Location Is Almost Everything

Historically, port development has been based largely on geographic location. US West Coast ports are obvious gateways for Asian imports and exports because of proximity, while European cargo generally goes through East Coast ports. Other ports, such as the Port of Houston, not only rely on geographic location (in this case, as a gateway to and from Latin America), but on commodities. For instance, petroleum and petroleum products, which are naturally abundant in Texas, are the Port of Houston's top import and export commodities. The Port of New York and New Jersey, meanwhile, has established itself as the country's leading automobile port. During the first half of this year, the port handled 277,000 units-an increase of 21.8% over the same period in 1999.

Value-added services play a big part, too. The Port of Seattle offers shippers a variety of custom services such as labeling, packaging, inspection, minor assembly, and modification. In addition, the port can provide shippers with single point of contact through its customer service managers; dock-to-warehouse transportation by the port's own trucking fleet; delayed dealer acceptance, pickup, and storage services; inventory updates; and product tracking.

Ports Battle the Price of Success

The tremendous growth in US imports has brought of lot of business to US ports, but it has also brought bottlenecks, especially during peak shipping season. "Cargo congestion has definitely been a downside to the tremendous growth we've experienced," concedes Jeff Leong, spokesman for the Port of Los Angeles. "On-dock rail has really helped the congestion, though," he adds. The port has four on-dock rail facilities with a fifth in the planning stage. In addition, the Alameda Corridor, a major rail project that will link the Los Angeles-Long Beach port complex with the rail yards south of downtown Los Angeles, is due for completion by early 2002.

Another response to cargo congestion at the port has been to extend the hours of operation. The opening up of "hoot gates," or late night-early morning gates, has been growing in popularity with shippers. "Resistance isn't at the conceptual level, it's just that cost can become a factor," explains Leong. "The bigger shippers can justify keeping their warehouses open with second and third shifts to receive containers, but many smaller shippers cannot."

Make New Friends, Keep the Old

How do ports retain the business they have and attract new customers? This can be a problem, given that ports often don't have additional acreage at their disposal. Fortunately, a dredging and landfill project that the Port of Los Angeles began in the fall of 1994 helped attract shipping giant Maersk Sealand to the port. "The timing was right," acknowledges Leong. "Maersk Sealand was looking for a mega-terminal to accommodate growth in their business over the next 10 years and beyond." The 484-acre Pier 400 Container Terminal is a two-phase project. Phase one will be completed by August 2002, and will include an on-dock rail facility. Phase two will be completed by April 2004. "It's a great opportunity for the port and Maersk Sealand," says Leong. "They have an advantage in that they could design a terminal from the ground up."

Given the multitude of transportation options available to shippers, ports have had to work hard to attract new customers. John P. Horan, director of trade development for the Port of Houston, says his group is "targeting Africa very heavily" for new business opportunities. Although the port is not a niche port, it does have a lot of experience in handling project cargo. "Mining equipment, power-generating machinery, and equipment for infrastructure projects like roads and airports are some of what we handle," notes Horan. "And, there are certainly opportunities for us in Africa's emerging markets."

Air Cargo Boom

Will Keep Airports Aloft

The world's leading airports won't be without business in the coming years, given that experts say the air cargo market will triple over the next 20 years. Speaking at last September's Air Cargo Forum in Washington, DC, the vice president of Boeing's Commercial Airplanes Group, Randy Baseler, said the size of the world's freighter fleet will also double during that same period. Airports are improving their existing facilities and optimizing their use of space.

Los Angeles World Airports is in the midst of a master plan that includes development of several hundred acres. "Accommodating our significant cargo business is part of that plan," notes Tom Winfrey, cargo promotions manager for Los Angeles World Airports. The airport is ranked third in terms of cargo. Winfrey concedes that Los Angeles International Airport (LAX) has an advantage because of its location, "but we are also surrounded by a large consumer market." Shippers will not only find every major carrier serving LAX, the "density of flights" and number of connections makes scheduling very convenient, says Winfrey. The other unique feature, according to Winfrey, is that LAX has a lot of people from around the world working there that know the air cargo business and the markets with which LAX does business.

Even though the air cargo industry is poised for future growth, that growth may be somewhat hampered by regulatory barriers. The US maintains open-skies agreements with 47 countries, yet some accuse the Department of Transportation of inhibiting competition. Heiner Wilkens, president and chief executive of Luxembourg-based Cargolux International Airlines, and Chris Foyle, chairman of Air Foyle, a British cargo company are critical of the US' policy of limiting foreign ownership of US air carriers to 24.5%, as well as the US's restrictions against wet-leasing of foreign aircraft by US airlines and cabotage laws that prevent foreign carriers from transporting cargo and passengers between two US cities. Air cargo should be subjected to the same rules as other freight transportation sectors, such as ocean shipping and trucking, contends Wilkens. For instance, ocean carriers can transport cargo from Yokohama to San Francisco, but European airlines cannot.