NEW CHALLENGES IN THE AIR CARGO MARKET

T H E I T A L I A N M A R K E T A I R C A R G O C O N F E R E N C E

M I L A N, I T A L YJULY 2004

NEW CHALLENGESIN THE AIR CARGO MARKET

NEW CHALLENGES IN THE AIR CARGO MARKET

The Italian Market Air Cargo Conference

3

Table of Contents

• The Metropolitan Washington Airports Authority

– Washington Reagan National Airport

– Washington Dulles International Airport

• The Washington Market Area

• The Washington Dulles Distribution Center

• The Metropolitan Washington Airports Authority and Air Cargo

• The Galaxy Alliance of Airports



4

The Metropolitan Washington Airports

Authority



5

The Metropolitan Washington Airports Authority Manages Two Area Airports – Dulles International and Reagan National

• Interstate Compact Between Virginia, Maryland and District of Columbia

– 13 Person Board of Directors

– 5 - Virginia

– 3 - District of Columbia

– 3 - Federal

– 2 - Maryland



6

The Washington Region’s Two Major Airports Serve Distinct Needs

• Washington Reagan National Airport

– Ultra-convenient central location

– Metro access

– Short haul services

• Washington Dulles International Airport

– In suburban high technology corridor

– Domestic and international services

– Hub for United and Star Alliance



8

Washington Reagan National Airport Plays a Unique Short Haul Role

Source: Official Airline Guide June 2004

ALB

ATL

BDL

BHM

BNA

BOS

BTV

BUF

CAE CHS

CMH

CRW

DAYDEN

DFW

DTW EWR

JFK

GSO

GSP

HPN

IND

JAX

LGA

LAX

MCO

MHT

MIA

MSY

ORD/MDW

ORF

PWM

PVD

PHLPIT

PHX

SEA

STL

SAV

ROCSYR

TPA

TYS

LAS

RDU

DCA

NAS

CLE

CLT

FLL

MCI

MSP

SLC

IAH

BDA

OMADSM

YUL

YYZ

ACKMVY

ILMMEM

MKE

PBI

RSW

SDF LEX

CVGSBY

HHH

MYRHSV

14 Airlines73 Destinations2,641 departures/week



10

Washington Dulles International Airport Is an Important Domestic Airport …


ALB

ATL

BDL

BNA

BOS

BTV

BUF

CAE CHS

CMH

CRW

DAYDEN

DFW

DTW

EWR

JFK

GSO

GSP

HPN

IND

JAX

LGA

LAX

MCO

MHT

MIA

MSY

ORD

ORF

PWM

PVD

PHLPIT

PHX

SEA

STL

SAV

ROC SYR

TPA

TYS

LAS

RDU

IAD

CLE

CLT

FLL

MCI

MSP

SLC

IAH

MEM

CVG

12 Airlines72 Destinations2,429 departures/week

STTSJU

PDX

SJCSFO

SMFOAK

SANLGB

AUS

ROARIC

CHO

MDT

ABEBGM

SCE

LWB

Star Alliance RouteNon-Star Alliance Route



11

… And a Growing International Gateway for Cargo and Passengers


IAD

18 Airlines25 Destinations337 departures/week

AMS

BGI

BRUCDG

CPH

CUN

EZE

FRA

GRU

GUA

ICN

LHRMAN

MEX

MUCMXP

SAL

NRT

SJO

SVO

TAB

VIEYOW

YUL

YYZ

YVR

ZRH

Star Alliance RouteNon-Star Alliance Route1/2 Stop Through Plane Service

GIG

SRZ

POS ADD

RUHJED

LPB

MVD



12

IAD

ATL

BOS

EWRORD

RDU

CAE

HPN

ORF

PWM

BNA

JAX

SYR

BTV

BUF

CHS

GSP

ROC ALB

CRW

MHT

TYS

LAN

GSO

SAV

CLEJFK

CMH DAY

BDL

IND

DTW

PVD

PIT

SDF

SWF

Source: www.flyi.com, June 2004

Notes:Service begins in August to: SAV, GSO, CLE, JFK, CMH, DAY, IND, BDL, PIT, PVD, DTW, SDFService begins in September to: SWF

Independence Air Will Reinforce Dulles As A Leading Destination for Low Fare Services



13

Washington Reagan National Washington Dulles

Passenger Traffic at Dulles and Reagan National

Source: Metropolitan Washington Airports Authority, 2004

Passengers(Millions)

