Feasibility Study Air Cargo Development at Windsor International Airport Phase 1

117 Pages·2009·1.53 MB·English

Feasibility Study
Air Cargo Development at Windsor
International Airport

Phase 1: Market Potential Analysis
Submitted on September 04th, 2009 by:
Lufthansa Consulting GmbH
Von-Gablenz-Str. 2-6
50679 Köln
Germany

Registration:
Local Court of Cologne
Commercial Register HRB 17788

Managing Director:
Werner Schuessler

Market Potential Analysis for Windsor International Airport
2
Content

1. Executive Summary .................................................................... 9
2. Introduction .............................................................................. 14
3. Methodology ............................................................................. 15
3.1 Research .................................................................................................... 15
3.2 Determine Relevant Air Cargo Market ........................................................ 16
3.3 GDP driven base forecast for the Relevant Market ..................................... 17
3.4 Definition of Market Share for Windsor International Airport and creation of
base forecast .............................................................................................. 18
3.5 Consider impacts of influence factors on YQG ........................................... 20
3.6 Use Forecast Model to project YQG Cargo Volumes .................................. 20
4. Economic Environment ............................................................ 23
4.1 Economic characteristics of Canada ........................................................... 23
4.1.1 Gross Domestic Product of Canada ........................................................... 24
4.1.2 Demographic Structure of Canada ............................................................. 25
4.1.3 Foreign Direct Investments of and in Canada ............................................. 26
4.2 Economical characteristics of Ontario ......................................................... 30
4.2.1 Gross Domestic Product of Ontario ............................................................ 30
4.2.2 Trade and Infrastructure of Ontario ............................................................. 31
4.2.3 Demographics of Ontario ............................................................................ 35
4.2.4 Perishable Air Cargo and Ontario’s Perishable Trade ................................ 36
4.2.5 A closer look at the economy of Windsor .................................................... 39
4.3 Economic characteristics of Michigan, USA ................................................ 42
4.3.1 Gross Domestic Product of Michigan .......................................................... 42
4.3.2 Trade and Automotive Industry of Michigan ................................................ 44
4.3.3 Demographics of Michigan ......................................................................... 46
4.4 Canadian Trade Development .................................................................... 48
4.4.1 Canada’s Trade Partners ............................................................................ 51
4.4.2 Key Export / Import Commodities ............................................................... 52
4.4.3 Agreements impacting trade crossing the border (CA-USA) and Air Cargo
Security ...................................................................................................... 53
4.5 Canada’s Transport System and Trade by Mode of Transportation ............ 56
4.5.1 Canadian Air Transportation & Trade ......................................................... 57
4.5.2 Canadian Road Transportation and Trade .................................................. 60
4.5.3 Canadian Rail Transportation and Trade .................................................... 62
4.5.4 Canadian Marine Transportation and Trade ............................................... 64
4.6 Aviation Policies and Regulations ............................................................... 65
4.6.1 Historical Background ................................................................................. 65
4.6.2 Bilateral Air Agreements (Canada) ............................................................. 65
5. Relevant Airports and Airlines for YQG ................................... 70
Market Potential Analysis for Windsor International Airport
3
5.1 Windsor International Airport (YQG) ........................................................... 70
5.2 Competing Airports ..................................................................................... 71
5.2.1 Region of Waterloo International Airport (YKF) ........................................... 72
5.2.2 Hamilton - John C. Munro International Airport (YHM) ................................ 73
5.2.3 London International Airport (YXU) ............................................................. 74
5.2.4 Detroit Metropolitan Wayne County Airport (DTW) ..................................... 75
5.2.5 Detroit Willow Run Airport (YIP) .................................................................. 77
5.2.6 Toledo Express Airport (TOL) ..................................................................... 79
5.2.7 Toronto - Lester B. Pearson International Airport (YYZ) ............................. 80
5.2.8 Bishop International Airport (FNT) .............................................................. 82
5.3 Historic Traffic Development at YQG .......................................................... 84
5.4 Canadian Airline Market ............................................................................. 85
5.4.1 Canada’s Key Passenger and Cargo Airlines ............................................. 85
5.4.2 Other Regional and Cargo Airlines ............................................................. 89
6. Air Cargo Forecast ................................................................... 93
6.1 Influence Factors ........................................................................................ 93
6.1.1 Development of Air Cargo Related Facilities .............................................. 93
6.1.2 Distribution Centers .................................................................................... 93
6.1.3 Airline Marketing / Air Service Development ............................................... 94
6.1.4 Pre-Clearance Facility ................................................................................ 94
6.1.5 Stimulus Packages and Local Business Development ............................... 94
6.2 Assumptions for the three Forecast Scenarios ........................................... 95
6.3 Cargo Forecast Results .............................................................................. 98
6.3.1 Most Likely Scenario................................................................................... 99
6.3.2 Optimistic Scenario ....................................................................................102
6.3.3 Conservative Scenario ...............................................................................102
7. Recommendations ..................................................................103
7.1.1 Development of Air Cargo related facilities ................................................103
7.1.2 Airline Marketing / Air Service Development ..............................................104
7.1.3 Development of the “Cargo Village” ...........................................................105
8. Annex I - Cargo Forecast Data by Scenario ..........................106
8.1 Most Likely Scenario..................................................................................107
8.2 Optimistic Scenario ....................................................................................110
8.3 Conservative Scenario ...............................................................................113
8.4 Short to long term growth rates ..................................................................116
9. Annex II – Examples of Shippers, Consignees and Routings for
the Windsor Region ................................................................117

