TYING FREIGHT TO ECONOMIC

DEVELOPMENT:

AIR CARGO

TYING FREIGHT TO ECONOMIC

DEVELOPMENT:

AIR CARGO

TALKING FREIGHT SEMINAR SERIES

February 18, 2004

AIR CARGO DEVELOPMENT POTENTIAL

Air Cargo Markets:• Demonstrated unmet Demand• Existing Airports are Capacity Constrained• Regional Growth Driven Demand• Speculative Development to Drive Regional

Growth

Air Cargo Airports:• Existing Underutilized Facilities• Regional or Municipal Airports (G.A.)• Military Base Conversion• New Construction

Air Cargo Markets:• Demonstrated unmet Demand• Existing Airports are Capacity Constrained• Regional Growth Driven Demand• Speculative Development to Drive Regional

Growth

Air Cargo Airports:• Existing Underutilized Facilities• Regional or Municipal Airports (G.A.)• Military Base Conversion• New Construction

HOW DOES AIR CARGO CREATE ECONOMIC ACTIVITY?

Direct Impacts:• Air Cargo Carriers, Forwarders, Truckers• Support and Ancillary Services

Indirect Impacts:• Shippers• Manufacturing and Suppliers• Third-Party Logistics• Distribution (Retail and Wholesale)• Enhance FTZ Utilization

Direct Impacts:• Air Cargo Carriers, Forwarders, Truckers• Support and Ancillary Services

Indirect Impacts:• Shippers• Manufacturing and Suppliers• Third-Party Logistics• Distribution (Retail and Wholesale)• Enhance FTZ Utilization

THE MULTIPLIER EFFECT

Greater Economic Benefit is derived from the Secondary Impacts.

Manufacturing and Distribution Operations will locate and/or expand to take advantage of new multi-modal services.

Air Cargo intensive Manufacturers and Distributors produce and transport high-value goods.

Greater Economic Benefit is derived from the Secondary Impacts.

Manufacturing and Distribution Operations will locate and/or expand to take advantage of new multi-modal services.

Air Cargo intensive Manufacturers and Distributors produce and transport high-value goods.

PRIMARY PLANNING CONSIDERATIONS

• Market Understanding – Service Demand

• Cargo Carrier Understanding – Service Supply

• Anchor Tenant Concept

• Critical Mass

• Market Understanding – Service Demand

• Cargo Carrier Understanding – Service Supply

• Anchor Tenant Concept

• Critical Mass

LOCAL/REGIONAL AIR CARGO MARKET

Demand Analysis:• Geographic Region to be Served – Catchment Area

• Core Market Grouping(s)

• Population and Industrial Centers

• Identifies Competing Facilities within Region

• Identifies the Region that will Benefit*

Demand Analysis:• Geographic Region to be Served – Catchment Area

• Core Market Grouping(s)

• Population and Industrial Centers

• Identifies Competing Facilities within Region

• Identifies the Region that will Benefit*

WHAT THE DEMAND ANALYSIS TELLS US

Is this Project Feasible in light of:

• Current and Projected Volume of Air Cargo

• Capacity Constraints at Competing Airports

• Achievable Levels of Cargo Diversion

• Market Growth Potential

• Ideal Airport Location

• Types of Shippers and Freight within Region (Wholesale, Retail or Combination)

Is this Project Feasible in light of:

• Current and Projected Volume of Air Cargo

• Capacity Constraints at Competing Airports

• Achievable Levels of Cargo Diversion

• Market Growth Potential

• Ideal Airport Location

• Types of Shippers and Freight within Region (Wholesale, Retail or Combination)

SUPPLY ANALYSIS

What Air Cargo Market will this Facility Serve?

Air Cargo is NOT GenericAir Cargo Service is NOT Generic

Wholesale – Industrial/Manufacturing Shippers •High Volume per Customer, High Frequency•Heavy reliance on Forwarders and All-Cargo Charters•Manufacturing Centers, Industrial Park Concentrations

Retail – Consumer and Business Shippers •Low Volume, Sporadic Frequency•Heavy Reliance on Integrated Express Carriers•Large population and Urban Centers

What Air Cargo Market will this Facility Serve?

Air Cargo is NOT GenericAir Cargo Service is NOT Generic

Wholesale – Industrial/Manufacturing Shippers •High Volume per Customer, High Frequency•Heavy reliance on Forwarders and All-Cargo Charters•Manufacturing Centers, Industrial Park Concentrations

Retail – Consumer and Business Shippers •Low Volume, Sporadic Frequency•Heavy Reliance on Integrated Express Carriers•Large population and Urban Centers

SUPPLY ANALYSIS

Who will Provide the Service?•Integrated Express Carrier•All-Cargo Carrier•Freight Forwarder•Commercial Passenger Carriers

Develop the Facility Based on the Anticipated Service Provider – They

are Your Customer.

