ITEM NO: __7b Supp___ DATE OF MEETING: February 22, 2011 Strategic Opportunities for International Trade Logistics at Seattle-Tacoma International Airport - Air Cargo Briefing Air Freight is Big Business Over $1 trillion is spent annually on domestic US transportation and logistics services Air freight accounts for 24 % of the total US merchandise trade value $85 billion air freight & express market $35 billion US domestic market Freight traffic growing about 6% per year worldwide Market size doubles every ten years 2 Cargo Industry Players Supply-Distribution Chain Supplier Manufacturer Distributor Retailer End Consumer Reverse Logistics Air Transportation/Logistics Shippers 3PLs/4PLs Customs brokers Consolidators Indirect carriers General Sales Agents Gov postal authorities Motor carriers Air carriers Airports Cargo/Ground handlers Federal Inspection Agencies Consignees 3 A Changed Role for Cargo Airports As the economy recovers, airports with substantial cargo movement should recognize the multimodal nature of cargo and increased role of third party logistics services, and consider an expanded role Airports should think of themselves not only as airfields, but as logistics centers that extend beyond the airport fence and embrace regional partnership opportunities Airports are becoming network hubs for consolidation and distribution of not just air, but also truck and rail freight 4 Air Cargo is Vital to Pacific Northwest Major economic benefits accrue from an efficient transportation logistics industry, boosting trade and increasing regional economic strength. Trade-Dependent Industries Regional Logistics Sea-Tac Air Cargo More than 160,000 jobs in Washington state are related to air cargo at Sea-Tac. Those jobs earned $8 billion in wages and salaries and contributed $737 million in state and local taxes. Total annual value of air freight exported from Sea-Tac is estimated at more than $15 billion. Source: Martin Associates, 2009 5 Air Cargo at Sea-Tac 3rd Largest International Gateway on the West Coast Origin and Destination Market Share Metric Tons 1,500,000 Europe 13.9% Alaska 5.7% 1,000,000 500,000 Asia 21.9% 0 Rank LAX OAK SFO ONT SEA YVR PDX 5 12 15 18 20 25 27 *based on 2009 tonnage Hawaii 1.9% Contiguous U.S. 56.6% 6 International Air Cargo Service February 2011 Seoul Beijing Seattle Tokyo Osaka Taipei 2010 Asia Imports +25% Exports +27% London Heathrow Paris Amsterdam Luxembourg Frankfurt 2010 Europe Imports +17% Exports -6% 7 Air Cargo Market Share Fedex (FX) 130,325 Alaska Airlines (AS) 25,354 Delta Air Lines (DL) 20,729 China Airlines (CI) 12,682 United Airlines (UA) 12,220 Korean Air (KE) 11,185 EVA Air (BR) 9,957 Cargolux (CV) 8,796 Lufthansa Airlines (DHL) 6,281 British Airways (BA) 5,949 Southwest Airlines (WN) 5,403 Continental Airlines (CO) 4,959 Martinair (MP) 4,957 Air France (AF) 3,824 Hawaiian Airlines (HA) 3,703 Hainan Airlines (HU) 3,510 US Airways (US) 3,050 Asiana Airlines (OZ) 2,471 0 International 30% Domestic 70% Passenger "Belly" 36% Freighter 64% 20,000 40,000 60,000 80,000 100,000 120,000 140,000 Volume in Metric Tons 8 Air Cargo Facilities at Sea-Tac North Cargo Area South Cargo Area 9 Top PNW Air Export Commodities Electric Machinery, TV & Sound Equipment Aircraft & Spacecraft Parts Optic, Photo & Medical Instruments Machinery & Parts Fish & Shellfish Fruits & Vegetables Footwear Plastics Plants, Bulbs & Cut Flowers 10 Positive Attributes: Location & Connectivity YVR Seattle PDX BOI ORD SFO JFK DEN LAX 11 International Gateway Hubs 12 Strategic Roadmap for Sea-Tac Envision and market Sea-Tac as an International Air Cargo Logistics Gateway Vision: logistics as a core component of the Seattle economy Goal: Enhance the air cargo volumes by attracting global logistics/manufact uring companies to Sea-Tac airport logistics park Objective: Strengthen the linkage between on-airport cargo activity and offairport 3PL/4PL activities Strategy: market Sea-Tac as a single logistics platform to the various links up and down the supply chain 13 Air Cargo Logistics Study Findings Air cargo service is a core component of the Sea-Tac business model Port should strengthen physical and institutional linkages between on-airport cargo operations and off-airport facilities and services provided by private sector 3rd-party companies Advance strategy by creating "Sea-Tac International Gateway Logistics Center" that would enhance airport cargo operations Port-owned properties north of airfield are uniquely situated to accommodate physical movement of cargo to and from airport cargo area Properties south of airfield are ideal for attracting 3rd-party value-added logistics services 14 North Airport Properties • North end graphic 15 South Airport Properties • South end graphic 16 Airport Based Logistics Center Linkage to the Airport • Efficient roadway linkage to Airport and industry clusters • Technology linkage • Connectivity with CPB/TSA/AMS NERA 3 L-Shape Property NERA 1 (Lora Lake) Freight consolidation Value-added logistics Universal branding • "Sea-Tac Gateway Logistics Center" Sea-Tac Airport Common standards • design & development • property management • performance & security Des Moines Creek Business Park Foreign Trade Zone designation International gateway logistics 17 Existing 2009 Freight and Goods Transportation System Freight Mobility BINMIC Port of Seattle Duwamish MIC Boeing Field All air cargo moves by truck at some point in the journey North Tukwila MIC Airport access from point of origin is key Sea-Tac Airport Kent MIC Keep freight mobility efficient and cost-effective Support statewide system investment to serve cargo Port of Tacoma Fredrickson MIC 18 On-Airport Facilities Investment  Customs and Border Protection (CBP) cargo inspection facilities - $1.3 million • Off-gate hardstand fueling and power improvements, and expansion  Cargo 6 ramp - $6 million  Cargo 2 ramp - $13 million • Fuel hydrant system completion - est. $25 million 19 Future Outlook for Sea-Tac Air Cargo currently in a growth mode Strong and growing international and express sectors With overall aircraft operations down at Sea-Tac, airport has capacity to grow cargo Focus on International Air Cargo Logistics Gateway Hub strategy as a jobs creator and export promoter Maintain and improve on-airport facilities Promote efficient and cost-effective regional freight mobility 20