Market Potential Analysis for Windsor International Airport
4
List of Figures

Figure 1: Lufthansa Consulting project approach .......................................... 9
Figure 2: Data for total forecast – all three scenarios .................................. 12
Figure 3: Data for Most Likely Scenario – Comparison of Segments .......... 12
Figure 4: Lufthansa Consulting project approach ........................................ 15
Figure 5: 2008 market shares within the Relevant Air Cargo Market .......... 16
Figure 6: Air Cargo Base Forecast for the Relevant Market 2009-2034 ...... 18
Figure 7: Air Cargo Base Forecast for YQG – 2009 to 2034 ....................... 19
Figure 8: Screenshots Lufthansa Consulting “Market Model Technique” .... 21
Figure 9: From Base Forecast to three different scenarios for YQG ........... 22
Figure 10: Map of Canada showing YQG ................................................... 23
Figure 11: Nominal GDP of Canada – 1998 to 2008 ................................... 24
Figure 12: Canada’s nominal GDP growth – 1999 to 2033 ......................... 24
Figure 13: Canada’s GDP structure – 2008 ................................................ 25
Figure 14: Population density of Canada .................................................... 25
Figure 15: Top 15 cities in Canada – 2009 ................................................. 26
Figure 16: Development of Canada’s in and out flow FDI – 2004 to 2008 .. 27
Figure 17: FDI in Canada by industry – 2008 ............................................. 27
Figure 18: FDI in Canada by geographical area – 2008 ............................. 28
Figure 19: Canadian FDI abroad by industry – 2008 .................................. 28
Figure 20: Canadian FDI abroad by geographical area – 2008 .................. 29
Figure 21: Map of Ontario ........................................................................... 30
Figure 22: Ontario and its geographical regions ......................................... 30
Figure 23: GDP structure of Ontario – 2008 ............................................... 31
Figure 24: Ontario’s Real GDP – 2006 to 2013 .......................................... 31
Figure 25: Top international export markets of Ontario – 2008 ................... 32
Figure 26: Top international exports of Ontario – 2008 ............................... 32
Figure 27: Top international import markets of Ontario – 2008 ................... 33
Figure 28: Top international imports to Ontario – 2008 ............................... 33
Figure 29: Age distribution of Ontario in 2008 ............................................. 35
Figure 30: Immigration to Canada in 2008 .................................................. 35
Figure 31: Types of Perishable Air Cargo (PER) ........................................ 36
Figure 32: Ontario Agri-Food Trade Development (bn CAD) ...................... 37
Figure 33: Ontario Agri-Food Trade by Region – 2008 ............................... 37
Figure 34: Ontario’s agri-food trade per commodity group – 2008 .............. 38
Figure 35: Ontario’s agri-food trade per commodity group – 2008 .............. 38
Figure 36: Farm Statistics 2006 .................................................................. 39
Figure 37: Windor’s Real GDP growth – 2006 to 2013 ............................... 40
Figure 38: Industry Growth Rate Forecast for Windsor – 2009 to 2013 ...... 40
Figure 39: Windsor’s regional GDP by sector – 2008 ................................. 41
Figure 40: Map of Michigan ........................................................................ 42
Figure 41: USA’s GDP structure per region - 2008 ..................................... 43
Figure 42: GDP structure Michigan – 2008 ................................................. 43
Figure 43: Top international export markets from Michigan – 2008 ............ 44
Figure 44: Michigan’s Exports by industry parts - 2008 .............................. 44
Market Potential Analysis for Windsor International Airport
5
Figure 45: Top imports from Canada to Michigan – 2004 ........................... 45
Figure 46: Transportation imports from Canada to Michigan – 2004 .......... 45
Figure 47: Oil price development Michigan – Jan. 2005 to Jul. 2008 .......... 46
Figure 48: Age distribution in Michigan – 2008 ........................................... 47
Figure 49: Michigan main occupations – 2008 ............................................ 47
Figure 50: Historic Trade Development in Canada – 2005 to 2008 ............. 48
Figure 51: Canadian import growth by industry sector – 2004 to 2008 ....... 49
Figure 52: Canadian export growth by industry sector – 2004 to 2008 ....... 49
Figure 53: Canadian export growth by country – 2003 to 2008 ................... 50
Figure 54: Canadian import growth by country – 2003 to 2008 ................... 51
Figure 55: Canada’s major Export Trading Partners – 2008 ....................... 51
Figure 56: Canada’s major Import Trading Partners – 2008 ....................... 52
Figure 57: Leading exports in million CAD – 2005 to 2008 ......................... 52
Figure 58: Leading imports in million CAD – 2005 to 2008 ......................... 53
Figure 59: Canadian International Trade Value (of goods) by Transportation
Mode ......................................................................................... 56
Figure 60: Domestic Freight within Canada by Mode – 2005 (thousand of
metric tons) ................................................................................ 57
Figure 61: Int. goods shipped by air to/from Canada – ’98 to ‘08 ................ 58
Figure 62: Canadian Air Imports/Exports by world region – 2007 to 2008 .. 59
Figure 63: Top 25 Canadian Air Trade Partners – 2008 ............................. 59
Figure 64: Canadian Air Imports and Exports by commodity groups 2007-
2008 .......................................................................................... 60
Figure 65: Tonnage by Canadian For-Hire Carriers – 2004 to 2006 ........... 61
Figure 66: Canadian Int. Trade Shipped by Trucks per Country – 2008 ..... 61
