Recession hurts Anchorage air cargo business

Shuttle buses to be reduced, managers considering increased parking fees

Posted: Monday, June 01, 2009

ANCHORAGE - The global recession has hurt one of the mainstays of the Anchorage economy - the air cargo business at the Anchorage airport.

There's a hiring freeze for airport workers. And a $20 million building project between the north and south terminals has been delayed. The airport staff plan to leave windows unwashed this summer and don't plan to mow the grass as often, either.

Officials said shuttle buses will be reduced in July and airport managers are considering increased parking fees for travelers.

Much like the overall decline in the global economy, the number of cargo planes touching down to refuel and swap freight in Anchorage on their way between Asia and the Lower 48 began to sag in mid-2007. By last year, it was in a slump.

The eruption of Cook Inlet's Mount Redoubt volcano, which filled the sky with dangerous ash and scared away some cargo carriers until early May, made it even worse. Flights diverted due to the volcano cost the airport $2 million alone in lost revenue.

"It was a double whammy, that's what it was," said Joe Zerck, general manager of Pegasus Aircraft Maintenance, an airport company that furloughed about 40 of its 93 employees during the Redoubt eruptions. Due to the overall slowdown in cargo traffic, Pegasus has added back just a handful of workers. It may not be back to previous staffing levels until the end of the year, Zerck said.

"As with anyone, we're hopeful that the economy will continue to improve," Zerck said.

While May statistics aren't out yet, cargo landings are improving somewhat. Revenue is expected to be down 20 percent this year but are forecasting about 2 percent next year.

The airport's recent budget cuts include $350 million in capital projects over the next five years and a 6 percent reduction in operations and maintenance spending.

The airport is not required to turn a profit but is supposed to cover its costs rather than rely on state funds.

Between last July and this March, the Anchorage airport dropped from its No. 3 ranking among the world's airports for cargo landings (by weight) to No. 5. Cargo weight at airports in Shanghai and Seoul didn't change much, but those airports leapfrogged ahead of Anchorage when its cargo declined. Memphis and Hong Kong maintained their ranking as No. 1 and No. 2.

In the Lower 48, "other airports are down the same or worse," said Christine Klein, Alaska's deputy commissioner of aviation.

Internationally, air-cargo shipments have fallen by more than 20 percent since January, according to the International Air Transport Association.

Manufacturers in Asia are shipping less to reduce the amounts of goods that piled up in their warehouses when consumers reined in their spending, according to the association.

Average monthly revenue at the Anchorage airport has dropped from $10 million to $8 million, according to Klein.

As a result, the airport has cut its operations and maintenance spending this year by 5 percent. Capital projects over the next five years, such as a preliminary study for a fourth runway, have been pushed further into the future, said airport spokeswoman Linda Bustamante.

FedEx announced earlier this year that it is transferring 68 pilots elsewhere, saying the move is part of a companywide strategy to cut costs and improve efficiency as cargo volumes drop. The transfers, scheduled for April, still haven't been finalized, a company spokesman said.

Another whammy for the airport is expected at the end of this year when Northwest Airlines, one of Anchorage's large freight operators, plans to retire its national fleet of cargo planes. Five of the fleet's nine jets land in Anchorage. Forty of the airline's 80 jobs in Anchorage will be eliminated, says Delta Airlines, which recently bought Northwest.

The loss of Northwest could cost the Anchorage airport $3 million in revenue annually, according to the airport's estimates. But airport officials said they hope a new cargo carrier will absorb Northwest's routes.

Shanghai-based Great Wall Air, a smaller outfit, began chartering planes through Anchorage this month.

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