,906
5.2% 5.0% 4.2% 5.2%
1.9% 1.4% 1.3% 1.9%
0.9% 1.2% 0.6% 0.9%
3.5% 3.4% 3.0% 3.5%
Sources: Historical—Airport Records. Forecast—Landrum & Brown, Inc. Notes: AACGR=Average Annual Compound Growth Rate.
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IV.
KING COUNTY INTERNATIONAL AIRPORT
Airport data were used to analyze historical air cargo activity at BFI. Total air cargo data were provided for the years 1993 through 1996, enplaned and deplaned cargo volumes were provided from 1997 through 2004, and carrier-specific data was provided from 1999 through 2004. Figure IV-11 illustrates recent historical trends in air cargo along with the primary events that have caused air cargo volumes to fluctuate at BFI since 1993. Air cargo volumes peaked at BFI in 1997, the same year in which FedEx decided to relocate its operation to SEA. As a result, cargo volumes declined at BFI and were subsequently further impacted in 2001 by an economic recession, an earthquake, and the aftermath of the 9-11 terrorist attacks. Air cargo volumes gradually recovered at BFI in 2002 and 2003. In 2004, air cargo volumes jumped almost 20 percent to 126,000 tons as a result of DHL relocating its operations from SEA to BFI and UPS experiencing a 17 percent increase in air cargo volumes.
Figure IV-11 AIR CARGO (FREIGHT & MAIL) KING COUNTY INTERNATIONAL AIRPORT (CALENDAR YEARS; IN METRIC TONS) 160,000
UPS begins air operation at BFI
Air Cargo (metric tons)
140,000
FedEx relocates to SEA
Economic recession, Earthquake, & 9-11
DHL relocates to BFI
120,000 100,000
Enplaned Deplaned
80,000
Total
60,000 40,000 20,000 0 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004
Source:
Airport Records.
As discussed in Chapter II of the report, there are two distinct types of cargo carrier operating at BFI. The first type are primarily “large” integrated all-cargo carriers such as UPS and DHL/Airborne which typically operate a mix of narrow-body jet aircraft and wide-body jet aircraft. The second type are “small” feeder carriers which generally operate turboprop aircraft weighing less than 60,000 pounds. For
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purposes of developing the forecast for BFI, these different types of operation were treated separately with the division based on classifications of aircraft type. Between 2000 and 2004, the large all-cargo carriers increased their share of air cargo at BFI from 93 percent to 96 percent. UPS handles the largest share of air cargo at BFI, accounting for nearly 60 percent of total air cargo in 2004 (see Table IV-8). Table IV-8 AIR CARGO BY CARRIER KING COUNTY INTERNATIONAL AIRPORT (CALENDAR YEARS; IN METRIC TONS) Aircraft Operated Carrier >60,000lbs DHL/Airborne Express ATI/BAX Global Evergreen UPS Total
1999
17,003 22,159 17,772 12,672 18 12 68,811 63,728 98,521 103,654
60,000lbs DHL/Airborne Express ATI/BAX Global Evergreen UPS Total
2000
2001
2002
2003
2004
% of Tot. 2004
1,562 708 4 3,554 5,828
1,242 556 2 3,218 5,018
1,316 810 4 3,040 5,170
1,346 796 3,068 5,210
2,414 790 32 3,080 6,316
10.6% 3.5% 0.1% 13.6% 27.8%
1
In reviewing potential options for the accommodation of forecast growth, the Team identified all regional airports at which commercial air cargo volumes were reported to the Airports Council International (ACI), which tracks airport statistics, in the past three years. Only King County International and Sea-Tac reported cargo activity in that time period. While it is possible that some freight was moved through Bremerton and Paine Fields, any such cargo would have been privately carried and not show up in national statistics. In 2004, 136 airports reported cargo volumes to ACI. Number 136 reported only 17 tons over the course of the year. This is less volume than could be carried in one operation of a 727 and would have no impact on planning airport capacity.
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I.
NORTHWEST REGION AVIATION ACTIVITY
As part of the forecasting process, historical trends in aviation activity were analyzed for Sea-Tac and Boeing Field along with trends for Portland International Airport (PDX), Vancouver International Airport (YVR), Paine Field (PAE), and Spokane International Airport (GEG). Collectively, these airports are referred to as the Northwest region. These other airports were chosen due to their geographic proximity to SEA and BFI and their overlapping cargo markets (the market overlap for each of these airports, based on a 200-mile Air Trade Area radius, is illustrated on the following page). The purpose of analyzing trends at these other airports is to provide a context for the recent trends in activity at Sea-Tac and Boeing Field and determine whether these trends are unique to each airport or are indicative of broader regional trends. For a discussion of how these airports compete with each other see Chapter III, subsection 4. Enplanement Trends Passenger airlines are, by definition, in the business of transporting passengers. However, they often use the capacity of belly compartments of their aircraft not used to transport passenger baggage to generate incremental revenue through the transportation of air cargo. Passenger flight activity at an airport generally moves in the same direction as passenger traffic volumes. Consequently, positive growth in enplanements generally correlates with increased flight frequencies or larger aircraft, often resulting in increased lift capacity for air cargo (and vice versa). However, increased belly capacity is also closely tied to passenger load factors and size of aircraft. Airlines will typically increase load factors and, on appropriate routes, move to larger aircraft in an effort to drive down unit costs. As a result, the growth rate of operations will lag that of passengers. As Figure IV-1 shows, 30.3 million passengers were enplaned on flights from the region’s airports in 2004. Sea-Tac has historically accounted for the largest share of enplanements from these airports (47 percent in 2004). The most recent economic recession beginning in early 2001 and subsequent events (primarily the 9-11 terrorist attacks, SARS, and the Iraq War) resulted in declining passenger enplanement volumes in the Northwest region between 2001 and 2003. In 2004, passenger enplanement volumes returned to an upward trend, increasing almost 8 percent over the previous year. Analyzing each of the airports individually, it is evident that passenger enplanement volumes at Sea-Tac have been less affected by recent events, than at many of the other airports. As illustrated in Figure IV-2, Sea-Tac and Spokane are the only airports in the Northwest region to have handled more passengers in 2004 than in 2000. Boeing Field and Paine Field were not included in the review of passenger activity.
