Airport considering air cargo facility

Move over, FedEx: Indianapolis airport officials are considering building a smaller version of that company's 2-million-square-foot
hub here, one that could accommodate several cargo carriers from around the globe.

The "international air cargo facility" could be up to several hundred thousand square feet in size and could cost
tens of millions of dollars to build. It would be used to lure cargo carriers who now tend to focus on larger airports such
as Chicago's O'Hare, where nearly 30 cargo carriers congregate.

"We want to move those carriers down here," said Kirk Lovell, air service director for BAA Indianapolis, which
operates Indianapolis International Airport.

In recent years, airport officials have touted Indianapolis as a cheaper place to operate. Save $7 million a year in fuel
by not having to taxi as far, or $240,000 in annual landing fees on each Boeing 747 cargo freighter.

It turns out cheap isn't enough. A recurring theme during conversations with carriers in Asia and Europe is, "We
need to see your facilities. What kind of facilities can you offer us?" said Lovell, who just returned from a trip to
China.

He and Airport Director Patrick Dooley have been globe-trotting in recent years to woo international cargo carriers. There's
good reason.

Korean Air, for example, has boosted the number of freighters to New York and Miami. Air China, Cathay Pacific, Japan Air
Lines and Singapore Airlines have a growing cargo presence at New York's John F. Kennedy International, reports Air Cargo
World.

Airport managers here don't necessarily want to compete with the East Coast, but they want to at least become a stronghold
for international cargo flowing in and out of the Midwest.

"A lot [of carriers] are bypassing the traditional West Coast gateway cities" such as San Francisco and Los Angeles,
said Tom Phillips, a principal of Seattle-based air cargo consultancy Keiser Phillips Associates.

One thing driving that trend is technological improvements in aircraft that have improved the economics, Phillips said. Also,
over the last decade, there have been a number of new "open skies" agreements expanding routes into the United States
for foreign carriers.

Indianapolis International officials, meanwhile, sense some vulnerabilities at airports such as O'Hare, said Michael
Wells, a board member of the Indianapolis Airport Authority. The Chicago airport is adding runways and expanding passenger
facilities, putting a squeeze on space for expanding cargo facilities, he said.

Plotting cargo course

Just what kind of cargo facility Indianapolis needs is the focus of a $250,400 study to be headed by Cincinnati-based consulting
firm Landrum & Brown Inc. Indianapolis-based consulting firm Aerofinity Inc., and Jacobsen/Daniels, of Detroit, will assist.
The contract was awarded by the Airport Authority board Feb. 2, and the study is to be completed in April.

Airport officials have succeeded in landing a cargo carrier without having a specialized facility. Last March, Europe's
Cargolux began the first of two weekly flights between Indianapolis and Luxembourg. A Boeing 747–a rare sight in Indianapolis-largely
moves medical-related products for Switzerland-based Roche Diagnostics, which has Indianapolis facilities on Hague Road near
Interstate 69's 96th Street exit.

The 24-or-so tons of goods per flight are processed in an empty portion of the former United Airlines maintenance base. But
Lovell said that facility is running out of space for cargo use, especially as principal tenant AAR Corp. of Chicago expands
its aircraft maintenance business here.

Ironically, perhaps, a building that could fit the bill is sitting nearly vacant at the airport.

The U.S. Postal Service stopped shipping air parcels through its 337,000-square-foot "Eagle" hub in 2001, after
outsourcing its air cargo business to FedEx in a $6.3 billion, seven-year deal.

Since then, the Postal Service has used a portion of the giant complex as a trucking hub. The airport's lease with USPS
doesn't expire until 2012, short of any renegotiation. If negotiations ended up freeing the building for other uses, it
could be retrofitted as a cargo terminal.

Another potential site is the current airport passenger terminal, which is scheduled to close next year when the $1 billion
midfield terminal opens. Observers said that site is a natural, with concrete aprons capable of accommodating heavy planes–along
with plenty of parking and quick access to interstate highways.

But Lovell said the availability of the old terminal is still "a little too far out" for the airport's aggressive
timetable. A new facility could be built relatively quickly.

What airport managers already know they need is a building where carriers can quickly unload and process cargo. The building
needs to have numerous docks to accommodate trucks. Such so-called pass-through facilities often range from 20,000 square
feet to several hundred thousand.

The facility also would be capable of refrigerating perishable cargo during the transfer process, but it wouldn't include
long-term storage.

"We don't want a warehouse," Lovell said, noting there are numerous warehouses in nearby Plainfield and on
the city's far-west side.

The facility is not intended to provide competition to package-carrier FedEx, Lovell said. Rather, it would accommodate heavy
freight and small and specialized high-value cargo, such as pharmaceuticals.

Airport officials also see potential for "backfilling" planes that could come here loaded with Asian exports–perhaps
with engines from Columbus-based Cummins Inc. or drugs from Indianapolis-based Eli Lilly and Co.

"It would also help out on the manufacturing side. People want to get their products out quicker," said Jack Pence,
an industrial broker at the local office of St. Louis-based Colliers Turley Martin Tucker.

Whatever the goods, the facility's ability to transfer them efficiently would be key given the time-sensitive nature
of air cargo, said Bill Herber, president of consulting firm Global Logistics Indy, and former head of the Greater Indianapolis
Foreign Trade Zone.

Herber compared it to how Southwest Airlines is able to best competitors when it comes to quickly boarding and unloading
passengers. Air cargo carriers need to maximize aircraft use, as well, to maximize revenue.

"Remember, planes don't make money on the ground. They have to get down, get rid of their cargo, and get back up
into the air," he said.

Other cargo draws

Indianapolis International already has a number of selling points for air cargo, even without a dedicated air cargo facility
to market. It boasts several interstate highways and rail lines intersecting here, is plump with distribution centers and
warehouses, and is home to offices of seven of the top 10 freight forwarders.

The entire airport property now has been designed as a foreign trade zone, meaning cargo coming in here can be uncrated,
separated or otherwise manipulated duty-free.

The airport also has room to build a third runway, south of Interstate 70. Grading for the footings of a future bridge that
would carry planes above I-70 can already be seen.

Indianapolis ranks as the eighth-largest U.S cargo airport–up 4.8 percent in the first eight months of 2006, according to
data published by Airports Council International. Indianapolis ranks 20th largest in cargo worldwide.

Most of that 1.2 million tons of cargo moving through here annually is due to the FedEx hub–the Memphis, Tenn., company's
second-largest. Last year, FedEx announced a $214 million expansion that should add another 600,000 square feet and possibly
800 more jobs. The facility employs about 4,200.

FedEx confirmed previously that it's likely to fly aircraft directly between Indianapolis and Asia. Now, that cargo stops
first in Alaska.

Indianapolis faces some stiff competition, though–and not only from Chicago and Detroit. Columbus, Ohio's, Rickenbacker
International Airport, for example, touts itself as an intermodal bastion for transferring cargo among air, truck and rail.

"I think it's yet to be played out who's able to generate the interest and the critical mass in the Midwest,
other than Chicago," Phillips said.

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