After three years of delays, a massive effort to consolidate and modernize LAX’s air cargo facilities has resumed.
Last month, executives at Los Angeles World Airports, the city agency that operates LAX, sent out a request for proposal to private cargo facility developers to reimagine the airport’s cargo operations, eventually replacing two dozen more and more difficult to handle. aging facilities. Air cargo volumes brought on by the pandemic.
“This is a long overdue project,” said Terri Mestas, chief development officer at LAWA. “We desperately need to upgrade our aging cargo facilities.”
While there is no clear price tag for the modernization work, Mestas said it will cost “at least” hundreds of millions of dollars.
The Airport Authority initially set out to rebuild LAX’s cargo building in 2018, even soliciting advice from the private sector. But just after four companies or teams of companies submitted their proposals, airport officials decided to delay the work for fear it could interfere with multi-billion-dollar modernization projects, including terminal improvements and automated people-moving.
But amid the disruption, the need for overhauling cargo facilities has become more urgent as air cargo volumes hit record levels during the pandemic. LAX handled nearly 3 million tons of cargo last year, a 21% increase from 2020 and a 28% increase from 2019, before the pandemic.
Part of the increase was due to emergency shipments of medical protective equipment and vaccines related to the pandemic. Supply chain disruptions and port congestion have also taken their toll, forcing shippers and their customers to turn to air freight for the most-needed products.
All of this extra cargo has further strained already stretched-out companies, said Kent Hindes, managing director overseeing supply chain specialty logistics and industrial services at the Chicago-based Cushman & Wakefield Ontario office. The system is more tense.
The 27 existing cargo facilities are spread over three acres at LAX; some were built in the 1950s, when the airport was beginning to transform from a regional airport to an international tourism hub.
These oldest freight facilities lacked multiple gates to speed up the movement of goods in and out of the building, which resulted in frequent bottlenecks, Hindes said. In addition, the decentralized nature of the building allows trucks to take longer to transport cargo out of the airport building, including detours around the main airport runways.
“The way cargo facilities are being deployed right now results in frequent delays,” Hindes said. “There’s no question that the need for modernization is urgent and, as I’ve spoken to some of the people who are in charge of transporting goods, it’s very critical.”
What’s more, Hindes said, older buildings cannot accommodate the increased automation and data management over the past few decades.
“Today’s modern cargo buildings have larger, completely flat aisles with grooves and sensors to accelerate the movement of robotic cargo equipment,” he said. “You can’t apply this technology to buildings that are 60 and 70 years old; you have to build new facilities from scratch.”
Hindes said LAX is not alone in this dilemma. He noted that cargo modernization projects are either planned or under way at several major U.S. airports, including Hartsfield-Jackson International Airport in Atlanta, John F. Kennedy International Airport in New York and Miami International Airport. Chicago O’Hare International Airport has opened some new cargo terminals.
But with cargo overhauls at LAX suspended, some cargo operators have had to innovate on their own.
Mercury Air Cargo – Once the largest independent cargo company at LAX, it is now poised to become a subsidiary of SATS Ltd. in Singapore. – According to a blog post by Mercury President John Peery at the time, we worked hard in late 2019 and throughout 2020 to reconfigure the space and install some features to accommodate the automation of its cargo building.
more flexible approach
While LAX’s cargo facility overhaul is moving forward again, the approach has changed. When it first requested proposals four years ago, it called for a 450,000-square-foot multi-story building that was intended to be the first of several similar buildings. The list price for the first building is estimated to be between $325 million and $450 million.
But in the latest RFP to hit the streets, there is no such prescriptive requirement; the call for proposals is relatively open.
LAWA’s Mestas said: “Our aim is to give freight development companies more room to innovate so that we can come up with a plan that is flexible in approach and forward looking.”
Airport authorities are also pursuing a more comprehensive approach to freight modernization through the RFP, she added. “Eventually, the number of existing 27 buildings will be reduced, but it will be up to the industry to decide how many buildings are needed and how big those buildings should be,” she said.
There’s another key change this time around: Mestas said LAWA is now considering a public-private partnership model in which it earns some future revenue from freight traffic in addition to the standard land lease revenue. What the cut in revenue will be – even if it eventually does – remains to be determined, she said.
An outside freight logistics expert said it was a necessary change.
Nick Vias, founding executive director of the Kendrick Institute for Global Supply Chain Management at the USC Marshall School of Business, said: “Under this public-private partnership, both parties — airport authorities and cargo facility operators — will be involved. ” .
“This will motivate them to find solutions and create more profitable business models,” Vyas continued. “LAWA has to be a real stakeholder, and income equity allows that.”
Vyas said the prospect of sharing revenue with LAWA for the first time should not deter bidders.
“Look, this modernization effort will significantly increase cargo throughput and make the whole pie bigger,” he said. “That should be enough to offset any revenue the operator has to share with LAWA.”
long road ahead
The publication of this RFP is just the first step in a years-long overhaul of LAX’s trucking business. Respondents must submit bids by January. Mestas and her team at LAWA will then evaluate the proposals and determine an overall design framework for freight modernization. Once the framework is agreed upon, the environmental review process will begin, which will take at least a year. Another RFP for the actual Phase 1 construction work can then be issued.
Mestas said she was unable to set a timeline for the process.
“I can say that, unlike some of the other projects at LAX, we don’t have the 2028 Summer Olympics as a completion date,” she said.
Vyas said the lack of a specific timetable is worrying.
“Airports in Singapore and other parts of Asia already have state-of-the-art infrastructure and data to support the movement of goods,” he said. “Currently, LAX has outdated infrastructure and outdated business practices that cannot be highly automated to move cargo efficiently.”