Rare cargo options offered at Stevens Airport

Photo/Elwood Brehmer/AJOC

Oh, the possibilities.

Thanks to a little two-paragraph amendment by the late Sen. Ted Stevens to the 2004 Century of Aviation Reauthorization Act, the airport now named after the senator is open to more business opportunities than virtually any other hub on Earth.

What can be done at Ted Stevens Anchorage International Airport would be cabotage other places — a federal crime. Airport leadership prefers to describe it differently.

“What we’re doing is trying to find ways to contribute to the efficiency of the overall global supply, specifically the supply chain that connects Asia and North America,” Anchorage Airport Manager John Parrott said.

A U.S. Department of Transportation exemption for Alaska in the Federal Aviation Administration authorization passed in 2004 allows cargo landed in the state on its way to and from the Lower 48 to be shuffled among planes and carriers at that time without being subject to federal regulations. It is still considered to be on its international journey.

“Nowhere else in the world, in a significant country, is a foreign carrier allowed to pick up cargo within a country, take it to another place in that country and offload it,” he said.

While the exemption must be renewed every two years, it’s understood that it won’t be vacated for the foreseeable future.

“The U.S. Department of Transportation recognizes that Alaska is part of the United States, but it is so different geographically that it can in some cases be treated as a separate country,” Parrott said.

The options are also available at Fairbanks International Airport. However, being the much larger of the two, Anchorage attracts the cargo flights.

Ask Parrott to describe the cargo transfer options only if time is abundant. A simple question can spur an hour-long onslaught of information that is a history, economics and logistics lesson wrapped in one. A white board is helpful.

He is eager to market his airport and its potential.

Parrott begins his lesson in the early 1970s, when international passenger traffic was king in Anchorage. Before the Soviet Union opened its airspace, planes flying between Europe and Asia made a technical stop in Anchorage to refuel while on the circumpolar route.

“I skipped the part where the earth cooled and dinosaurs roamed,” he quipped.

As Boeing’s 747 became the de facto choice for trans-ocean travel later in the decade, it was believed the stop in Anchorage would become obsolete, Parrott said, but that didn’t happen. Rather, the passenger business in Anchorage collapsed with the Berlin Wall and the opening of Russia’s skies.

 Fortuitously, Asia’s manufacturing industry and FedEx were growing rapidly at about the same time and Anchorage International Airport quickly transitioned from a passenger stop to one of the world’s busiest cargo hubs — a title it retains today.

Anchorage was the fifth-busiest cargo airport in the world over the last year, according to the Airports Council International, with nearly 2.5 million metric tons of freight landing at the airport. Domestically, it was second behind Memphis International, FedEx’s homeport.

Cargo vs. fuel

The cargo business is a result of basic economics.

Even with most major cargo airlines flying the latest and long range capable 747-8s, it makes economic sense for the jumbo jets to carry more cargo and less fuel — thus making a technical stop in Anchorage — on their way from Asia to North America, rather than sacrifice carrying capacity to fly direct.

Parrott said the latest 747s can make a trans-Pacific flight if about 100,000 pounds of cargo capacity is sacrificed.

“At a dollar a pound, that’s $100,000 for stopping here” per flight, he said.

Extrapolated out to multiple flights per day it can man hundreds of millions of dollars per year for some of the major carriers.

While the stop isn’t free, the roughly $10,000 in landing fees and extra crew costs still easily pencil out, according to Parrott. If they didn’t, one wouldn’t see a mix of Cathay Pacific, Eva Air, Korean Air, China Airlines, FedEx and UPS cargo planes among others in Anchorage at any given time.

It’s here where the cargo transfer possibilities begin to take off.

Almost all of the dedicated cargo traffic headed to the Lower 48 through Anchorage is destined for another major cargo hub, likely Chicago, New York City or Los Angeles. From there, the goods are sent out by land in a web of distribution networks.

