Puerto Rico plays the game: How regional hubs can – and should – be built

A test of Puerto Rico’s strategy blocks

Several challenges, however, stand in the face of this grand dream as other players test the strength of Puerto Rico’s strategy in crafting a hub airport.

Removed from air cargo’s existing systemic structure, Puerto Rico does have a history of being challenged by weather and sources told  Air Cargo World that risk mitigation would be a critical issue in convincing carriers to invest in building major hub-status operations there. There also exists the issue of available capacity as the island does present a finite territory.

When replaced into the current system of global air cargo, there are nearby competitors, like Miami (MIA) with existing infrastructure, space, networks and security Puerto Rico does not currently offer. Therefore, Puerto Rico may be “hard-pressed to compete,” one source said.

The island’s airports also face internal challenges from opposition against airport privatization. Only three days after the Commonwealth government submitted its application, L.A. Irizarry & Associates, a consultant for several air carriers, submitted an opposition to the application to the DOT.

The opposition piece argued privatization of Puerto Rico’s has hurt the economy by serving buyers over the Puerto Rican public. It further claimed that the action of the government is “trying to circumnavigate the already established agreements between signatory countries under the Chicago Convention for the freedoms of the air.”

These challenges do not mean Puerto Rico has no chance at becoming a hub but that it will require the island’s airports to make a compelling argument as to the value they can offer stakeholders.

Building a winning strategy

“It takes a number of attributes to really fit within the ideal hub location,” Memphis International Airport (MEM) President and CEO Scott Brockman said. “It’s not a field of dreams where you build it and they will come.”

The three key building blocks critical to a sound hub development strategy include – location, infrastructure and value. See the sidebar to the right for examples of how existing hub airports in North America have incorporated these elements into their strategies.

For location, Puerto Rico is positioned to capture some traffic moving between the Americas and Europe, but must assuage viable concerns related to risk mitigation necessary for sustaining ops related to weather. Several carriers also currently view Puerto Rico a consumer market and export market for pharmaceuticals, but not as a trans-loading market. Even were the island to attain trans-shipment status for its airports, this may not necessarily be enough to attract operators.

“At the end of the day the special rights are only an enhancement and not the driving factor of what ANC offers its stakeholders,” explained Anchorage (ANC) airport director Jim Szczesniak.

With regards to infrastructure, Puerto Rico still is recovering from the hurricane, but clearly can facilitate strong pharmaceutical operations. Demonstrating further expansion on perishables or more diverse market offerings could improve this point.

Freight forwarders, for example look at “how [airports] geographically align with large concentrations of tonnages from our key clients, and how we can pull together a diverse mix of products, so we can effectively build and move consolidations,” AIT Worldwide Logistics Executive Vice President Global Operations Greg Weigel said.

Next, the island must also convince stakeholders of the value proposition in hosting a hub there. Puerto Rico already offers fuel cost benefits. However, sources said it would also behoove the island to demonstrate they can provide efficient infrastructure and airport management that allows operators to seamlessly run their operations then become the key facets stakeholders look for in a hub.

When working to create a transit hub, “pay attention to needs of your stakeholders, take care of your infrastructure, try to plan in advance, move at the pace that the business needs you to move, and then get out of their way and let them be successful,” explains CVG CEO Candace McGraw said.

As Puerto Rico awaits its pending DOT application, it relies upon the island to demonstrate to stakeholders it hosts sound building blocks for a hub as it seeks to win a larger share in regional air cargo.