Future Air Cargo Economic Competitiveness
Economic Competitiveness Overview
As a part of Cincinnati/Northern Kentucky International Airport (CVG) five-year (2021-2025) Strategic Plan, solidifying and growing the airport’s status as an “epicenter of e-commerce” remains a driving force. CVG’s future strategic growth includes several components:
- Increasing air operations for express service, landside improvements, and expansion
- Maintaining and expanding a competitive advantage for high value goods and increase modal share
- Retaining and supporting air cargo businesses
- Diversifying through increased general air cargo movements
- Enhancing air maintenance and repair operations
- Improving landside connectivity for more efficient operations
CVG Expansions Already Underway or Planned
- FEAMAero, a leading provider of aviation maintenance services globally, will complete construction on a second, triple-wide repair hanger in 2023.
- DHL has plans to expand its facility with additional sorting capacity.
- In the next seven to 10 years, a planned Hangar Row would provide 2,000 to 3,000 new jobs.
- Amazon Air Prime will continue to build out its $1.5 billion, multi-phase air cargo hub.
- CVG has space available adjacent to the airfield for development of additional intermodal facilities.
Future Air Cargo Value
The region is expected to see the value of air cargo increase greater than 115% due in large part to the growth in machinery (machine parts and finished products), pharmaceuticals, and high-tech commodities such as electronics, precision Instruments and transportation equipment. The United States Department of Transportation’s (USDOT) Federal Highway Administration (FHWA) future freight forecasts for 2050 do not show a diversification of commodities transported by air changing over the next three decades.
A change in the value of the commodities has a direct correlation to the competitiveness of the region. The greater the increase in the value of goods being purchased and produced, the more economic output growth for the region. According to the Bureau of Labor Statistics, the Cincinnati Metropolitan Statistical Area (MSA) has a high employment location quotient (LQ) within the manufacturing industry at 1.29 and a wage LQ of 1.43 during the second quarter (April-June) of 2022. The expected growth in the value of machinery, equipment, precision instruments, etc. coupled with the region’s strong labor position in manufacturing, suggests air cargo will continue to be relied upon for critical high-value, low-weight goods movement to support regional economic competitiveness.
(Source: United States Bureau of Labor Statistics. Quarterly Census of Employment and Wages. Private, High-Level Industries, Cincinnati, OH-KY-IN MSA. 2022 Second Quarter, All establishment sizes. [Data set].)
This growth is presumed to be a result of expected growth in the use of high-tech manufacturing processes and the need for equipment upgrades in the OKI region, as well as areas outside the region that are served by CVG cargo facilities. As an example, truck probe data show a large number of truck trips to and from CVG to a cluster of medical equipment manufacturers outside the OKI region in Indiana. These data provide evidence that manufacturers rely on shipments to and from CVG and are presumed to continue to require air transportation as the regional economy and their businesses grow.
Air cargo has been extremely important to the financial sustainability of CVG to date and particularly throughout the COVID-19 pandemic. CVG expects the two largest air cargo operators at the airport, Amazon Air Prime and DHL, to continue to increase operations and hire new employees. CVG places critical importance on workforce growth as an important part of regional economic development through the creation of jobs.
Workforce availability is critically important for express cargo shippers. While the region offers an abundant, highly trained workforce in aviation and logistics, the talent pipeline is one of the most pressing issues for the airport and express shipping partners. Meeting the workforce demands of DHL, Amazon, and others in this supply chain will continue to be a priority in the years to come. Currently, airport and airline logistics and ground crew service employees tend to be transient among regional employers. The airport is actively engaged with local and regional partners, including schools, trade schools, and universities, to develop and implement programs that will support the long-term success of these companies.
Future Competition for Air Cargo?
Hyperloop systems are being designed and tested to move passengers and cargo at air travel speeds and reduced costs. They are vehicles that are suspended by magnetic systems in under or above ground vacuum tubes to reduce friction and operate at high speeds with low turbulence. Many of the systems being explored are designed to be driver-less and require fewer support personnel than air cargo transport. Given the curved designed of Hyperloop corridors, freight containers used to transport goods may resemble those currently used in air cargo transport and referred to as Unit Load Devices (ULDs). Products able to be transported by Hyperloop will need to be contained and lighter-weight, also similar to air cargo, versus bulk materials transported by truck, rail, barge, and pipeline.
There are several companies looking at Hyperloop as an alternative mode to move freight in various locations around the world. Those looking at the U.S. market include Hyperloop One, The Boring Company, Arrivo, Hyper Chariot, and Hyperloop Transportation Technologies.
Hyperloop One announced in 2022 that it was going to focus exclusively on freight movement due to the unknown market for passenger intercity travel and the impact on passengers from the acceleration of hyperloop vehicles to reach an efficient speed.
Although many companies are working on the technology, given the costs and the state of maturity, Hyperloop systems are still far from real-world deployment and not expected to occur by 2050, the planning horizon year for this freight plan. In addition, Hyperloop’s benefit to the movement of goods is realized in its ability to move relatively small cargo loads, over great distances, with great time savings. With this objective, Hyperloop could connect Cincinnati to major metropolitan areas such as Chicago, New York, and Atlanta. It would not be used to address the delivery of freight solely within the OKI region.
Economic Value of New Technologies
Several new air cargo-related technologies are discussed under each of the other four freight transportation goals. An added economic benefit of new technology results from the reduction in operational costs associated with air cargo. Whether through the advancement and adoption of more sustainable fuels, delivery time savings through drayage optimization, or more efficient and safe removal of flight obstructions, technology speaks to air cargo’s bottom line. Cost savings offer the opportunity for air cargo operators to pass on savings to customers or invest additional funds to achieve a constant flow of freight advancements that perpetuate improved safety, infrastructure maintenance, mobility and reliability, environmental sustainability, and economic competitiveness throughout the OKI region