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Figure IV-1 NORTHWEST REGION—ENPLANEMENT TRENDS
Enplanements (in millions)
(CALENDAR YEARS) 35.0 30.0 25.0 20.0 15.0 10.0 5.0 0.0
2000
2001 SEA
2002 YVR
2003
PDX
2004
GEG
Source: Airport Records.
Figure IV-2 INDEX OF NORTHWEST REGION PASSENGER ENPLANEMENT TRENDS (CALENDAR YEARS; 2000=100) 102 100 98 96 94 92 90 88 2000
2001 SEA
GEG
2002 PDX
2003 YVR
2004 NW Region
Source: Airport Records.
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Air Cargo Volumes Approximately one million metric tons of air cargo were handled at the Northwest region’s airports in 2004 (see Figure IV-3). 2 Sea-Tac and Boeing Field accounted for 34 percent and 12 percent of the Northwest region’s air cargo, respectively. Unlike passenger volumes, air cargo volumes in the Northwest region have not recovered to pre 9-11 levels. In 2004, air cargo tonnage for the Northwest region was still 13 percent below 2000 levels. It is worth noting, however, that 2004 marked the first year of air cargo tonnage growth since 1999, increasing 5 percent over 2003. Figure IV-3 NORTHWEST REGION—AIR CARGO VOLUMES (CALENDAR YEARS; IN METRIC TONS) 1.4
Air Cargo (metric tons)
1.2 1.0 0.8 0.6 0.4 0.2 0.0 2000
2001
SEA
2002
PDX
YVR
2003
BFI
2004
GEG
Source: Airport Records.
Sea-Tac’s cargo volumes have been particularly affected in recent years. As Figure IV-4 shows, air cargo handled at Sea-Tac has declined in each year since 2000. In 2004, air cargo tonnage (freight and mail) at SEA was down 25 percent compared to 2000 levels. By contrast, air cargo volumes at Boeing Field in 2004 were up 15 percent over the same period. The reasons for these changes will be explored in more detail in the next three subsections.
2 A metric ton is a weight measure equal to 2,204 pounds as opposed to a U.S. ton (or short ton) which is equal to 2,000 pounds. All data shown throughout the forecast chapter are expressed in metric tons.
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Figure IV-4 INDEX OF NORTHWEST REGION AIR CARGO TRENDS (CALENDAR YEARS; IN METRIC TONS, 2000=100)
Air Cargo (metric tons)
120 110 100 90 80 70 2000 SEA
2001 GEG
2002 PDX
YVR
2003 BFI
2004 NW Region
Source: Airport Records.
II.
AIR CARGO FORECAST CENTRAL PUGET SOUND REGION
The central Puget Sound region is comprised of King, Kitsap, Pierce and Snohomish counties. Its major aviation facilities include Seattle-Tacoma International Airport, King County International Airport (Boeing Field), and Snohomish County Airport (Paine Field). Historically, air cargo in the region has been handled almost entirely at SEA and BFI. A bottom-up approach to the forecasts was used due to the lack of overlap in airlines’ operations at the two main air cargo airports in the region. This approach allowed for a detailed segmentation of the data into domestic and international segments and by carrier type. Corresponding assumptions were then developed for each segment to forecast activity at both SEA and BFI. The forecasts of air cargo and flight operations for Seattle-Tacoma and King County International airports were combined in order to develop an aggregate regional forecast (see Figure IV5 and Table IV-1). The aggregated forecast was subjected to a number of reasonableness checks based on the assumptions laid out in this chapter of the report and the information presented in the previous chapters. These checks included review of peer airport forecasts and broader national and global forecasts. Historical market share trends for SEA and BFI were also reviewed. The air cargo forecasts for SEA and BFI are presented in the subsequent two subsections. Air cargo handled in the region is forecast to average growth of 3.4 percent per year over the forecast period. By 2025, air cargo volumes in the region are forecast to reach 950,000 tons, more than double the 2004 level (473,000 tons).
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Figure IV-5 AIR CARGO FORECAST (FREIGHT & MAIL) CENTRAL PUGET SOUND REGION (CALENDAR YEARS; IN METRIC TONS)
1,000 ACTUAL
Air Cargo (000s tons)
900
FORECAST
800 700 600 500 400 300 SEA
200
BFI
100
SEA 456,920 401,535 374,753 351,418 346,966
2010 2015 2025
428,300 156,900 585,200 512,900 182,300 695,200 707,600 242900 950,500
3.6% 3.7% 3.3% 3.5%
3.7% 3.0% 2.9% 3.2%
Total 566,724 492,253 479,191 456,732 472,830
2024
2022
2020
2018
2016
2014
2012
2000 2001 2002 2003 2004
AACGR: 2004-2010 2010-2015 2015-2025 2004-2025
BFI 109,804 90,718 104,438 105,314 125,864
2010
2008
2006
2004
2002
2000
0
% of Total SEA BFI 80.6% 19.4% 81.6% 18.4% 78.2% 21.8% 76.9% 23.1% 73.4% 26.6%
Total 100.0% 100.0% 100.0% 100.0% 100.0%
73.2% 73.8% 74.4%
100.0% 100.0% 100.0%
26.8% 26.2% 25.6%
3.6% 3.5% 3.2% 3.4%
Sources: Historical—Airport Records. Forecast—Landrum & Brown, Inc.
Unlike passenger volumes, which more often than not involve a round trip itinerary, air cargo volumes can be significantly unbalanced (i.e., more tonnage can be enplaned than deplaned and vice versa). Understanding the balance of air cargo
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can give a better understanding of risk associated improvements and the potential for air cargo diversion.
with
planned
capital
At SEA air cargo volumes have been evenly balanced with 50 percent of air cargo enplaned and deplaned. When segmented by flight orientation, international air cargo is somewhat more heavily weighted by enplaned air cargo (55 percent in 2004), while domestic air cargo split evenly between enplaned and deplaned volumes. At BFI, air cargo volumes are more heavily weighted by deplaned air cargo (64 percent in 2004).