Who will Provide the Service?•Integrated Express Carrier•All-Cargo Carrier•Freight Forwarder•Commercial Passenger Carriers

Develop the Facility Based on the Anticipated Service Provider – They

are Your Customer.

Three Types of Air Cargo Airports:Three Types of Air Cargo Airports:

• Local Market Station – Offers Service to Local Market Station – Offers Service to Surrounding Market Area or Catchment Area Surrounding Market Area or Catchment Area

• Hub (Regional and National) – Consolidates Hub (Regional and National) – Consolidates and Distributes Network Flowsand Distributes Network Flows

• International Gateway – Consolidates and International Gateway – Consolidates and Processes International MaterialProcesses International Material

Three Types of Air Cargo Airports:Three Types of Air Cargo Airports:

• Local Market Station – Offers Service to Local Market Station – Offers Service to Surrounding Market Area or Catchment Area Surrounding Market Area or Catchment Area

• Hub (Regional and National) – Consolidates Hub (Regional and National) – Consolidates and Distributes Network Flowsand Distributes Network Flows

• International Gateway – Consolidates and International Gateway – Consolidates and Processes International MaterialProcesses International Material

AIR CARGO AIRPORT TYPES

AIRPORT LOCATION FACTORSIntegrated Express Carriers

Catchment Area is Small – Up to Catchment Area is Small – Up to 100 Miles 100 Miles

Markets are Tightly Defined Markets are Tightly Defined

Airport Must Be Located Near the Airport Must Be Located Near the Largest Concentration of Largest Concentration of CustomersCustomers

Catchment Area is Small – Up to Catchment Area is Small – Up to 100 Miles 100 Miles

Markets are Tightly Defined Markets are Tightly Defined

Airport Must Be Located Near the Airport Must Be Located Near the Largest Concentration of Largest Concentration of CustomersCustomers

AIRPORT LOCATION FACTORS Freight Forwarders and All-Cargo Carriers

Catchment Area is Large – Up to 600 milesCatchment Area is Large – Up to 600 miles

Willing to Truck Greater Distances – Loosely Willing to Truck Greater Distances – Loosely Defined Market AreasDefined Market Areas

Multiple Competing Airports Can Serve a Single Multiple Competing Airports Can Serve a Single Catchment Area Catchment Area

Local Market Stations are Local Market Stations are Customer LocationsCustomer Locations

Flexibility - Networks Flexibility - Networks are Fluidare Fluid

Catchment Area is Large – Up to 600 milesCatchment Area is Large – Up to 600 miles

Willing to Truck Greater Distances – Loosely Willing to Truck Greater Distances – Loosely Defined Market AreasDefined Market Areas

Multiple Competing Airports Can Serve a Single Multiple Competing Airports Can Serve a Single Catchment Area Catchment Area

Local Market Stations are Local Market Stations are Customer LocationsCustomer Locations

Flexibility - Networks Flexibility - Networks are Fluidare Fluid

DEVELOPING “CRITICAL MASS”

Necessary Ancillary Support to Facilitate Necessary Ancillary Support to Facilitate Air Cargo Operations Include:Air Cargo Operations Include:

• Interstate/Highway AccessInterstate/Highway Access• Distribution/Intermodal FacilitiesDistribution/Intermodal Facilities• Warehouse SpaceWarehouse Space• LTL TruckingLTL Trucking• Ground HandlingGround Handling• CustomsCustoms

Typically an Evolutionary ProcessTypically an Evolutionary Process• An Anchor Tennant Will Jump-Start Necessary An Anchor Tennant Will Jump-Start Necessary

“Critical Mass” “Critical Mass”

Necessary Ancillary Support to Facilitate Necessary Ancillary Support to Facilitate Air Cargo Operations Include:Air Cargo Operations Include:

• Interstate/Highway AccessInterstate/Highway Access• Distribution/Intermodal FacilitiesDistribution/Intermodal Facilities• Warehouse SpaceWarehouse Space• LTL TruckingLTL Trucking• Ground HandlingGround Handling• CustomsCustoms

Typically an Evolutionary ProcessTypically an Evolutionary Process• An Anchor Tennant Will Jump-Start Necessary An Anchor Tennant Will Jump-Start Necessary

“Critical Mass” “Critical Mass”

ANCHOR TENNANT

A Single Airport User that Can Initiate and Drive Facility Usage.