40

35

30

25

20

15

10

5

01994 1995 1996 1997 1998 1999 2000 2001 2002 2003

4th15.515.7 15.2 15.2 16.0 15.2 15.9 13.3 12.9 14.2

12.411.7 12.9 13.8 15.7 19.8 20.1 18.0 17.2 17.0



14

Dulles Continues its Rapid Growth Today

1962 Washington Dulles International Airport opens

1987 Metropolitan Washington Airports Authority begins operations

1990 United Airlines starts Dulles-Frankfurt service

1991 United Airlines purchases London routes of Pan Am; starts Dulles-London/Paris

1992 First U.S.-Europe open skies agreement with Netherlands

1996 Virgin Atlantic inaugurates services as third Washington-U.K. airline

1997 Star Alliance created by Lufthansa, United and others. Dulles is eastern U.S. hub

2001 bmi British Midland starts services as fourth Dulles-U.K. airline

Scandinavian Airlines starts services to Dulles

2002 United Airlines services to Sao Paulo, Buenos Aires link Dulles to South America

2004 Independence Air chooses Dulles as hub for low fare services

Alitalia starts nonstop service between Dulles and Milan Malpensa



15

The Washington Airports Enhance the Region’s Strong Economy

Total National Dulles

Jobs 27,551 8,709 18,842

Employee Earnings (Millions) € 1,037 € 334 € 702

Business Revenue (Millions) € 3,872 € 855 € 3,016

State and Local Taxes (Millions € 193 € 62 € 131

Federal Aviation Specific Taxes (Millions) € 311 € 78 € 233

Source: Martin Associates, 2002



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The Washington Market Area



17

Washington D.C. is More Than the Center of U.S. Government

• Population of Region 5.2 Million: Fourth Largest in U.S.

• Third Largest Effective Buying Income Per Capita

• The Capital of the United States … AND …

– The world’s leading center for biotechnology research

– Headquarters for 15 Fortune 500 companies

– Best performing large U.S. city for job creation 2000-2004

– Located at the center of the mid-Atlantic east coast road network - a large manufacturing and consuming region

– Site of Reagan National and Dulles International Airports



18

Washington D.C. is Both the National Capital and a Growing, Sophisticated Urban Community



19

Washington Dulles’ Core Air Cargo Catchment Area Includes Extensive Manufacturing of High Value Products Shipped by Air

• Machinery, except Electrical (SIC 35) includes Computers, Terminals and Peripherals

– 11,490 Firms– 338,335 Employees

• Electrical and Electronic Machinery (SIC 36) includes Semiconductors, Circuit Boards, and Communications Equipment


• Transportation Equipment (SIC 37) includes Aircraft and Aircraft Parts and Aerospace


• 10 States and Washington, DC have a Total of 76,776 Manufacturing Firms

• 836 Firms Export by Air• 521 Firms Import by Air

PENNSYLVANIA

WEST VIRGINIA

DELAWARE

MARYLAND

VIRGINIA

NORTH CAROLINA

SOUTH CAROLINA

GEORGIA

KENTUCKY

TENNESSEE

High Technology Firms and Employment by Industry (SIC Code)

Source: US Census Bureau 2002



20

The I-95 Corridor is Home to Many World Class Manufacturers and Shippers

POWERTRAIN



21

The Washington Dulles Distribution Center



23

Dulles is the Undisputed Air Cargo Gateway to the Washington Region

Source: Metropolitan Washington Airports AuthoritySource: Metropolitan Washington Airports Authority, 2004

Tonnes

350,000

300,000

250,000

200,000

150,000

100,000

50,000

0

1994 1995 1996 1997 1998 1999 2000 2001 2002 2003

4th

240,162229,924

253,854

292,594 295,718 293,714

321,803

288,299

304,113

267,614



24

International Air Freight at Dulles has Grown by More than 900% Since 1980, Far Out-Pacing Total U.S. International Freight

Source: Metropolitan Washington Airports Authority, Air Transport Association 2004

160,000

120,000

80,000

0

40,000

‘80 ‘81 ‘82 ‘83 ‘84 ‘85 ‘86 ‘87 ‘88 ‘89 ‘90 ‘91 ‘92 ‘93 ‘94 ‘95 ‘96 ‘97 ‘98 ‘99 ‘01 ‘02

Dulles International Cargo US International Freight RPM Index

Tonnes

‘03‘00



25

Dulles Offers an Airfield With Abundant Capacity, With Room to Expand



26

Dulles’ RFS Serve Key U.S. Markets in Under 14 Hours – From Aircraft Landing to Destination Loading Dock

Source: www.mapquest.com



27

Washington Dulles Airport Offers a Low Cost Business Environment, Compared to Other World Cargo Hubs Such as JFK

Lower Landing Fees are One Example of IAD’s Savings

Note: Landing fees at JFK and IAD are based on different criteria. JFK on MTOW; IAD on MLW.

