Duluth Airport Authority Air Cargo Study Fall 2015 Transportation and Logistics Research Center Table of Contents List of Tables ...................................................................................................................... 3 1. Research Team ................................................................................................................ 5 2. Acknowledgements ........................................................................................................ 5 3. Executive Summary ....................................................................................................... 7 4. Introduction and Methodology ....................................................................................... 9 4.1 Definitions and Industry Background Information .................................................. 9 4.2 Commodities and Goods Shipped by Air .............................................................. 10 4.3 Goals for This Report............................................................................................. 12 5. Methodology ................................................................................................................ 13 5.1 Defining Current Market Area ............................................................................... 19 5.2 Assessing the sources of current demand for airfreight in the region .................... 24 5.3 Determining future expanded airfreight service area............................................. 25 5.4 Evaluating the airfreight capacity of current airport infrastructure ....................... 25 5.5 Estimate future demand for airfreight that could be routed through DLH ............ 25 5.6 Profile characteristics of the airport’s future airfreight customer base .................. 25 6. Research Results .......................................................................................................... 27 6.1 Survey of Companies in the Region ...................................................................... 27 6.2 Defining Current Market Area ............................................................................... 52 6.3 Assessing the sources of current demand for airfreight in the region .................... 53 6.4 Determining future expanded airfreight service area............................................. 54 6.5 Evaluating the airfreight capacity of current airport infrastructure ....................... 55 6.6 Estimating future demand for airfreight that could be routed through DLH ......... 56 6.7 Comparing airfreight at DLH with population peer metropolitan areas ................ 57 6.8 Profiling characteristics of the airport’s future airfreight customer base .............. 59 7. Situation Analysis ......................................................................................................... 61 7.1 Customers .............................................................................................................. 61 7.2 Capabilities of Duluth Airport Authority and DLH ............................................... 65 7.3 Competition............................................................................................................ 65 7.3.1 Carrier competition for customers .................................................................. 65 7.3.2 Airport competition for airfreight carriers ...................................................... 65 7.3.3 Airport competition for customers vs. other airports ...................................... 66 7.3.4 Airport competition against other transportation modes ................................ 66 7.4 Partners .................................................................................................................. 66 7.5 The Environment ................................................................................................... 67 7.6 DLH Competitive Advantages ............................................................................... 67 8. Strategic Alternatives and Recommendations .............................................................. 69 8.1 Carriers ................................................................................................................... 69 8.1.1 Build Passenger Traffic and Encourage Use of Mainline Aircraft ................. 69 8.1.2 Encourage Capacity Increases by Incumbent All Cargo Carriers .................. 69 8.1.3 Embrace Airfreight Trucking Model .............................................................. 70 8.1.4 Promote DLH as Stop for Great Circle Route Air Cargo Flights ................... 70 8.2 Airfreight Users ..................................................................................................... 77 1 List of Figures Figure 1 - Map of target zip codes for survey ................................................................... 15 Figure 2 - Locations of firms targeted for the survey ....................................................... 16 Figure 3 - Locations of firms targeted for survey – Twin Ports area ................................ 17 Figure 4 - Firms where contact was attempted by NAICS 2 digit code groupings .......... 18 Figure 5 – Difference in driving time to DLH vs. MSP ................................................... 23 Figure 6 – Difference in driving time DLH vs. ORD ....................................................... 24 Figure 7 - Results from target firm contacts ..................................................................... 28 Figure 8 - Results from target firm contacts by firm location .......................................... 28 Figure 9 - Results from target firm contacts by firm location – Twin Ports ..................... 29 Figure 10 - Primary industries of respondent firms .......................................................... 30 Figure 11 - Number of employees at location of respondents .......................................... 32 Figure 12 - Functions performed at respondent locations – percent of responses ............ 33 Figure 13 - Commodities shipped by airfreight to/from respondent firms ....................... 36 Figure 14 – Average share of airfreight shipments by carrier .......................................... 37 Figure 15 - Airport share reported by respondents ........................................................... 40 Figure 16 - Average weekly airfreight volume (in pounds) shipped ................................ 43 Figure 17 - Average weekly number of airfreight shipments ........................................... 44 Figure 18 - Average value ($ per pound) of airfreight shipments .................................... 45 Figure 19 - Average percent of airfreight shipments with hazardous materials ............... 46 Figure 20 - Average percent of airfreight shipments rated at dimensional weight ........... 47 Figure 21 - Average percent of airfreight shipments where firm specified routing ......... 48 Figure 22 - Impact of events on number of airfreight shipments over next 3 years ......... 51 Figure 23 – Current airfreight market area for DLH ........................................................ 52 Figure 24 – Potential expanded airfreight service area of DLH ....................................... 54 Figure 25 – DLH airport diagram ..................................................................................... 55 Figure 26 – Population density of area surrounding DLH ................................................ 61 Figure 27 – Population density of area surrounding MSP ................................................ 63 Figure 29 – Great circle route MXP LAX ........................................................................ 71 Figure 30 – Great circle route FRA SFO .......................................................................... 72 Figure 31 – Great circle route NRT JFK .......................................................................... 73 Figure 32 – Great circle route PVG ATL ......................................................................... 74 Figure 33 – Great circle route HKG MIA ......................................................................... 74 Figure 34 – Great circle route NRT ORD ......................................................................... 75 Figure 35 – Great circle route AMS LAX ........................................................................ 76 2 List of Tables Table 1 - Methodologies used ........................................................................................... 13 Table 2 - Targeted primary NAICS codes for survey ....................................................... 14 Table 3 - Summary of survey contact attempts ................................................................ 19 Table 4 – Competitive positions of U.S. airports surrounding DLH – passenger ............ 21 Table 5 – Competitive positions of U.S. airports surrounding DLH – all cargo .............. 22 Table 6 - Results from target firm contacts by industry (primary NAICS code) ............. 31 Table 7 - Location types of survey respondents ............................................................... 32 Table 8 - Functions performed at respondent locations .................................................... 33 Table 9 - Commodities shipped by airfreight to/from respondent firms .......................... 35 Table 10 - Average share of airfreight shipments by carrier ............................................ 37 Table 11 - Top destinations/origins of respondents’ airfreight shipments