Figure 67: Canadian Int. Trade Shipped by Trucks per Commodity Group –
2008 .......................................................................................... 62
Figure 68: Twenty Largest Border Crossings (CA-US) for Trucks - 2008 ... 62
Figure 69: Rail exports originating from Canada and Ontario – ‘99 to ‘08 ... 63
Figure 70: Rail imports originating from Canada and Ontario – ‘99 to ‘08 ... 63
Figure 71: Exports/Imports by Province/Territory of Origin/Clearance – ‘08 64
Figure 72: Tonnage Handled in Canada’s Port System – 2005 to 2007 ..... 64
Figure 73: Canadian Bilateral Air Agreements and Designated Carriers .... 66
Figure 74: Runways YQG ........................................................................... 70
Figure 75: Airlines serving YQG ................................................................. 70
Figure 76: Comparison of YQG’s Competing Airports ................................ 71
Figure 77: Runways YKF ............................................................................ 72
Figure 78: Airlines serving YKF .................................................................. 72
Figure 79: Landing Fees YKF ..................................................................... 72
Figure 80: Runways YHM ........................................................................... 73
Figure 81: Airlines serving YHM ................................................................. 73
Figure 82: Landing Fees YHM .................................................................... 74
Figure 83: Runways YXU ........................................................................... 74
Figure 84: Airlines serving YXU .................................................................. 75
Figure 85: Runways DTW ........................................................................... 75
Figure 86: Total Air freight DTW – 2008 to 2009 ......................................... 76
Figure 87: International Air freight DTW – 2008 to 2009 ............................. 76
Market Potential Analysis for Windsor International Airport
6
Figure 88: Domestic Air freight DTW – 2008 to 2009 .................................. 76
Figure 89: Airlines serving DTW ................................................................. 77
Figure 90: Charges DTW ............................................................................ 77
Figure 91: Runways YIP ............................................................................. 78
Figure 92: Airlines serving YIP .................................................................... 78
Figure 93: Landing Fees YIP ...................................................................... 79
Figure 94: Runways TOL ............................................................................ 79
Figure 95: Airlines serving TOL .................................................................. 80
Figure 96: Runways YYZ ............................................................................ 80
Figure 97: Airlines serving YYZ .................................................................. 81
Figure 98: Landing fees YYZ ...................................................................... 81
Figure 99: Runways FNT ............................................................................ 82
Figure 100: Air cargo tonnage at FNT – 01/2008 to 05/2009 ...................... 82
Figure 101: Airlines serving FNT ................................................................ 83
Figure 102: FedEx air cargo tonnage at FNT – 01/2008 to 05/2009 ........... 83
Figure 103: Total Aircraft movements at Windsor Airport – 2004 to 2008 ... 84
Figure 104: Air Canada ............................................................................... 85
Figure 105: Cargo Revenues Air Canada ................................................... 86
Figure 106: Cargo Airline Ranking 2007 ..................................................... 86
Figure 107: WestJet.................................................................................... 87
Figure 108: Air Transat ............................................................................... 87
Figure 109: CargoJet Airways..................................................................... 88
Figure 110: Other regional and cargo airlines ............................................. 89
Figure 111: Aggregated Average Growth Rate of the Total Cargo Forecast98
Figure 112: Total Air Cargo Forecast – all three Scenarios ........................ 98
Figure 113: Most Likely Air Cargo Forecast for YQG .................................. 99
Figure 114: Impact of Influence Factors on Most Likely Scenario ............... 99
Figure 115: Most Likely Scenario – Inbound vs. Outbound ....................... 100
Figure 116: Most Likely Scenario – International vs. Domestic ................. 100
Figure 117: Most Likely Scenario – Comparison of Cargo Segments ....... 101
Figure 118: Optimistic Air Cargo Forecast for YQG .................................. 102
Figure 119: Conservative Air Cargo Forecast for YQG ............................. 102
Figure 120: Air Service Development Approach ....................................... 104
Figure 121: Development of the Cargo Village ......................................... 105
Figure 122: Data for Total Forecast – all three Scenarios ......................... 106
Figure 123: Data for Most Likely Scenario – Inbound vs. Outbound ......... 107
Figure 124: Data for Most Likely Scenario – International vs. Domestic ... 108
Figure 125: Data for Most Likely Scenario – Comparison of Segments .... 109
Figure 126: Data for Optimistic Scenario – Inbound vs. Outbound ........... 110
Figure 127: Data for Optimistic Scenario – International vs. Domestic ..... 111
Figure 128: Data for Optimistic Scenario – Comparison of Segments ...... 112
Figure 129: Data for Conservative Scenario – Inbound vs. Outbound ...... 113
Figure 130: Data for Conservative Scenario – International vs. Domestic 114
Figure 131: Data for Conservative Scenario – Comparison of Segments . 115
Figure 132: Growth Rates ......................................................................... 116

