Optimism is high, yet guarded, at George Bush Intercontinental Airport (IAH) in Houston where troubling economic times in the airline industry is shifting carrier service everywhere.
But according to Genaro Pena, Houston Airport System (HAS) marketing director, Houston as a city is attracting more business from Asia and the Middle East than any other market in all of the Americas. That’s because Houston is not only an oil town; it’s home to numerous headquarters, manufacturing and operational activities.
“All of these elements are helping us with market growth, particularly in the Middle East and Southeast Asia where oil, engineering, and construction industries are strong,” Pena says.
Yet the economic downturn, currency devaluations, high fuel prices, and exchange rate issues, places Houston in a very unusual position currently. “This is one of the most unusual markets we’ve ever seen,” he exclaims. “The high fuel prices benefi ts Houston, but hurts the airlines.”
Cargo commitments
Consequently, domestic cargo volumes are flat, but international volumes strong. In fact, for the first six months of 2008, international air cargo shipments increased by 6.7 per cent – largely due to the addition of new services by Singapore Airlines and Emirates earlier this year.
Nevertheless, the air carriers with the most significant growth in air cargo traffic during the month of June 2008 were Air France, Burlington Air Express and Cargolux, with respective year-overyear increases of 57.4 per cent, 18.3 per cent and 13 per cent, all in comparison to the same time frame in 2007.
The international regions with the most significant growth in air cargo shipments through June 2008 were Mexico; Central and South America combined; and Europe, with respective year-over-year increases of 21.2 per cent, 12 per cent and 11.3 per cent.
“Where we are hurting is East Asia, which remains a strong target market for us, but the yields out of China are down,” Pena says. “What was driving growth in air cargo is gone.”
Cathay Pacific Airways, Hong Kong’s largest airline, pushed their start up allcargo service from Houston to Hong Kong from September 2008 to March 2009. The carrier plans to introduce three times weekly freighter service to IAH.
EVA Air Cargo had increased its twice weekly service, inaugurated on November 1, 2007 with Boeing 747-400 aircraft, to three times weekly, and then paired it back to two. “Their service is now hit or miss,” Pena reveals.
Korean Airlines, which has been servicing IAH twice weekly since January 2007, and China Air, which began in September 2006, continue to do well. “But their markets are softening,” Pena remarks.
On March 20, Singapore Airlines started passenger service between Houston and Singapore via Moscow four times weekly. The service is significant because Moscow has emerged as a world capital. The service is IAH’s first to Moscow.
“The airline is capturing belly freight, which is taking away business from EVA,” Pena states.
Meanwhile, the Middle East is strong due to the oil and engineering industries, and shipments of high tech, pharmaceutical and biomedical goods.
Emirates Airlines, which commenced non-stop passenger service three times weekly on 17 December 2007 to Houston from Dubai, expanded its service to daily in a short two months. Pena is optimistic that the carrier will increase the service to double daily in the next six to nine months. There are no signs that Emirates SkyCargo will introduce freighter service, however.
On 10 November, Qatar Airways will launch three times weekly non-stop service using Boeing 777-200LR aircraft between IAH and Qatar’s Doha International Airport (DOH). Th e frequency will rise to daily a few weeks later in December 2008.
Future outlook
All totaled, Pena is convinced Houston will remain strong. An indicator is the number of Chinese companies now considering investing in the Americas.
“We are now seeing a swing back to Latin America for twin plant manufacturing to take advantage of lower duties and transportation costs,” he says.
Helping the trend is the recent Central America Free Trade Agreement (CAFTA) with the United States.
Consequently, companies are increasingly interested in establishing hubs with good logistics connections. “Our pitch is focused on Houston and its geographic position,” Pena says.
To meet future demand HAS officials are certain is coming, the airport continues to develop its infrastructure. Included is a 600,000 square feet warehouse, of which approximately 50,000 square feet will be utilized as its Perishables Centre.
Pena is confident that as airlines look at Houston as a hub gateway, carriers carrying cargo southbound to Latin America will find advantages to bringing flowers, fruits and fish northbound to Houston as opposed to the Latin America mega-hub gateway of Miami International Airport. For one, Houston is more centralised to key markets and the high cost of trucking is becoming increasingly a consideration.
Terminal B is also being expanded to the tune of US$1.2 billion in partnership with Continental Airlines. The multiphased construction and renovation is scheduled to be completed during the next seven to 10 years. The terminal currently operates as a regional jet hub for Continental Airlines.
“The time is right for a project like this,” comments Rick Vacar, HAS director of aviation. “Our customer base is growing, the cargo business is steadily improving, we are attracting new carriers and IAH is gaining attention as a global gateway. It is important for us to make strategic planning decisions so that we will be able to keep pace with this growth.”