III. SEATTLE-TACOMA INTERNATIONAL AIRPORT According to statistics published by Airports Council International, SEA ranked 21st among U.S. airports in terms of total air cargo handled in 2004. Of the 347,000 metric tons of air cargo handled at the airport in 2004, 77 percent was carried on domestic flights, with the remaining 23 percent carried on international flights. Sea-Tac staff provided air cargo and aircraft landings data for 2000 through 2004 by segment (domestic and international) and by airline. As a result, data could be grouped into meaningful categories in which to analyze historical air cargo activity at SEA. After disaggregating the data by domestic and international activity, historical data were developed, when appropriate, for the three primary modes of transporting air cargo at SEA: Integrated all-cargo carriers use dedicated air cargo aircraft to transport air cargo and have a vertically integrated trucking system which provides door-to-door freight services to its customers. The three primary “integrators” are FedEx, UPS, and DHL/Airborne. Non-integrated all-cargo carriers also operate dedicated air cargo aircraft but provide airport-to-airport freight services. These all-cargo carriers rely on freight forwarders to deliver outbound shipments to the airport from the shipper’s location and transport inbound freight from the airport to their final destination. Passenger airlines transport air cargo in the belly compartments of passenger aircraft. Domestic Air Freight As discussed in Chapter II, the volume of domestic air freight handled at SEA has been subject to both economic factors, strategic airline decisions, and unforeseen events such as the 9-11 terrorist attacks. In 2004, 31 airlines reported handling domestic air freight at SEA. However, a relatively high percentage of domestic freight is handled by just a small number of
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carriers (see Table IV-1). FedEx (an integrated all-cargo carrier) accounted for just over 50 percent of all domestic air freight in 2004, followed by Alaska (16 percent) and Delta (6 percent). In total SEA’s three largest carriers (ranked by domestic freight) accounted for almost 73 percent of domestic air freight at SEA.
Table IV-1 SHARE OF DOMESTIC AIR FREIGHT BY CARRIER GROUP SEATTLE-TACOMA INTERNATIONAL AIRPORT (CALENDAR YEAR 2004) Passenger Carrier % of Tot. Alaska* 42.1% Delta 15.4% United 12.0% Other 30.5% Total 100.0% Source: Note:
Integrators Carrier % of Tot. FedEx 95.7% DHL/ABX 3.9% UPS 0.4% Other 0.0% Total 100.0%
Other All-Cargo Carrier % of Tot. Emery 43.4% Kitty Hawk 38.4% Empire 12.7% Other 5.5% Total 100.0%
Total—All Carriers Carrier % of Tot. FedEx 50.9% Alaska* 16.0% Delta 5.9% Other 27.2% Total 100.0%
Airport Records. Data excludes mail volumes. *Data for Alaska includes air freight handled by regional affiliates Horizon and Mesa. DHL/Airborne Express and UPS now schedule all flights through BFI.
As Table IV-2 shows, SEA has experienced declining domestic freight volumes in each year since 2000. In 2004, approximately 205,000 tons of domestic air freight were handled at SEA, 13 percent below 2000 levels and on par with 1991 levels. While each group of carriers has experienced reduced domestic freight volumes, since 2000, there has been a shift in the distribution of domestic freight among the carrier groups. It should be noted, however, that if DHL had not relocated from Sea-Tac to Boeing Field in April 2004, Sea-Tac would have demonstrated positive growth in domestic air freight over 2003. While Boeing Field benefited from DHL’s relocation, BFI would have still posted year-over-year in gains in 2004 due to gains in domestic freight volumes recorded by UPS. Since the mid-1990s, FedEx, UPS, and DHL have relocated their operations from either SEA or BFI. UPS and DHL relocated and concentrated their operations out of Sea-Tac to Boeing Field in order to be as close as possible to their primary markets in the central business district. This is a critical concern to integrated carriers who build their business models around time definite delivery. At the same time, FedEx, seeking more space for their larger operation, relocated to Sea-Tac where it is planning further growth. These moves have altered what would have been the anticipated growth for both facilities. However, all three integrators have now indicated that they are where they want to be, and future growth should settle into normalized patterns at both airports.
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Passenger Airlines The performance of domestic air freight handled by passenger airlines at SEA has generally been more favorable than that for integrated and other freighter operators. Domestic freight volumes for passenger airlines declined 13 percent in 2001, primarily due to a national economic recession and the aftermath of the 9-11 terrorist attacks. Over the subsequent three years, passenger airlines at SEA recorded positive growth in domestic air freight at SEA. In 2004, passenger airlines’ domestic freight tonnage at SEA was 7 percent below 2000 levels versus an airport average of 13 percent less. As a result, passenger airlines’ share of total domestic freight increased from 36 percent in 2000 to 38 percent in 2004. Table IV-2 TRENDS IN DOMESTIC AIR FREIGHT BY CARRIER GROUP SEATTLE-TACOMA INTERNATIONAL AIRPORT (CALENDAR YEARS; IN METRIC TONS) Type 2000 2001 2002 2003 2004
Psgr. Feighter Operators Carriers Integrator Other 84,383 129,365 22,779 73,452 122,393 22,668 73,839 120,446 21,261 77,541 113,101 15,196 78,117 109,235 17,981
Total 236,527 218,513 215,546 205,838 205,333
% Change: 2000-2001 2001-2002 2002-2003 2003-2004 2000-2004
-13.0% 0.5% 5.0% 0.7% -7.4%
-5.4% -1.6% -6.1% -3.4% -15.6%
-0.5% -6.2% -28.5% 18.3% -21.1%
-7.6% -1.4% -4.5% -0.2% -13.2%
AACGR: 2000-2004
-1.9%
-4.1%
-5.7%
-3.5%
Psgr. Feighter Operators Carriers Integrator Other 35.7% 54.7% 9.6% 33.6% 56.0% 10.4% 34.3% 55.9% 9.9% 37.7% 54.9% 7.4% 38.0% 53.2% 8.8%
Total 100.0% 100.0% 100.0% 100.0% 100.0%
Source: Airport Records. Note: AACGR=Average annual compound growth rate.