Market Potential Analysis for Windsor International Airport
7
List of Abbreviations

AADT Annual Average Daily Traffic
a/c Aircraft
approx. Approximately
ATI Air Transport Intelligence
bn Billion
CA Canada
CAD Canadian Dollar
CAGR Compound Average Growth Rate
CASS Cargo Accounting Settlement System
et al and others
e.g. for example
etc. et cetera
EU European Union
FDI Foreign Direct Investments
GDP Gross Domestic Product
IATA International Air Transport Association
IBET Integrated Border Enforcement Team
ICAO International Civil Aviation Organization
i.e. that means
ISO International Standard Organization
km Kilometers
LCG Lufthansa Consulting GmbH
LH Lufthansa
m Million
MPA Market Potential Analysis
n.a. not available
O&D Origin and Destination
PAX Passenger
PIP Partners in Protection
RFS Road Feeder Services
RTK Revenue Ton Kilometers
sqkm square kilometers
sqm square meter
SSCMS Secure Supply Chain Management System
UN United Nations
USD US Dollar
YQG Windsor International Airport

Market Potential Analysis for Windsor International Airport
8
1. Executive Summary
Lufthansa Consulting recognizes the uniqueness of Windsor International
Airport’s position in the regional and national economy and its desire to de-
rive added value from a location in the midst of a region of high-level com-
mercial, transportation and logistics activities.

