The FedEx cargo hub at Anchorage's international airport is cutting a transit flight from its global network, while investment in newer aircraft and upgrades at a cargo hub in Oakland, Calif., may point to a future with fewer planes flying to Alaska’s largest city.
Anchorage has longed served as a strategic hub for freighter jets flying between Asia and North America. FedEx is the jewel of the cargo operations at the airport, where the company runs a sorting facility.
The axed trans-Pacific FedEx flight does not shift any cargo when it lands in Anchorage; it's simply a “gas-and-go” operation, said FedEx spokesman Scott Fiedler. The plane’s absence, however, will be apparent to local workers.
“It’s transparent to the Anchorage hub, and the reason is that it’s a transit stop … They just swap crews and fly it down to the Lower 48,” Fiedler said. “The flight simply stopped there for fuel.”
Come July, the plane will no longer touch down in Anchorage. Fielder declined to speculate on future cuts to the Anchorage-based cargo hub, but he said FedEx continually adjusts its flight network based on customer volume.
The air-freight industry is rapidly changing how it does business due to newer technologies and a stagnant global economy. The need for change is more apparent than ever; FedEx's fourth-quarter profits fell 45 percent, with some international customers using less-expensive delivery options. The company has spent heavily on restructuring, The Associated Press reported.
Part of the restructuring includes 3,600 employees taking voluntary buyouts. Nearly half of them have already left, according to the fourth-quarter report. Fiedler said the buyouts are occurring nationwide, but he declined to say whether any of them are in Alaska. There’s been no mention of layoffs in Anchorage either, he said.
Fewer flights between Asia, U.S.
According to its fourth-quarter report, FedEx plans to further cut delivery capacity between Asia and the U.S. in July, cuts that began about three months ago.
During the fourth-quarter earnings call, FedEx executives said their ground-services business remained strong and margins improved in the freight business. But that didn't fully offset weak global economic growth and a decline in priority international air shipments.
Anchorage’s international airport is experiencing the sting of a struggling global economy, too. Cargo passing through Anchorage has fallen about 25 percent since 2007, with the decline continuing into 2013, said airport manager John Parrott.
The volume of freight coming through Anchorage rebounded a bit in 2011, thanks to federal stimulus money. But as the cash flow waned, freight dropped last year and has continued to fall.
Cargo "is trending slightly below 2012, but it hasn’t been a precipitous drop off,” Parrott said.
The loss of FedEx’s trans-Pacific flight will have a limited impact on the airport, Parrott said, as about 450 wide-body cargo planes pass through each week. Companies are constantly adjusting their flights to maximize profits, he said.
FedEx invested at least $30 million into improving its Oakland facility by upgrading a conveyor belt and technology systems. The upgrades to the 75-acre complex should boost sorting capacity of international cargo fourfold to 12,000 pieces per hour and domestic cargo 40 percent to 24,000 pieces per hour, the San Francisco Business Times reported.
The multimillion-dollar investment includes adding a gate at the Oakland sorting facility that can accommodate a Boeing 777, also referred to as a “triple seven.” The triple seven is 15 percent more fuel efficient than the McDonnell Douglas MD-11 and can carry 15,000 more pounds, which means longer flights using less fuel and carrying more cargo. Anchorage’s FedEx hub handles both aircraft.
Despite the cuts to delivery capacity between the U.S. and Asia, FedEx is hastening the retirement of 86 aircraft and more than 300 engines in a move to modernize the company’s fleet. According to Daily Finance, FedEx's last Boeing 727 was retired earlier this month.
The company took an impairment charge of $100 million in May due to the aircraft retirement plan, and it expects an additional expense of $74 million in 2014, Reuters reported.
With all of these changes in the works, Alaska’s cargo intake may be affected. It’s hard to say exactly what will happen at the Anchorage hub, however, as FedEx generally is tight-lipped about specific company changes.
Answering an Associated Press reporter’s question about changes the company might make to its international operations, which Anchorage’s cargo economy largely hinges upon, FedEx chairman and chief executive Fred Smith said, “I think the problem we have is trying to answer questions like you just asked us. The international air cargo business is not going to go away … you’ll just have to trust us to know how to manage the business.”
Contact Jerzy Shedlock at jerzy(at)alaskadispatch.com