Available belly capacity for domestic air freight has declined at SEA, largely as a result of a 13 percent reduction in passenger operations at the airport between 2000 and 2004. Additionally, passenger airlines currently face significant upward pressure on unit costs due to high fuel prices coupled with downward pressure on yield (passenger fare paid per mile) resulting from intense competition within the domestic system. In order to better balance these variables, passenger airlines are “right-sizing” their fleet mix, utilizing capacity more efficiently, resulting in higher load factors. This is certainly evident at SEA where load factors have increased from around 72 percent in 2000 to 77 percent in 2004. With passenger aircraft operating with higher passenger loads, on average, there is also less room available for air cargo on a per operation basis. Estimates indicate that available belly
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capacity (before passenger baggage) on outbound and inbound domestic flights at SEA declined 16 percent from 559,000 tons in 2000 to 467,000 tons in 2004. With regard to utilization, it is estimated that passenger airlines used only 17 percent of capacity available for air cargo on domestic flights at SEA in 2004, despite the drop in operations and higher load factors. Consequently, from a capacity perspective, passenger airlines have potential to grow air cargo volumes in excess of the rate of growth in operations. This is not atypical. Studies at other airports indicate utilization rates between 14 and 20 percent for domestic passenger flights. Integrated All-Cargo Carriers Integrated carriers account for the largest share of domestic freight handled at SEA due almost entirely to the size of FedEx’s operation at the airport (see Table IV-1). Domestic freight volumes handled by integrated carriers declined in each year between 2000 and 2004, primarily due to strategic airline decisions (see Figure IV-6). Figure IV-6 TRENDS IN DOMESTIC FREIGHT—INTEGRATED ALL-CARGO CARRIERS (CALENDAR YEARS; IN METRIC TONS)
Air Freight (in tons)
140,000 120,000 100,000 80,000 60,000 40,000 20,000 0 2000
2001 FedEx
2002
2003
2004
DHL/Airborne Express
Source: Airport Records. Note: UPS reported air cargo accounting for less then 0.05% of domestic freight handled by integrated cargo carriers in any given year and is not shown on the chart.
In 2000, Airborne Express (ABX) operated from both SEA and BFI, but has since consolidated its entire operation at BFI (minus the occasional diversion to SEA). DHL relocated its entire operations to Boeing Field in April 2004. Previously, DHL operated approximately four daily operations at SEA and, as recently as 2003,
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accounted for 10 percent of domestic air freight carried by the integrators. In 2004, DHL acquired ABX and is in the process of integrating route structures and stations. Although the numbers of operations in the Puget Sound region may decrease, it is not anticipated that total cargo volumes will decline. Utilization of Sea-Tac by UPS is on an unscheduled basis, usually due to weather or unusual peaking, and is not a factor in the Sea-Tac forecast. Indeed, UPS operations are located entirely at BFI. FedEx handled 105,000 tons of air cargo at SEA in 2004, accounting for 96 percent of all domestic freight handled by integrated carriers. FedEx’s cargo volumes have declined in recent years (down 4 percent in 2004 compared to 2000) albeit to a lesser degree than for integrated carriers as a group (down 16 percent). This occurred in spite of the absorption of the USPS mail contract in August 2001. FedEx has since that time reported all mail as freight, which artificially inflated the carrier’s reported cargo volumes. Encouragingly, data reported by FedEx for the first five months of 2005 indicate that its domestic freight handled at SEA will likely return to an upward trend, with FedEx’s cargo volumes and operations up 3 percent and 10 percent, respectively. Data reported by FedEx to SEA and the U.S. Department of Transportation suggest that over the past year it has downsized the average size of aircraft operated at SEA and added frequencies to compensate for a lower payload per flight. Other All-Cargo Carriers The remaining freighter operators at SEA account for a relatively small portion of domestic air freight at SEA, ranging between 7 and 10 percent of total domestic freight over the past five years. This group of carriers experienced the largest reduction in domestic freight at SEA, declining 21 percent between 2000 and 2004. Two airlines, Emery and Kitty Hawk, accounted for 82 percent of domestic freight handled by this group of airlines. These carriers typically carry products that are less time sensitive than those handled by the integrators and are more susceptible to trucking substitution. Table IV-3 illustrates trends in air freight for the all-cargo carriers, both integrated and non-integrated all-cargo carriers.
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Table IV-3 TRENDS IN DOMESTIC AIR FREIGHT—FREIGHTER OPERATORS ONLY SEATTLE-TACOMA INTERNATIONAL AIRPORT (CALENDAR YEARS; IN METRIC TONS) Carrier Type Carrier Integrated All-Cargo Carriers FedEx DHL/Airborne Express UPS Total Non-integrated Cargo Carriers Emery Kitty Hawk Empire Ameriflight Other Total
2000
2001
Year 2002
2003
2004
109,203 110,386 108,195 100,993 104,508 19,988 11,840 11,809 11,951 4,286 174 167 442 157 441 129,365 122,393 120,446 113,101 109,235
14,557 209 1,105 2,140 4,768 22,779
13,327 2,736 819 2,147 3,639 22,668
9,769 4,195 1,684 2,086 3,527 21,261
7,369 4,082 2,201 1,192 352 15,196
% Change 2000-04 -4.3% -78.6% 153.4% -15.6%
7,799 6,905 2,283 112 882 17,981
-46.4% n.c. 106.6% -94.8% -81.5% -21.1%
152,144 145,061 141,707 128,297 127,216 Total—Freighter Operators Source: Airport Records. Note: Data do not include air freight handled by passenger carriers.
-16.4%
International Air Freight International air freight accounts for a small but growing component of air cargo at SEA. Over the past five years, SEA experienced a net gain in international air freight of 6 percent, with international freight volumes increasing from 75,000 tons in 2000 to 79,000 tons in 2004. Figure IV-7 TRENDS IN INTERNATIONAL FREIGHT BY MAJOR WORLD MARKET (CALENDAR YEAR 2004)
Asia 45% Canada & Other 2%
Europe 53%
Source: Airport Records. Data are for enplaned and deplaned freight for both passenger and all-cargo operators.
