A heavyweight in the Anchorage economy -- the city's international airport -- is riding out its own recession this year.

Click to enlarge

Story tools

Comments (0)

E-mail a friend

Print

Share on Facebook

Digg this

Seed Newsvine

Send link via AIM

Follow on Twitter

Font size : A | A | A

The effects are spilling out on the tarmac and the terminal. There's a hiring freeze for airport workers. 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.

Shuttle buses will be reduced in July and airport managers are considering increased parking fees for travelers, they said.

The main reason for the budget-trimming is a decline in international cargo shipping, a behemoth operation at the airport that in recent years transformed the airport complex into one of the city's biggest employers.

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.

But by late last year, as the global economy worsened, the sag had become a big 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 added back just a handful of workers and 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.

Airport officials are sanguine too. They said while May statistics aren't out yet, cargo landings are already improving somewhat. They predict their revenue will be down 20 percent this year but are forecasting modest growth -- 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. That should eliminate the possibility of financial losses this year, state officials said.

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

A VIRTUAL CITY

A local economist said a few years ago that if the airport were a separate city, it would have one of the biggest economies in Alaska.

UPS and FedEx have major freight hubs in Anchorage, where they have their own hangars, run cargo-sorting centers that employ hundreds and train pilots on multimillion-dollar flight simulators.

Jobs at the airport paid about $11,000 more than the average Anchorage salary of $44,000 two years ago, according to a 2007 study by the economist, Scott Goldsmith of the University of Alaska Anchorage.

About 13 percent of the jobs in the city -- ranging from hotel concierges to fuel suppliers -- are supported by activities that happen at the airport, Goldsmith wrote.

The rise of the cargo industry has also been seen as a stabilizing factor for the local economy. It's a global industry not tied to the boom-and-bust cycles of the state's major resources industries -- salmon, mining and oil -- or to the purse strings of the federal government.

But that doesn't mean that it isn't vulnerable to economic cycles too.

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.

She said no decision has been made yet about increasing parking fees at the airport. The public will be notified before a fee increase is finalized, she said.

MORE CUTS?

FedEx announced earlier this year that it is transferring 68 pilots elsewhere, saying the move is part of a company-wide 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.

In fact, they've already netted one new carrier.

It's a much smaller outfit than Northwest, but Shanghai-based Great Wall Air did begin chartering planes through Anchorage this month.

That shows that the economic perks for cargo landings in Anchorage are still in play, said Bill Popp, who runs the nonprofit Anchorage Economic Development Corp.

He said carriers can carry more cargo and spend less on fuel by landing and refueling in Anchorage, rather than making a longer flight from Asia to the Lower 48.

It's cheaper to land cargo in Anchorage than Seattle or San Francisco, for example, airport officials said, citing Anchorage's lower landing fees and cheaper jet fuel.

"Air cargo is still going to have a significant role in Alaska's economy, even with the downturn," Popp said.

International cargo carriers

Air China

Asiana Airlines

Cathay Pacific Airways

China Airlines

Eva Air

Evergreen International Airlines

Federal Express J

apan Airlines

Korean Air

Nippon Cargo Airlines

Northwest Air Cargo

Polar Air Cargo Singapore Airlines

United Parcel Service

Atlas Air

Shanghai Air Cargo

China Cargo Airlines

ANA Southern Air

Great Wall Airlines

Kalitta Air

Qantas

Domestic cargo carriers

Everts Air Cargo

Alaska Central Express

Alaska Airlines

Empire Airlines

Lynden Air Cargo

Northern Air Cargo

ADVERTISEMENT