As Parrott put it: “Wouldn’t it be cool if we could have (goods) land somewhere near their final destination to start with rather than going to Chicago, then getting on a train or truck and then getting on a smaller vehicle? The fewer steps you have, the less handling you have, the less chance for breakage, pilferage, shrinkage and time, if you’re paying for air cargo time, is probably a part of that equation.”

The U.S. Department of Transportation first expanded cargo transfer rights at then-Anchorage International Airport to on line transfers between flights by domestic and foreign carriers in 1996.

It also permitted commingling of domestic-bound cargo with that ultimately bound for elsewhere on a single flight. Last, it allowed for change of gauge, or starburst, movement — the transfer of cargo from one plane to another with the same flight number.

The Stevens Amendment liberalized those allowances even further. Now, domestic freight forwarders can purchase space on flights and act as the domestic carrier because they “own” the cargo.

It can all be done without prior approval at any time.

“The ultimate in cargo transfer we talk to folks is: ‘What if you fly, even on a small basis, you fly a 747 to Alaska and you have three (Boeing) 767s and you load up your 767s with the cargo and you fly one to Chicago, one to Atlanta and one to New York?’” Parrott said. “The 767s could be foreign flagged and never go back to their home country. They could spend their entire lives here until they were worn out doing nothing but connecting for a foreign air carrier in the Lower 48.”

Such a starburst operation would likely require the carrier to have an office in Anchorage and foreign aircraft certification, he said, but little more.

On its face, the logistical freedoms should encourage shippers to take advantage of the efficiencies that can be gained when they stop in Alaska and encourage those who aren’t stopping here to try to do so. Rarely is something that simple, and this case is not an exception.

Making the sale

Parrott said when the airport’s marketing team — himself and operations manager Trudy Wassel — explain to carriers what can be done in Alaska, they are met with consistent skepticism about the legality of the opportunities.

“One of our challenges is the uniqueness of this and the lack of any approval required is such a strange business concept that it’s difficult for the carriers to believe at first,” he said.

“They look at you like you have a third eyeball.”

Carriers have come close to starburst operations, but no one has taken the leap.

The key is building up a corporate memory about the cargo transfer options by continuing to drive home the message, Parrott believes.

Other challenges include a lack of trust between competitors. Getting two carriers to agree to meet in Anchorage to swap cargo is inherently difficult.

“Both airlines when you talk to them will tell you the idea’s great but ‘Those guys are never on time. We’re always on time, but those other guys are never on time,’” Parrott said.

In the past, Northwest Airlines partnered with Korea Air when the latter could not fly in China to transfer cargo in Anchorage. The pair would swap cargo and send planes off to Chicago and Atlanta several days per week, he said. When Delta Air Lines absorbed Northwest, that went away.

Japan Airlines also mingled cargo in Anchorage on flights coming from different cities inside its home country until it got out of the cargo business, so it has been done.

Going forward, airport officials are partnering with the Anchorage Economic Development Corp. on ways to attract business to Alaska that could benefit from the Foreign Trade Zone at the international airports.

AEDC President and CEO Bill Popp said his group managed a study that determined four industries — aerospace-aviation, electronics, auto parts and pharmaceuticals — could find Alaska’s opportunities advantageous.

A business in one of these industries could fly its product to Alaska from the Lower 48 or elsewhere, conduct simple value-added manufacturing at a facility at the airport and then fly it directly to its destination, thereby cutting out a transportation leg.

Popp said AEDC and the airport team are planning a three- to four-year effort to “mitigate the unknown” for prospective businesses.

“Right now, we face what seems to be a first mover disadvantage; nobody wants to be the first to try this,” UAA Logistics Professor Darren Prokop said.

If the numbers pencil out for someone, Popp said even one new business could be a big deal to a small market like Anchorage.

“Twenty to 30 jobs relating to this could be a big deal. If that’s what the number is those are good paying jobs,” he said. “They have the economic multiplier that we seek in the job attractor work that we do.”

Elwood Brehmer can be reached at [email protected].

11/18/2016 - 10:04am