User Can be Either an Air Cargo Carrier or a Large Volume Shipper

•Air Cargo Hub, Local Market Station or Gateway

•National Distribution Center

•International Manufacturer-FTZ Tennant

A Single Airport User that Can Initiate and Drive Facility Usage.

User Can be Either an Air Cargo Carrier or a Large Volume Shipper

•Air Cargo Hub, Local Market Station or Gateway

•National Distribution Center

•International Manufacturer-FTZ Tennant

Successful All-Cargo or Cargo Focus Airports

• Alliance – Dallas, Texas

• Rickenbacker – Columbus, Ohio

• Huntsville – Huntsville, Alabama

• Airborne Airpark – Wilmington, Ohio

• So. Cal. Logistics Airport – Victorville, CA

• Alliance – Dallas, Texas

• Rickenbacker – Columbus, Ohio

• Huntsville – Huntsville, Alabama

• Airborne Airpark – Wilmington, Ohio

• So. Cal. Logistics Airport – Victorville, CA

ATTRACTING AIR CARGO SERVICE

Market the Location!Market the Location!

• Air Cargo Carriers Must Operate from Airports Near Air Cargo Carriers Must Operate from Airports Near Customers (Catchment Area) – Highlight Local and Customers (Catchment Area) – Highlight Local and Regional Customer BaseRegional Customer Base

• Proximity Criteria is Dependant on Type of Carrier Proximity Criteria is Dependant on Type of Carrier and Airport Function – Understand Target Carrier and Airport Function – Understand Target Carrier Networks and OperationsNetworks and Operations

• Airport Facility Quality is Secondary to Location – Airport Facility Quality is Secondary to Location – Sell the Location not the AirportSell the Location not the Airport

Market the Location!Market the Location!

• Air Cargo Carriers Must Operate from Airports Near Air Cargo Carriers Must Operate from Airports Near Customers (Catchment Area) – Highlight Local and Customers (Catchment Area) – Highlight Local and Regional Customer BaseRegional Customer Base

• Proximity Criteria is Dependant on Type of Carrier Proximity Criteria is Dependant on Type of Carrier and Airport Function – Understand Target Carrier and Airport Function – Understand Target Carrier Networks and OperationsNetworks and Operations

• Airport Facility Quality is Secondary to Location – Airport Facility Quality is Secondary to Location – Sell the Location not the AirportSell the Location not the Airport

ATTRACTING AIR CARGO USERS

What Are the Marketable Benefits?

Cost, Time and Reliability

Increased Freight Connectivity Reduced Drayage Costs Access to New MarketsJ.I.T. Manufacturing CapabilityEnhanced Distribution Efficiency/Options

What Are the Marketable Benefits?

Cost, Time and Reliability

Increased Freight Connectivity Reduced Drayage Costs Access to New MarketsJ.I.T. Manufacturing CapabilityEnhanced Distribution Efficiency/Options

TARGET INDUSTRIES

High-value products, short life cycle products, time-critical J.I.T. and spare part goods.

•Aeronautics - Equipment & Parts•Automotive - Equipment & Parts•Pharmaceuticals•Computers & Computer Components•Diagnostic and Medical Equipment•Software•Textiles - Garments•Perishables - Flowers, Fruit, Vegetables & Fish•Economic perishables - Printed material•Telecommunications Equipment - Cell Phones, Pagers

High-value products, short life cycle products, time-critical J.I.T. and spare part goods.

•Aeronautics - Equipment & Parts•Automotive - Equipment & Parts•Pharmaceuticals•Computers & Computer Components•Diagnostic and Medical Equipment•Software•Textiles - Garments•Perishables - Flowers, Fruit, Vegetables & Fish•Economic perishables - Printed material•Telecommunications Equipment - Cell Phones, Pagers

ULTIMATE GOAL

Increase Regional Competitiveness via Increased Freight Connectivity, Efficiency

and Access to Markets

Air Cargo Operations Can Provide a Competitive Advantage to Regional Economic Development Efforts.

Efficient Air Cargo Access can Provide a Tangible Marketing Tool for Attracting New Businesses.

Most Air Cargo Intensive Target Industries Exhibit Desirable Economic Characteristics.

Increase Regional Competitiveness via Increased Freight Connectivity, Efficiency

and Access to Markets

Air Cargo Operations Can Provide a Competitive Advantage to Regional Economic Development Efforts.

Efficient Air Cargo Access can Provide a Tangible Marketing Tool for Attracting New Businesses.

Most Air Cargo Intensive Target Industries Exhibit Desirable Economic Characteristics.