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International freight handled at SEA is primarily from either Europe or Asia, with Canadian freight accounting for most of the remaining tonnage (see Figure IV-7). Between 2000 and 2004, air freight transported between SEA and Europe and Asia increased 8 percent to each market. For purposes of analyzing historical trends, international freight data was further segmented for each world market into freight transported in the belly of passenger aircraft and dedicated all-cargo aircraft. No distinction between the service characteristics of all-cargo carriers was made as integrated carriers do not operate on international routes from SEA. The final segmentation was to group the airlines transporting air cargo into U.S. flag carriers and foreign-flag carriers. Europe Air Freight Air freight on the European trade route accounts for the largest share of international freight at SEA (53 percent in 2004). Air freight traveling on the European trade route increased from 40,000 tons in 2000 to 43,000 tons in 2004 (up 8 percent). Passenger airlines have driven growth in air freight on the European trade route, up almost 30 percent over the five year period (see Figure IV-8). In absolute terms an additional 4,000 tons of air cargo were handled by passenger carriers on the European trade route in 2004 versus 2000, with the increase being split evenly between U.S. and foreign flag airlines. Figure IV-8 TRENDS IN AIR FREIGHT—EUROPEAN TRADE ROUTE BY CARRIER TYPE (CALENDAR YEARS; IN METRIC TONS) 50,000 45,000 Freight (in tons)
40,000 35,000 30,000 25,000 20,000 15,000 10,000 5,000 0 2000
2001
2002
Passenger
2003
2004
All-Cargo
Source: Airport Records.
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In 2004, all-cargo freight volumes on the European trade route were still 6 percent below 2000 levels. The entire decline occurred in 2001 and 2002 with all-cargo volumes on the European route rebounding somewhat over the subsequent two years. In fact, in 2004, all-cargo carriers experienced an 11 percent increase in air freight volumes on the European trade route over the previous year. Asia Air Freight In 2004, the Asia trade route accounted for 45 percent of total international freight handled at SEA. Since 2000, Asia air freight has increased 8 percent at SEA from 33,000 tons in 2000 to almost 36,000 tons in 2004. All-cargo carriers have accounted for the entire increase in Asia freight at SEA, experiencing more than a tripling in freight volumes over the past five years (see Figure IV-9 and Table IV-4). In 2004, all-cargo carriers accounted for 28 percent of Asia freight, up from just 9 percent in 2000. Foreign-flag carriers have driven growth in Asia freight handled by all-cargo airlines at SEA, more than offsetting declines in Asia freight volumes experienced by U.S. all-cargo carriers. In contrast, passenger carriers’ freight volumes on the Asia trade route were still 15 percent below 2000 levels in 2004. However, much of this decline occurred in 2001 and 2002, with Asia freight on passenger airlines remaining relatively unchanged thereafter. Notably, U.S. carriers have accounted for the entire decline in Asia freight transported by passenger carriers over the five year period. Figure IV-9 TRENDS IN AIR FREIGHT—ASIA TRADE ROUTE BY CARRIER TYPE (CALENDAR YEARS; IN METRIC TONS) 40,000
Freight (in tons)
35,000 30,000 25,000 20,000 15,000 10,000 5,000 0 2000
2001
2002
Passenger
2003
2004
All-Cargo
Source: Airport Records.
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Table IV-4 TRENDS IN AIR FREIGHT—ASIA TRADE ROUTE BY CARRIER (CALENDAR YEARS; IN METRIC TONS) Carrier Type Carrier 2000 2001
Year 2002
2003
2004
% Total 2004
Passenger EVA Northwest United Asiana American Total
6,023 7,630 5,938 3,951 6,708 30,250
7,438 6,708 4,450 3,627 4,880 27,103
7,908 8,814 5,411 2,410 24 24,567
8,715 8,563 5,715 1,570 24,563
9,164 8,119 6,242 2,282 25,807
25.6% 22.7% 17.4% 6.4% 0.0% 72.0%
836 191 1,906 1 2,934
2,980 1,873 2,199 1,983 303 9,338
4,492 1,630 1,381 1,274 89 8,866
5,000 1,305 1,886 385 8,576
6,171 2,075 1,215 553 10,014
17.2% 5.8% 3.4% 1.5% 0.0% 0.0% 28.0%
33,184
36,441
33,433
33,139
35,821
100.0%
Cargo China Airlines China Cargo Airlines Polar Air Cargo Gemini Air Cargo China Eastern Other Total Total—Asia Trade Route Source: Airport Records.
Air Mail Air mail tonnage growth at SEA averaged almost 8 percent per year between 1990 and 2000. In fact, air mail volumes peaked at SEA in 2000 at 144,000 tons, representing 32 percent of total air cargo handled at the airport. However, reported air mail volumes have declined dramatically at SEA in recent years. In 2004, reported tonnage was 60 percent below the 2000 peak, and accounted for just 18 percent of total air cargo volume at SEA. The decline in reported air mail tonnage at SEA has resulted primarily from the shift of mail to trucks and also due to mail substitutes such as e-mail. It is important to note while the decline in air mail at SEA is a fact, FedEx, which reports all mail as freight, distorts the magnitude of the decline. The USPS indicates that actual volumes of mail (as opposed to reported) are virtually identical to 2000 totals. The distortion of the true mail volumes by FedEx makes forecasting mail volumes accurately at SEA a very difficult task.
