While most of the conversation lately has centered on what the world of airlines, forwarders and other players in air cargo will look like moving ahead, here are some thoughts from Dan Muscatello, an expert in airport Cargo and Logistics strategy and planning.
     Dan brings an impressive portfolio of more than 40 years of experience, in both the public and private sectors.
     He has been a development strategist for both the business and physical facility planning of air cargo complexes, and the integration of ancillary and supporting logistics services and what make airport air cargo operationally and financially feasible.
     So here we are in the midst of the COVID-19 global challenge, with an airport air cargo perspective from “Dan, the Airport Cargo Man,” offering some plain talk about challenges that are confronting airports as well as some solutions for happy landings, financially and strategically moving ahead in 2020.

Out Of Control Change

     “The main issue for airports,” Dan contends, “is that so much of future cargo operations is beyond their control.
     “It’s important to note that airports in general, and airport organizations have developed detailed plans for how to protect personnel involved with the handling of cargo. But the problem in the changing logistics landscape that they are now facing, is figuring out if and how the cargo will arrive at their airport. Airlines have reduced their passenger operations by as much as 90% or more, and major routes have been scaled back. The result is that many of these remaining flights are extremely dependent on belly cargo for revenue, and a number of passenger aircraft have been converted to freighters. While we all believe that these situations will begin to reverse themselves, it may be several years before things begin to settle into a new normal.
     “The airlines have recently been allocated a $25 billion part grant, part loan bailout to help with their recovery. Airports, that are of course dependent on the carriers for revenue, received $10 billion in federal Airport Improvement Program (AIP) grants in the two trillion-dollar stimulus bill passed in March. These funds will be distributed to airports utilizing existing formulas.
     “The American Association of Airport Executives indicated that the infusion will assist airports that are "reeling from the impacts of coronavirus and the precipitous decline in travel that has occurred in a matter of a few short weeks." The money is intended to help retain staff, avoid defaults on bonds, deliver key capital programs, and assist with recovery efforts. While this seems like a substantial boost, it must be put in context.
     “Earlier this year, the Airports Council International estimated that North American airports will have approximately $125 billion in infrastructure needs that must be addressed over the next five years. When combined with the recent, ongoing, and projected future losses, the deferral of non-critical maintenance, and the reductions in traffic, the future will be lean. It therefore becomes imperative that airports identify every opportunity to enhance revenues and reduce costs for themselves, and their partners.
     “It seems unlikely that passenger volumes and revenues will see 2019 levels for years. The virus will have a scarring effect on many potential business and leisure travelers. New vacation destinations reachable by car will become more popular and fewer people will be inclined to wander too far from home. Businesses will have developed a new reliance on video conferences and the facilities for this type of communication have expanded exponentially in the present crisis; the very demonstrable cost and time savings will have an impact on business travel.
     “Overarching these considerations is the financial aspect that will severely curtail travel by air for a population that has taken a heavy hit. It’s also very likely that as we emerge from the pandemic, a number of less financially profitable routes to secondary airports will be gone. Fewer passenger flights translate to less belly cargo and a greater reliance on freighters and trucking.
     “Cargo statistics for the first quarter seem to indicate that overall volumes remained relatively flat, but the transport element shifted strongly to trucking and freighters. This is due to several factors. The most obvious is the reduction in belly capacity, but the virus “stay at home” containment strategies and the closing of non-essential retail have accelerated the growth of e-commerce. An added boost to the volumes has come from the shipment of medical supplies both domestically and internationally. The shift has been strongly felt at a number of airports—Anchorage, Seattle, and Chicago are just a few of the facilities impacted heavily by the freighter emphasis. The second quarter initial numbers also show only very little change year over year, although results vary regionally. So where do these changes leave airports?
     “Airports provide the facilities, landside access, and aeronautical infrastructure to accommodate the movement of goods by air. A substantial number of airports have historically built facilities that cater to belly cargo operations with minimal or no aircraft apron. With a continuing reduction in belly cargo capacity and a reliance on freighters, there is a likelihood that for these airports there will be a substantial loss of cargo volumes and an underutilization of the cargo facilities if they do not have available ramp. This would also have a potential impact on the regional logistics distribution and ground delivery systems. Conversely, airports with apron capacity, may be confronted with unanticipated demand for cargo handling and lack adequate facility capacity and landside access to accommodate the volumes.
     “The increased tonnage would also have a substantial impact on regional distribution systems. The bottom line is that the industry will, over the near-term, see some fairly significant changes. The questions are how long will the changes last and how can the evolution of the industry be best addressed?
     “My friend Brandon Fried continually reminds me that freight forwarders are some of the smartest people in the industry. Regardless of the circumstances, they are built to adapt and find the most cost effective and efficient way to deliver shipments to their customers. They work hand-in-glove with other critical elements of the air cargo industry—the carriers, truckers, government agencies, customs brokers, and the diverse universe of shippers, to meet the global needs of the industry.
     “Integrators and e-commerce giants carry an increasingly greater percentage of the world’s cargo volumes and have their own unique operating dynamics and requirements.
     “Historically, airports have been the landlords that provide the facilities and infrastructure with (other than few exceptions) limited interaction (by design) other than leasing. Several of the larger gateways have cargo committees that work well together in addressing day-to-day issues: what they may be facing over the next several months could be very different. So what can the industry reasonably expect – above all, the need for flexibility.

     “It will be critical that the physical platforms that airports provide are compatible with any changes to regional and industry shipping changes, and the best way for this to happen is through solid communication. On the surface it sounds pretty straightforward, but candid discussion can be an issue. Segments of the industry tend to be parochial about operations. Some firms may need to bite the bullet and extend themselves to facilitate the assurance of a rational plan for the airport to meet industry requirements.
     “All that being said, airports have an opportunity to help themselves and their partners. As the common point where industry segments and their operations come together, it seems logical for airports to take the lead either through their existing committees, or through the assembly of multi-disciplinary Cargo Response Teams to address the issues as soon as possible.
     “Now is the time to first look at the challenges that existed prior to the virus, assess how they have changed and can be addressed, and then take a comprehensive look at building a framework that addresses the long-term needs of the regional air cargo community.
     “It’s still too soon to see where the future will take us, but that future is taking shape now and it’s not too soon to begin to open up a dialogue that will keep airports and their partners ahead of the curve.”
Dan Muscatello