Internet-based commerce may fuel new cargo facility

McCarran International Airport is one of the top 20 airports in the world by number of operations and total passenger boardings, but lags behind other airports regionally and nationally in cargo shipping.

That could change if county officials and a private partnership succeed in creating a secondary airport in the Ivanpah Valley, 40 miles southwest of Las Vegas.

The new airport would ease passenger congestion at McCarran and be a hub for air cargo generated by the explosion in Internet-based commerce.

By the amount of cargo shipped, McCarran ranked 137th in the world in 1998 in statistics compiled by Airports Council International of Geneva. The council said 73,846 metric tons of cargo went in and out of McCarran last year.

In comparison, Los Angeles International Airport, the No. 2 cargo facility in the world, handled 1.9 million metric tons. Memphis, Tenn., where Federal Express is headquartered, is the world's largest air cargo handler with 2.4 million metric tons shipped in 1998.

The amount of cargo shipped through McCarran climbed 3.5 percent in 1998 over 1997 and is expected to keep growing, according to Wayne Duzita of International Aviation Terminals, a Vancouver, British Columbia-based company that works with McCarran to manage cargo at the airport.

The company specializes in managing all kinds of airport services, from flight kitchens and warehouses to aircraft-towing vehicles. Most of IAT's operations are in Canada -- the only other airport in the United States where it has operations is in Reno.

Duzita, senior vice president of IAT's management group in Vancouver, said resort and convention industries account for half the cargo shipments that pass through McCarran. General business is responsible for the other half.

At McCarran, IAT is in a participatory lease, said Gary Johnson, commercial property manager at the airport.

"It's the best deal in the whole wide world we can get into," Johnson said. "If they do well, we do well and we participate in the rewards without the risk."

Under terms of the 4-year-old deal, McCarran leases land to IAT and the company builds facilities on speculation. The agreement tends to make financing more difficult for IAT since the contract is up for re-evaluation every three years. But McCarran has no risk and is motivated to help IAT succeed since the airport gets 50 percent of the net proceeds. Duzita said IAT manages 1.5 million square feet of warehousing space in Las Vegas, has 225,000 square feet under construction, 75,000 square feet on the drawing board and 100,000 square feet in early design stages.

"When you get a big show like Comdex in town, every square foot is filled," Duzita said.

The resort sector also keeps IAT busy with regular deliveries of fresh seafood and floral arrangements.

It isn't IAT's responsibility to load planes. That's handled by IAT's customers -- Federal Express, United Parcel Service, Airborne Express and the U.S. Postal Service among them -- which load crates, boxes and packages into the bellies of passenger planes. About 75 percent of McCarran's cargo arrives or leaves in passenger planes as opposed to freighters.

If and when McCarran reaches capacity -- around 55 million passengers a year -- a satellite airport would be needed to relieve congestion.

Not just a cargo facility

Airport director Randy Walker has stressed that an airport proposed in the Ivanpah Valley south of Las Vegas wouldn't be just a cargo facility. He's not sure how long it will be before McCarran hits capacity, but this year, the airport is anticipating about 33 million passengers.

Few expect airport operations to grow as rapidly as they did in the 1990s, but if growth averages 5 percent a year, the airport would be out of room in 11 years.

Duzita said his company has been monitoring the progress of Ivanpah Valley land acquisition and supports the concept of a satellite airport.

He said IAT would continue to operate at McCarran since the proximity of the airport to the Strip is important for timely deliveries. An operation at the satellite airport would mean new opportunities for additional revenues for IAT, Duzita said.

Another partnership of investors is looking at Ivanpah Valley as an opportunity for a different type of cargo operation. The group wants to make the new airport a center of logistics for electronic commerce, or e-commerce.

The group is a partnership between Hamilton Associates, a White Plains, N.Y.-based investment group, and Dumez-GTM, a French conglomerate that includes engineering and construction management companies.

Raymond Young, the project manager and a Hamilton Associates executive, said that as Internet commerce grows the timely delivery of products will become increasingly important.

"The Internet economy and its emphasis on e-commerce, the full impact of which will not likely be felt until 2002 to 2005, will place demands that cannot be met by existing transportation facilities and logistics networks," Young said.

"Transportation and logistics facilities for the future will need designed-in ability to improve our ability to put technology and management to work to reduce congestion, wasted resources and harmful impacts, while also raising productivity and supporting efficient movement of goods," he said.

Numerous hurdles to clear

Young knows that there are numerous hurdles to clear before the dream of turning Southern Nevada into an e-commerce cargo hub can be realized.

The biggest, of course, is getting the airport built. Young said that since 1996 his group has stepped back from being a lead proponent to allowing Clark County and its Department of Aviation to carry the ball.

Young's group also must consider competition.

Late last month the Southern California Logistics Airport began operations in Victorville, Calif., about 150 miles southwest of the Ivanpah Valley airport site.

Stirling Airports International, a private airport operator and ground transportation coordinator based in Laguna Hills, Calif., kicked off a global cargo operation.

The cargo arm of Swissair, a major international air carrier, is one of the partners in an operation that initially will bring about 100 tons of freight a week into Southern California.

The Southern California airport was the last link in a network of airports connecting Asia, Europe and South America with North America.

Aboard each Boeing 747 jet freighter arriving at Victorville are clothing, electronic components and computer equipment from Asia. Southern California manufacturers also have the ability to export overseas through the network.

Developers of the Southern California Logistics Airport, located at the decommissioned George Air Force Base site, hope to build market share in the air cargo industry by relieving flights into Los Angeles International Airport.

"It was obvious to us that LAX (Los Angeles International) was growing dramatically and, like most commercial airports, passengers are the priority there," said Dougall Agan, principal of Stirling Airports International, which is partnering with the city of Victorville on the project. "Our plan was to develop an airport where cargo is the priority."

Stirling is doing that by coordinating the airport with rail, trucking, freight forwarding logistics and real estate. The Burlington Northern and Santa Fe Railway Co. spurs into the airport and trucks have easy access to the facility off Interstate 15.

In addition, the airport is establishing incentives for businesses to build there. An 1,800-acre foreign trade zone is being offered as well as a business enterprise zone providing special tax credits for companies that make the airport home.

Agan said he expects the airport to service markets within a 12-hour drive of Victorville: Los Angeles, San Francisco, San Diego, Phoenix, Salt Lake City, Denver -- and Las Vegas.

Young, meanwhile, sees the Ivanpah airport as a pioneer for the industry and not a competitor. He pointed out that his company's focus is on becoming an e-commerce distribution center while the California group is centered on international cargo.

By the time e-commerce hits its stride, Young figures construction could be close to beginning at Ivanpah Valley and the two entities would be on level ground for that market. Besides, Young feels that an Ivanpah Valley airport would be a strong competitor in cargo operations for the same reason other companies have chosen Nevada over California -- the tax advantages.

Young expects government officials would put enterprise zone incentives into place at Ivanpah to stimulate growth, and tax bills will be less in the Silver State than they are in the Golden State.

But it's hard to deny that Victorville won't have a massive head start with a decade of experience in cargo operations before earth-movers ever arrive at Ivanpah Valley. Stirling also will continue to develop growth strategies. Agan said the Southern California airport began as a facility for aircraft maintenance before branching into cargo logistics.

Agan said one of the risks of his venture is its close tie to the global economy. Overseas slowdowns like the "Asian flu" could limit growth for the airport and its affiliated companies.

Young points out that because the Southern California and Southern Nevada airports would be relatively close to each other geographically doesn't mean they couldn't co-exist economically. He points out that the Ohio River Valley is filled with competing freight companies.

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