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FORECAST ASSUMPTIONS A set of assumptions was developed for each of the segments of air cargo activity presented in the preceding historical analysis. The key assumptions underlying the forecast of air cargo for SEA are laid out below. Domestic Air Freight Passenger Airlines The availability of air cargo capacity on passenger carriers is determined by the volume of operations, passenger load factors and resulting passenger baggage volumes, as well as the size of passenger aircraft being operated at a given airport. Passenger carriers will tend towards higher passenger load factors over the forecast period in order to utilize seat capacity more efficiently at SEA. As a result, it is assumed that belly capacity available per flight for air cargo will decline. Despite the expected reduction in available belly capacity for cargo, the current low utilization rates at SEA will allow for continued growth in belly cargo. Additionally, based on recent positive enplanement trends at SEA, it is reasonably assumed that passenger operations will increase to accommodate future air travel demand. The FAA’s Terminal Area Forecast issued in January 2005 for Sea-Tac calls for long term growth of 2.6 percent per year for enplanements and 2.1 percent per year for commercial operations. In order to better balance the variables of revenue and cost, passenger airlines are expected to increasingly look to air cargo to generate incremental revenues when aircraft size and frequency permit. At the time of writing this report (July 2005), Southwest Airlines had announced its intention to move its entire operation from Sea-Tac to Boeing Field, due to concerns regarding the future cost of operations at SEA. Subsequently, Alaska Airlines submitted a proposal for development of a new passenger operation at Boeing Field. In October 2005 King County turned down both airlines’ proposals. Consequently, all current operations by Alaska and Southwest Airlines were assumed to remain at SEA for purposes of the forecast.
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Integrated All-Cargo Carriers Integrated carriers operating at SEA are involved entirely in the shipment of domestic air cargo. As a result, it is assumed that over the long term, growth in air cargo tonnage at SEA will be influenced more by U.S. economic activity than by global economic activity. The Energy Information Administration currently forecasts growth in U.S. GDP ranging from 2.5 to 3.6 percent annually through 2025. While, it is virtually impossible to determine the true origin and destination of air cargo shipments, it is assumed that the central Puget Sound region will provide a solid base for the transportation of goods by air. As discussed in Chapter I, key economic variables such as population, employment, and personal income are forecast to match or exceed forecast growth rates for the state and the U.S. as a whole. The ground (i.e., trucking) component of integrated carrier’s operations will continue to increase over the forecast period. Moreover, the expected increase in time definite second and third day delivery could potentially temper growth in integrated all-cargo operations at Sea-Tac. FedEx, which accounts for approximately half of all domestic freight handled at Sea-Tac, is expected to maintain and expand the size of its operation over the forecast period. It is assumed that FedEx’s operations will grow at a somewhat slower rate than the corresponding air cargo tonnage volumes as, where possible, it accommodates more air freight on existing flights or moves to larger aircraft. Other All-Cargo Carriers Domestic freight handled by non-integrated carriers jumped 18 percent in 2004, but was still 21 percent below pre 9-11 levels. This group of all-cargo carriers has been particularly affected by the shift of air freight to trucks. While it is assumed that the non-integrated allcargo carriers will experience growth in domestic freight volumes over the forecast period, it will occur at a slower rate than either the passenger or integrated carriers because the basic product carried is more susceptible to trucking substitution.
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International Air Freight Asia Air Freight In terms of world economic growth, Asia was the fastest growing world area in 2004 (up 5.2 percent). China is the primary driver of the Asian economy experiencing growth of 9.1 percent in 2004. Japan, which has been Asia’s largest and slowest growing economy in the past ten years, also experienced relatively strong economic growth in 2004 (up 4.1 percent). Global Insight, in its World Economic Outlook, November 2004, calls for long term growth of 3.6 percent in Asian economies. At the country level, Global Insight projects that Japan’s GDP will expand at 1.7 percent annually over the long term while China’s economy will grow at a significantly faster rate, averaging growth of 6.8 percent per year. Asia air cargo transported by all-cargo carriers is expected to grow at a faster rate than cargo carried in the belly of passenger aircraft. This is based on the assumption that all-cargo carriers will continue to transport Asia air cargo primarily between SEA and China while passenger carriers will likely have service split between China and Japan. It is estimated that passenger operations flying between SEA and Asian destinations utilize 50-60 percent of available belly capacity for air cargo. While this utilization is significantly higher than for domestic operations, it is assumed that current belly capacity utilization will allow for growth above the growth rate for operations. The relatively high concentration of Asians in the central Puget Sound region is expected to support growth in both passenger activity and freight activity between the region and Asian markets. European Air Freight Western Europe experienced relatively moderate GDP growth in 2004 (up 2.4 percent) while GDP growth in Eastern Europe expanded at a more robust rate (up 7.1 percent). Over the long term, based on projections published by Global Insight, the economies of Western Europe and Eastern Europe are forecast to expand at 2.2 percent and 4.6 percent per annum, respectively. Passenger airlines, particularly Northwest and British Airways, have driven growth in European freight from SEA (averaging 6.6 percent per year as a group between 2000 and 2004). The increase in belly cargo has been driven by increased utilization of belly capacity rather than increased lift due to additional passenger operations. In 2004,
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passenger carriers utilized approximately 58 percent of their belly capacity. While there is still room to accommodate additional belly cargo on European-bound passenger flights from SEA, it is assumed that the rate of growth for belly cargo will be slower than that experienced over the past five years. Cargolux and Martinair Holland have provided virtually all the lift for European all-cargo operations at SEA over the past five years. Both airlines have experienced a moderate decline in air cargo volumes at SEA over this period, but have added operations. It is assumed that the majority of European air cargo handled by all-cargo carriers at SEA is destined for Western Europe and will experience relatively moderate growth over the forecast period. Other International Markets International freight handled on flights other than those destined for Europe or Asia accounted for just 2 percent of international freight at SEA. Historically, most of this freight was transported between SEA and Canada. This segment of international freight has declined in each year since 2000 and, in 2004, was estimated to be 25 percent below 2000 levels at SEA. Due to the geographic proximity and easy access to Canada via ground transportation from the region, trucking freight into Canada has become an increasingly attractive option. In the event the TSA imposes strong screening requirements for belly cargo, it is anticipated that this market segment will be affected more than most in the form of additional diversion to trucks. While forecasts call for long-term growth of 2.8 percent annually for the Canadian economy, it is assumed that the trend to trucking will continue over the forecast period, resulting in relatively slow growth for air freight transported between SEA and Canada. Given the geographic positioning of the region, growth in cargo traffic to the emerging markets of Latin America and the Middle East is considered to be limited. Air Mail Air mail volumes at SEA have fallen sharply in recent years and this trend shows no sign of reversing in the near term. Mail volumes reported by airlines (other than FedEX) indicate that mail is down a further 4 percent for the first five months of 2005. Over the forecast period, it is assumed that air mail volumes will bottom out and return to an upward trend. However, the growth in air mail volume will be significantly lower than experienced during the 1990s.