Source: The Port Authority of NY and NJ, Schedule of Charges for Air Terminals, May 2004; Metropolitan Washington Airports Authority, 2004 Summary of Airline Rates and Charges, January 2004

COST/OPERATION

WEIGHT RATE (000) lbs. LANDING TOTAL/YEAR5

New York JFK 606,0001 $5.253 $3,183.08 $496,559.70

Washington IAD 407,7772 $2.504 $1,019.75 $159,081.00

S A V I N G S $2,163.33 $337,478.70

1 Maximum Gross Takeoff Weight, A340-200 lbs2 Maximum Landing Weight, A-340-200 lbs3 Landing Fee, effective date for New York JFK, May 2004. $/000 lbs4 Landing Fee, effective date for Washington IAD, January 1, 2004. $/000 lbs5 3 Opns/Week



28

Dulles Management Works Closely With Cargo Community, Government Agencies

• DACMA - Dulles Air Cargo Managers Association

• TSA - Transportation Security Administration

• USCBP - US Customs and Border Protection



29

Cargo Handling



30

Washington Dulles World Cargo CenterAircraft and Air Cargo Handlers



32

The Metropolitan Washington Airports Authority and Air Cargo



33

The Washington Dulles World Cargo Center Supports Its Cargo Airlines – Every Pallet and Every Step of the Way

• Washington’s Dedicated Cargo Development Program

– Assistance with Marketing, Promotion, Problem-solving

• Customer-focused – 24/7

• Cargo-friendly, An Advocate for International Air Cargo

• Specific Support for Cargo: Washington’s FTD Program



34

The F.T.D. Cargo Promotion Program:A Partnership with Dulles’ Airlines

• Jointly Funded – 50/50 Basis

• Flexible Cost-effective Program to Help Stimulate Business

• Provides Quantifiable Support for cargo carriers

• Builds on a Strong Working Relationship between the Metropolitan Washington Airports Authority and its cargo operators



35

The Metropolitan Washington Airports Authority Supports the Air Cargo Industry

• Provides High Quality and Low Priced Facilities

• Attracts All-cargo and Passenger Belly Services

• Promotes Forwarder Consolidation at Dulles

• Facilitates Cooperative Market Development

• Publicizes Cost and Revenue Advantages of Dulles

• Liaison Between Airlines, Forwarders, Government

• Quality Control of Dulles Services

• Intervenes in Route Allocation Proceedings

• Ensures That Regulators and Community Understand Importance of Air Freight

• Promotes Worldwide Cooperation on Air Cargo Through Galaxy Alliance



36

Galaxy Alliance



37

The Galaxy Group of Airports Promotes Air Cargo

• Cargo-friendly Airports Around the World With a Common Vision

• These Airports Recognize the Unique Needs and Economic Benefits of Air Cargo

• Galaxy Seeks Better Environment for Air Cargo Through

– Liberalization

– Solving “doing business” issues

– Common standards

– Greater public awareness

• Exchange of Information and Ideas



38

Galaxy’s Scope and Founding Members

Chateauroux(CHR)

Shenzhen

Fairbanks

Stockholm

Bucharest

Casablanca

Hamilton

Sharjah

Accra

Avalon

Milan

Kuala Lumpur

Washington Dulles (IAD)

Koln/Bonn..Prestwick

DublinManchester

Houston

Calgary

Johannesburg

Venice

February 2004

In 1999, the Metropolitan Washington Airports Authority, operator of Washington Dulles International Airport, and Chateauroux Airport in France joined together to establish the International Cargo Airport Alliance.



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Conclusions



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Air Cargo is a Vital Industry that Needs Proactive Stewardship

• Air cargo is important to the Washington Region

• The Dulles World Cargo Center is large and rapidly growing

• The Center offers high quality and attractively priced air cargo facilities

• The Metropolitan Washington Airports Authority promotes air cargo to enhance regional development

• The Authority believes international cooperation is a key to the growth of air cargo

• The Galaxy Group of Airports provides air cargo-friendly airports a network of support

• The Group lets cargo-friendly airports speak with one voice



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Richard P. NorrisAir Cargo Development ManagerMetropolitan Washington Airports Authority1 Aviation CircleWashington, DC 20001-6000

Tel: 703.417.8754Fax: 703.417.8892E-mail: [email protected]



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NEW CHALLENGES IN THE AIR CARGO MARKET