Positive altitude: YVR air cargo plan

$48 million Sea Island deal consolidated the airport’s facilities, provided platform for improved freight service 

Vancouver International Airport (YVR) is about as well situated as a water station at the halfway mark of a marathon. Located in the closest major North American city to Asia, and within sight of port and border, YVR might be expected to take heady cargo volumes as a given. However, touting geography as your sole competitive advantage has the hubris of claiming credit for plate tectonics and continental drift.

And in the commercial cargo business, location is good, but the killer combination of service, speed, space and synchronicity is what makes cargo hubs great.

In the last two years, Vancouver Airport Authority (VAA) has invested substantial capital and culture in a service-centric approach that has distanced it from its peers in more ways than kilometres can measure.

“I would say, out of all the airports in Canada, Vancouver airport is probably the one that is most receptive, or in tune with, air cargo needs,” says Lise-Marie Turpin, vice-president of cargo for Air Canada. “They’ve been very proactive in looking to work with us and understand what they can do more to help us with our business.”

In mid-2014, the VAA acquired the leasehold interests in 17 neighbouring buildings on Sea Island for $48 million. The consolidation created Cargo Village, a one-owner hub providing more than a million square feet of cargo buildings and warehouse space that is home to air carriers, freight forwarders, customs brokers, trucking firms and courier companies. VAA launched a subsidiary, Vancouver Airport Property Management (VAPM), to operate Cargo Village with the explicit goal of expanding business.

Raymond Segat, VAA’s director of cargo and business development, says Cargo Village is a unique offering in North America. Segat, who also oversees VAPM, says their cargo strategy mirrors the thinking behind the creation of the airport authority and its effect on what has become an award-winning passenger terminal: own the infrastructure, create a direct relationship with tenants and have the authority to quickly respond to evolving needs.

“We wanted to have a much closer working relationship with all the tenants in the [cargo] industry. So, we know what they need, where they’re going and how we can help facilitate that growth,” explains Segat. “We’re more tied into the industry than being a landlord collecting a rent cheque.”

Centralizing cargo facilities has also created the platform for faster dialogue and decision-making, a big selling point for a service that promotes time as its value proposition, says Turpin.

“We’re air. We sell speed, so everything has to be quick. They understand the necessity to bring all the stakeholders in the supply chain closer together so we can interface more quickly.”

VAPM is also looking to improve the velocity of operations in a pilot project. Cargo from an international flight destined for a connection has to be off-loaded and moved to a carrier’s cargo facility, sometimes located a considerable distance away from the gate. The issue is important. International represents the bulk of Air Canada’s cargo business, says Turpin. Cargo can often sit for several hours before it needs to be transported back to be loaded onto a connecting flight. The pilot program with Air Canada has created a dedicated area near the terminal to stage freight in transit. The initiative is aimed at improving the efficiency of moving in-transit freight, saving on handling costs and fuel, reducing vehicle wear and tear and improving the airport’s environmental footprint. And, importantly, it could reduce the time needed between connecting flights, trimming shipping times. Lessons from the pilot program will be considered in VAA’s long-term terminal expansion plans.

“It’s [another] way they’re willing to accommodate us and help out,” Turpin says.

By design, all VAPM employees work at Cargo Village. This factory-floor, front-line approach underlines Segat’s No. 1 priority of “understanding our tenants’ business and moving forward on things they require.”

VAA’s overall cargo approach mirrors the same service attitude of another supply chain company. When Hunter Harrison came aboard Canadian Pacific Railway in 2012, he moved the company’s headquarters from its comfy Calgary downtown digs to its rail operations at Ogden Yard to ensure everyone who looked out the window knew what business they were in. And Harrison, who is now the CEO of international transportation company CSX Corp., made sure everyone knew the first rule for railroading: provide service.

Likewise, Segat wants everyone breathing cargo.

“Overall, [it’s about] being plugged into the business,” Segat says. “I’m not just talking about a property manager understanding what our tenant needs. I believe the integration of knowledge needs to go all the way through our team.”

YVR’s cargo business, much like its passenger volume, has seen steady growth. Only extraordinary global events like 9/11, the SARS outbreak and the 2008 financial meltdown have put dents in its business. YVR’s 2016 air cargo business increased 3.4% to 281,018 tonnes compared with the year previous, and nearly 6% between 2014 and 2015 – far exceeding VAA’s modest 1% annual growth rate that it uses for planning purposes. However, air cargo tonnage alone is a misleading performance metric that represents just a fraction of YVR’s commercial cargo business. Sea Island is also home, for instance, to a UPS regional hub and major FedEx, DHL and Purolator operations.

According to VAA’s 2015 numbers presented at a recent conference, air cargo accounted for only 21% of the 1.27 million tonnes processed at the airport. Most of the cargo (78%) processed at the airport goes by truck. Total value of airport cargo in 2015 was $30.2 billion, with truck-to-truck accounting for $15.5 billion, air cargo representing $12.5 billion and diverted cargo amounting to $2.2 billion.

Ultimately, YVR’s cargo service must also be grounded to trucking.

“The freight that we load [from truck] onto our flights originates from a much broader catchment area,” says Turpin. “There’s a lot of trucking going on. Airports need to build facilities that will facilitate the interface between trucking and air – having the right space to manoeuvre and ease of access to roadways. All of that they understand very well.”