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FORECAST RESULTS Air Cargo Total air cargo (air freight and air mail) at SEA is forecast to increase from 347,000 metric tons in 2004 to 708,000 tons in 2025, averaging growth of 3.5 percent per year. Growth in international freight is expected to drive growth in air cargo at SEA over the forecast period (see Figure IV-10). By comparison, preliminary air cargo projections published in the Sea-Tac Comprehensive Development Plan calls for long term growth of 3.6 percent per year, on average. Figure IV-10 FORECAST OF AIR CARGO (FREIGHT & MAIL) SEATTLE-TACOMA INTERNATIONAL AIRPORT (CALENDAR YEARS; IN METRIC TONS) 800
Domestic Freight International Freight Air Mail Total Air Cargo
Cargo (000's of Tons)
700 600 500 400 300 200 100
2025
2015
2010
2004
2003
2002
2001
2000
0
Sources: Historical—Airport Records. Forecast—Landrum & Brown, Inc.
Domestic freight is forecast to average growth of 3.5 percent per year, increasing from 205,000 metric tons in 2004 to 427,000 tons in 2025 (see Table IV-5). Domestic freight handled by passenger airlines and integrated all-cargo carriers are expected to drive growth, averaging gains of 3.9 percent and 3.4 percent per year, respectively. Domestic freight handled by non-integrated all-cargo carriers is forecast to increase at a slower rate, averaging growth of 2.5 percent per year. In
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comparison, the FAA’s forecast of domestic air cargo at the national level calls for growth of 3.3 percent per year between 2004 and 2016. 3 Table IV-5 FORECAST OF AIR FREIGHT (EXCLUDING MAIL) SEATTLE-TACOMA INTERNATIONAL AIRPORT (CALENDAR YEARS; IN METRIC TONS) Domestic Air Freight All-Cargo Integrator All Other 129,365 22,779 122,393 22,668 120,446 21,261 113,101 15,196 109,235 17,981
International Air Freight Total 74,854 75,773 71,048 73,664 79,278
GRAND TOTAL 311,381 294,286 286,594 279,502 284,611
2000 2001 2002 2003 2004
Passenger 84,383 73,452 73,839 77,541 78,117
2010
102,000
138,200
22,100 262,300
54,500
54,600
1,900 111,000
373,300
2015
124,400
164,200
25,000 313,600
73,900
63,300
2,200 139,400
453,000
2025
175,900
220,600
30,500 427,000
128,700
79,000
2,800 210,500
637,500
4.5% 4.1% 3.5% 3.9%
4.0% 3.5% 3.0% 3.4%
7.2% 6.3% 5.7% 6.3%
4.5% 3.0% 2.2% 3.1%
AACGR: 2004-2010 2010-2015 2015-2025 2004-2025
3.5% 2.5% 2.0% 2.5%
Total 236,527 218,513 215,546 205,838 205,333
Asia 33,184 36,441 33,433 33,139 35,821
Europe 39,685 37,521 35,789 38,736 41,969
4.2% 3.6% 3.1% 3.5%
Other 1,985 1,811 1,826 1,789 1,488
4.2% 3.0% 2.4% 3.1%
5.8% 4.7% 4.2% 4.8%
4.6% 3.9% 3.5% 3.9%
Sources: Historical—Airport Records. Forecast—Landrum & Brown, Inc. Note: AACGR=Average Annual Compound Growth Rate.
International freight is forecast to almost triple over the forecast period from 79,000 tons in 2004 to 211,000 tons in 2025, averaging growth of 4.8 percent per year. Air freight transported on the Asia trade route is forecast to grow at the fastest rate, averaging growth of 6.3 percent per year. By 2025, the Asia trade route is expected to account for 61 percent of international air freight at SEA, up from 45 percent in 2004. Air freight on the European Trade route is forecast to grow at 3.1 percent per year over the forecast period, approximately half the rate of Asia air freight. Mail volumes, for those carriers other than FedEx, are forecast to decline from 62,000 tons in 2004 to 55,000 tons in 2010. Thereafter, mail volumes are forecast to return to a moderate upward trend, reaching 70,000 tons by 2025. Commercial Operations Operations for passenger airlines and all-cargo carriers combined are forecast to increase 2.1 percent per year from 351,000 operations in 2004 to 542,000 3
The FAA’s current forecast of domestic cargo was published in March 2005 and was developed in revenue ton miles (RTMs) and includes both freight and mail volumes for the U.S. as a whole.
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operations in 2025 (see Table IV-6). The forecast of operations is in line with growth rates for SEA laid out in the FAA’s Terminal Area Forecast, published in January 2005, and is also consistent with operations forecasts published by the Port of Seattle. Domestic operations are forecast to average growth of 2.1 percent per year. Integrated all-cargo carrier operations are projected to experience the fastest rate of growth in domestic operations, based on the assumption that they will increase lift through adding frequency more than increasing cargo per operation. Passenger airlines are expected to be more readily able to accommodate additional air cargo through existing belly capacity and by up-gauging aircraft size. The remaining freighter operations are expected to experience the slowest growth in domestic operations, averaging growth of 1.8 percent per year. Table IV-6 FORECAST OF COMMERCIAL OPERATIONS SEATTLE-TACOMA INTERNATIONAL AIRPORT (CALENDAR YEARS)
Domestic All-Cargo Integrator All Other 6,450 13,504 5,078 11,946 5,286 8,738 4,958 7,390 3,798 5,216
International
2000 2001 2002 2003 2004
Passenger 365,340 344,078 302,830 297,968 302,704
2010 2015 2025
351,000 387,600 472,400
4,460 5,120 6,480
5,520 360,980 6,260 398,980 7,620 486,500
2.5% 2.0% 2.0% 2.1%
2.7% 2.8% 2.4% 2.6%
0.9% 2.5% 2.0% 1.8%
AACGR: 2004-2010 2010-2015 2015-2025 2004-2025
Total 385,294 361,102 316,854 310,316 311,718
Asia 5,084 5,390 4,734 4,698 4,590 6,380 7,940 11,260
2.5% 2.0% 2.0% 2.1%
5.6% 4.5% 3.6% 4.4%
Other 34,178 33,426 30,324 28,014 31,792
Total 42,332 42,016 38,268 35,952 39,516
GRAND TOTAL 427,626 403,118 355,122 346,268 351,234
3,720 34,240 4,060 36,380 4,680 39,920
44,340 48,380 55,860
405,320 447,360 542,360
1.9% 1.8% 1.4% 1.7%
2.4% 2.0% 1.9% 2.1%
Europe 3,070 3,200 3,210 3,240 3,134
2.9% 1.8% 1.4% 1.9%
1.2% 1.2% 0.9% 1.1%
Sources: Historical—Airport Records. Forecast—Landrum & Brown, Inc. Notes: AACGR=Average Annual Compound Growth Rate. Excludes data for general aviation and military operations.
