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

Dulles International Airport - from Google Maps

Dulles International Airport – from Google Maps

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

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

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

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

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

MWAA revenues 2012

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

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

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

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

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

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

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

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

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

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

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

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

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

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

MWAA forecasts slide

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

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