During a stint at the old Emery Worldwide from 1987 to 2005, Richard Zablocki can remember times when airfreight forwarders were able to get so physically close to the aircraft they used that they could truck their customers' cargoes right up to the plane.
For Zablocki and other executives, there was something symbolic about that degree of operational intimacy between airlines and airfreight users. For a large part of the 1980s and through the 1990s, air freight was the devil-may-care diva of the transport modes. The U.S. economy was booming, as were airfreight-centric markets like Japan. Airfreight growth was juiced by surging demand for high-value technology and telecommunications equipment to support buildouts of the Internet and the wireless telecommunications spectrum. The push toward global just-in-time manufacturing convinced many shippers and forwarders that it was better to whisk products to their destinations by air as needed rather than invest in expensive buffer inventory that would be prone to obsolescence. Above all, Sept. 11 was just another date on the calendar.
"It was very desirable for a freight forwarder to be located near an airport," said Zablocki, who today is vice president of trade lane management for Dutch multinational forwarder Ceva Logistics LLC.
The thrill appears to be long gone, however. The 9/11 terrorist attacks ended the practice of airfreight forwarders' trucks pulling right up to aircraft. In addition, the airfreight industry is very far removed from its halcyon days of the roaring '90s. Middling demand for the past 15 years has kept rates low. Meanwhile, business costs across the board have continued to rise. Today, air freight is a luxury many companies can't afford, save for emergency situations or hot product rollouts. As a result, property within three to five miles of a gateway that would support fast-cycle distribution patterns doesn't generate nearly the interest it used to. Yet close-in rents remain high because of what are still considered premium locations. At Los Angeles International Airport (LAX), for example, rents for occupying a facility around three miles away are about double the rents for a building 10 miles away.
Aside from companies shipping perishable items like flowers, seafood, and produce that can't be more than five miles from airport property, "demand for airfreight space within a three-mile radius has really tapered off," according to Luke Staubitz, a Los Angeles-based executive vice president at JLL (formerly Jones Lang LaSalle), the real estate and logistics services giant. Staubitz, whose focus is LAX, said he is not as familiar with the situation at other U.S. gateways. However, he believes demand for close-in freight space also remains soft at gateways like New York, Seattle, Miami, and Dallas.
One exception is DHL Global Forwarding, a unit of the DHL transport and logistics empire, and the world's largest air forwarder. The company's buildings are located close to all U.S. and North American air gateways, said Jannie Davel, head of airfreight for the Americas. But there are few airfreight firms with the volumes, resources, and needs of the DHL unit. For the rest, locating as far as 15 miles out is usually a better deal, according to Staubitz. Tenants get more bang for the buck by having access to larger and more modern buildings, while remaining close enough to meet tight cutoff times for aircraft departures, Staubitz said. (Anything beyond 15 miles is problematic for providers because of the extra distance and the risk of traffic congestion, he said.)
While locations may change, the characteristics of the prototypical airfreight facility remain the same. The standard structure is narrowly configured, with no more than 50,000 square feet of capacity under the roof and often less than that. There is also a preponderance of dock doors. The design is driven by the need for fast turns of relatively small products of high value, the classic airfreight consignment. "Everything is built [around] moving the freight as quickly as possible" to hit airline cutoff times and keep the expensive stuff moving, Staubitz said.CHANGING ATTITUDES
The flagging demand for close-in airport space has, to some degree, mirrored air freight's fortunes over the past 15 years. Two recessions in the last decade have reshaped shipper attitudes toward air use. The first, between 2000 and 2002, led to the collapse of many information technology (IT) firms and upended the high-voltage growth plans of the survivors, many of which had been major airfreight users. The second, the so-called Great Recession, leveled virtually every industry and led to unprecedented declines in airfreight volumes.
The legacies of both downturns still haunt the industry. Frugal shippers have migrated to more economical forms of transport that focus on time-definite deliveries rather than on the fastest transit possible. In the U.S. and Europe, that has meant more road transport; between continents, it has meant more ocean freight. These modes have improved in speed and, most important in many users' minds, reliability. While there is always hope air freight can surmount these seemingly secular obstacles and return to the glory days of the 1990s, no one sees that happening.
Traffic gains are expected to remain in the low- to mid-single digits for years to come, accompanied by one-time or cyclical surges for the peak holiday season, the Lunar New Year, new product launches, and diversions from ocean freight during events such as the recent West Coast port contract dispute, which helped drive February's global air volumes up 11.4 percent year over year, according to the International Air Transport Association (IATA), the leading airline trade group.
Over the years, freight forwarders and others in the aircargo community have found themselves being pushed farther away from airport gateways. Starting with security measures following the 2001 terrorist attacks, it reached a somewhat ludicrous crescendo last October when New York Gov. Andrew Cuomo proposed relocating JFK Airport's entire cargo apparatus to Stewart International Airport, 60 miles north of New York City, so the Port Authority of New York and New Jersey, JFK's operator, could use the freed-up space to build hotels, shops, and restaurants for travelers. The plan, much derided from the start, has gone nowhere.
Zablocki of Ceva said the shifts in site selection also reflect changes in how the tenants themselves do business. For years, it was common for a big forwarder to specialize in one transport mode. Today, that same forwarder may have evolved into a one-stop shop whose service menu includes air, ocean, trucking, warehousing and distribution, and customs brokerage. If an industrial complex houses all of those services, it then behooves the company to be centrally located near as many of them as possible, even if it means being farther away from the airport, according to Zablocki. "We are an end-to-end service provider, so it makes sense to be in the middle of everything," he said.
Forwarders also need to get creative in getting the most from their facility space, Zablocki said. Ceva's LAX facility, for example, has been designated a free trade zone, a special geographic area where goods may be landed, handled, manufactured or reconfigured, and re-exported without the intervention of the customs authorities. Zablocki said the operation has been effective in boosting the value of LAX as a logistics center.