International operations are forecast to increase from 40,000 operations in 2004 to 56,000 operations by 2025, averaging growth of 1.7 percent per year. Operations on the Asian trade route are expected to drive growth in international operations (up 4.4 percent per year). All-cargo operators will account for an increasing share of operations on the Asian trade route, accounting for 29 percent of Asia operations in 2025 versus 24 percent in 2004.
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European operations are forecast to increase 1.9 percent per year based on the assumption that there continues to be available capacity on passenger flights to accommodate European freight growth and that freight tonnage per flight for allcargo operators on the European trade route is currently down 24 percent over 2000 levels with no discernable change in aircraft gauge over the period. While the remaining international flight activity (i.e., air cargo not to and from Asia or Europe) currently accounts for just 2 percent of international freight, it represents 80 percent of international operations. The large majority of this activity is accounted for by scheduled passenger service to Canada. Currently the average gauge of aircraft operating to Canada is approximately 50 seats, and it is anticipated that airlines will move to larger aircraft on appropriate routes before increasing frequency. As a result, relatively moderate growth for this segment of operations is forecast, averaging 1.7 percent per year. The forecast of international operations for the freighter operators only is presented in Table IV-7. As the table shows, freighter operations on the Asia trade route are expected to drive growth in freighter operations at SEA, over the forecast period. Table IV-7 FORECAST OF INTERNATIONAL FREIGHTER OPERATIONS SEATTLE-TACOMA INTERNATIONAL AIRPORT (CALENDAR YEARS)
2004 2010 2015 2025 AACGR: 2004-2010 2010-2015 2015-2025 2004-2025
Asia 1,120 1,679 2,146 3,236
Europe 624 755 810 918
Other 622 668 710 752
Total 2,366 3,102 3,665 4,906
5.2% 5.0% 4.2% 5.2%
1.9% 1.4% 1.3% 1.9%
0.9% 1.2% 0.6% 0.9%
3.5% 3.4% 3.0% 3.5%
Sources: Historical—Airport Records. Forecast—Landrum & Brown, Inc. Notes: AACGR=Average Annual Compound Growth Rate.
Chapter IV – Air Cargo Forecast
IV-24
IV.
KING COUNTY INTERNATIONAL AIRPORT
Airport data were used to analyze historical air cargo activity at BFI. Total air cargo data were provided for the years 1993 through 1996, enplaned and deplaned cargo volumes were provided from 1997 through 2004, and carrier-specific data was provided from 1999 through 2004. Figure IV-11 illustrates recent historical trends in air cargo along with the primary events that have caused air cargo volumes to fluctuate at BFI since 1993. Air cargo volumes peaked at BFI in 1997, the same year in which FedEx decided to relocate its operation to SEA. As a result, cargo volumes declined at BFI and were subsequently further impacted in 2001 by an economic recession, an earthquake, and the aftermath of the 9-11 terrorist attacks. Air cargo volumes gradually recovered at BFI in 2002 and 2003. In 2004, air cargo volumes jumped almost 20 percent to 126,000 tons as a result of DHL relocating its operations from SEA to BFI and UPS experiencing a 17 percent increase in air cargo volumes.
Figure IV-11 AIR CARGO (FREIGHT & MAIL) KING COUNTY INTERNATIONAL AIRPORT (CALENDAR YEARS; IN METRIC TONS) 160,000
UPS begins air operation at BFI
Air Cargo (metric tons)
140,000
FedEx relocates to SEA
Economic recession, Earthquake, & 9-11
DHL relocates to BFI
120,000 100,000
Enplaned Deplaned
80,000
Total
60,000 40,000 20,000 0 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004
Source:
Airport Records.
As discussed in Chapter II of the report, there are two distinct types of cargo carrier operating at BFI. The first type are primarily “large” integrated all-cargo carriers such as UPS and DHL/Airborne which typically operate a mix of narrow-body jet aircraft and wide-body jet aircraft. The second type are “small” feeder carriers which generally operate turboprop aircraft weighing less than 60,000 pounds. For
Chapter IV – Air Cargo Forecast
IV-25
purposes of developing the forecast for BFI, these different types of operation were treated separately with the division based on classifications of aircraft type. Between 2000 and 2004, the large all-cargo carriers increased their share of air cargo at BFI from 93 percent to 96 percent. UPS handles the largest share of air cargo at BFI, accounting for nearly 60 percent of total air cargo in 2004 (see Table IV-8). Table IV-8 AIR CARGO BY CARRIER KING COUNTY INTERNATIONAL AIRPORT (CALENDAR YEARS; IN METRIC TONS) Aircraft Operated Carrier >60,000lbs DHL/Airborne Express ATI/BAX Global Evergreen UPS Total
1999
17,003 22,159 17,772 12,672 18 12 68,811 63,728 98,521 103,654
60,000lbs DHL/Airborne Express ATI/BAX Global Evergreen UPS Total
2000
2001
2002
2003
2004
% of Tot. 2004
1,562 708 4 3,554 5,828
1,242 556 2 3,218 5,018
1,316 810 4 3,040 5,170
1,346 796 3,068 5,210
2,414 790 32 3,080 6,316
10.6% 3.5% 0.1% 13.6% 27.8%