Air cargo can play a large role in developing an airport; in the case of Wind-
sor International Airport (YQG), considerable quantities of air cargo are gen-
erated in its catchment area, mainly by the automotive and agricultural sec-
tors. YQG furthermore is characterized by excellent accessibility and pro-
vides ample space for development and intermodal transshipments, but
currently lacks state-of-the-art infrastructure and facilities to process and
handle air cargo.

The Market Potential Study and Forecast have been defined as Phase 1 of a
comprehensive Feasibility Study for Windsor International Airport. The
Study’s objective has been to analyze and assess the potential for YQG
to build up its air cargo business in the short, medium and long term.
The report provides reliable figures on which to base subsequent deci-
sions in regard to the development of suitable, economically viable
facilities for air cargo services in line with the market requirements.
The figure below shows the steps that have been carried out to compile the
Market Potential Study and the Air Traffic Forecast. The figure also includes
Phase 2 and 3 of the Feasibility Study.

Figure 1: Lufthansa Consulting project approach

1 2 3
Market Potential Study and Conceptual Planning Detailed Design and
Forecast Study and Financial Implementation
Viability Analysis Management
Go / no go decision
DDeevveelloopp GGDDPP
hh DDeeffiinnee MMaarrkkeett
ResearcResearc DDAAeettiieerr rrCCmmffaaooiirrrrnngg eeYYoo QQRR MMGGeeaalleerrkkvveeaattnn tt FFCCddooRRrrrraaeeiieerrvvllccggeeeeaaoovvnnss aa MMttTTnn ffrraattooaa rrAArrffkk ffiitteeiirrcchhtt ee aannSSddhh aaccffrroorreeeerr aaeeffttoocceeaarr ssaaYYtt QQbbaaGGss ee CCFFooaannooccssfftt ooiiIIddnnrreessffllrr uuoo IIeemmnnnn ppYYccaaeeQQcc GGttss MMUUooYYssddVVQQeeeeoo GGllFF llttuu ooooCCmmrr aappeeeerrccrrggssooaa oojjssee ttcc tt

Source: Lufthansa Consulting

The Market Potential Analysis takes into account all factors having an impact
on the demand and supply situation for Windsor International Airport and
forecasts cargo traffic over the next twenty five years (2009-2034). The re-
sults show that YQG – building on its strengths – has the potential to suc-
Market Potential Analysis for Windsor International Airport
9
cessfully develop its air cargo business. An enlarged business base, but also
the implementation of specific influence factors will enable Windsor to be-
come a true full service airport.

Lufthansa Consulting evaluated a catchment area of 350 km around Wind-
sor International Airport. Eight airports within this radius, considered the
most important in the region in terms of air cargo, and YQG have been de-
fined as Relevant Air Cargo Market. A GDP-driven base forecast for the
Relevant Market has been calculated.

To derive a base forecast for YQG only, Lufthansa Consulting has made
logical and profound assumptions on the market share development of YQG
for the following air cargo segments (see chapter 6.3 and Annex I) respec-
tively for inbound and outbound traffic:

 International Scheduled Cargo
 Domestic Scheduled Cargo
 International Charter Cargo
 Domestic Charter Cargo
 International Integrator
 Domestic Integrator
 International Road Feeder Services - RFS (Trucking)
 Domestic Road Feeder Services - RFS (Trucking)

Since the base forecast for Windsor does not consider the local and regional
influence factors it has been modified and substantiated by taking specific
influence factors (determinants) into account that are a precondition for air
cargo development at YQG:

Specific micro-economic influence factors

 Development of Air Cargo Related Facilities
 Development of Distribution Centers
 Implementation of Airline Marketing / Air Service Development Initiatives

Specific macro-economic influence factors

 Establishment of a U.S. Pre-Clearance Facility
 Stimulus Packages and Local Business Development

How the different influence factors affect the air cargo forecast is outlined in
chapter 6.2.

To a large degree, air cargo traffic relies on scheduled, frequent passenger
services in hub-and-spoke as well as in point-to-point traffic. YQG is present-
ly suffering from a lack of scheduled uplift capacity. The volume currently
transported is almost entirely based on the occasional charter flight. As a
Market Potential Analysis for Windsor International Airport
10