Consultant Insight: ANC garners investment as a critical hub for trans-Pacific freight ops

Amid constrained trans-Pacific air capacity, FedEx Express announced plans to invest $200 million in a new sorting facility at the Ted Stevens Anchorage International Airport (ANC) to help speed last-mile deliveries. As retailers and manufacturers shift freight from ocean to air to ensure they can quickly rebuild depleted inventories and take on extra inventories for just-in-case purposes, capacity continues to be an issue. “Right now cargo is king and we expect that trend to continue for some time. And Alaska, and in particular Anchorage, are only growing in importance over time,” FedEx Express Americas President Richard Smith said at the Anchorage Economic Development Corporation (AEDC) annual economic forecast luncheon, according to reports . [caption id="attachment_69752" align="alignright" width="398"] Cathy Roberson, Cargo Facts Consulting senior consultant and Air Cargo World columnist[/caption] Indeed, for over a year inventories for retailers and manufacturers have struggled to keep up with demand from end customers . January retail sales were up 12.6% compared with January 2021, while inventories were up only 6.1% for the same period, according to the latest inventories and sales report from the U.S. Census Bureau. Meanwhile, January manufacturer sales were up 10.8% year over year and inventories were up 9.8%. However, capacity constraints from the manufacturer to the last mile have resulted in delivery delays throughout retailer and manufacturer supply chains. “Out of Asia, demand seems pretty high because of the current commercial capacity constraint, but also, because inventory levels are still so low,” FedEx CMO Brie Carere told analysts during the company’s recent earnings call. An Alaskan hub In 2019, UPS also announced expansion plans at ANC, which handled about 3.6 million tonnes of cargo 2021, breaking its record for cargo volume by 14%, or just over 400,000 metric tons. The previous record was set in 2020. Anchorage is a popular transit point for trans-Pacific freight operations for airlines like FedEx and UPS, and according to the Alaska International Airport System , ANC is also one of the world’s few airports where international cargo can be transferred between aircraft without being subject to customs and other trade requirements. ANC is an important hub for goods transported between Asia and the U.S. Instead of flying goods from Asia to FedEx’s or UPS’ air hubs located at Memphis (MEM) or Louisville (SDF), respectively, the express operators will be able to sort inbound goods from Asia at ANC without incurring additional fees, and send these goods directly to their final locations within the U.S. This skips the FedEx and/or UPS central hubs which typically takes on this role in a hub-and-spoke network, thus speeding the last-mile delivery. The need for speed However, e-commerce is playing a more significant role these days, and its characteristics, including the need for speed, are putting into question the traditional hub-and-spoke network. Resilience and agility are necessary in today’s environment and establishing hubs such as ANC will prove beneficial for cross-border e-commerce deliveries. “Our international businesses are navigating a dynamic environment [as] capacity constraints continue to be a reality,” FedEx’s Carere said. “At this point, valet capacity on trans-Atlantic passenger airlines is expected to recover faster than trans-Pacific. Passenger airline capacity is not expected to fully recover to pre-COVID levels until 2024 or even later across our largest global trade lanes.” Indeed, until then and perhaps beyond, express providers such as FedEx and UPS will likely command a bigger piece of the freight market.

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