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To Fly High, California's Economy Must First Get Airborne

March 25, 2001|Jock O'Connell | Jock O'Connell is a Sacramento-based international business consultant

SACRAMENTO — It's a familiar sight on the front page and the evening news: Crowds of exasperated and angry passengers, stranded by flight delays or cancellations, milling around the airport.

Yet, while stranded airline-ticket holders get the attention, the frustration of businesses trying to negotiate the same over-stressed air transportation system to get their goods to market is virtually ignored. That's regrettable, because deficiencies in air-freight operations hurt the economy much more than hordes of disgruntled holiday travelers.

Unfortunately, like most Californians, our top policymakers seldom ponder the logistics of the Golden State's economy. Take exports. Everyone agrees that our export trade--valued at $130 billion in 2000--is vital to California's economic well-being. Yet, in the state Capitol, whose denizens routinely indulge in rhetorical flourishes about the global economy, international trade is perceived as something that happens down by the waterfront, where longshoremen resembling Ernest Borgnine load tramp steamers bound for foreign ports.

Consider what happened at a meeting last year of the California State World Trade Commission--with Gov. Gray Davis in attendance--when one panelist inquired whether the state's transportation infrastructure was poised to accommodate anticipated growth in the volume of for-eign trade. The ensuing discussion, which focused entirely on the road and rail links to the state's major seaports, prompted the commission to schedule its next meeting at the sprawling Port of Long Beach to get a closer look at the relevant transportation issues.

But what the commission, explicitly created to promote exports, failed to appreciate is that most U.S. exports go nowhere near a seaport. According to the U.S. Transportation Department, 34.2% of our merchandise exports in 1999 were shipped by air. Furthermore, owing to the surge in trade with Canada and Mexico spurred by the North American Free Trade Agreement, 27.4% of the nation's exports left by truck and another 2.5% by rail in 1999, while waterborne exports accounted for just 26.3% of U.S. exports. (The remaining 9.6% is listed as "other and unknown modes.") Here in California, where businesses transport high value-added goods such as computer chips and perishable foods, more than 60% of all exports are sent by air.

No one disputes the enormous economic value of maritime facilities like the ports of Long Beach and Los Angeles. Together, they constitute the nation's largest port complex, handling three times the volume of standardized shipping containers as the ports of New York and New Jersey. Even so, Los Angeles and San Francisco international airports each handle more exports (measured in dollar value) than do the ports of Los Angeles and Long Beach combined. In 1999, the last year for which comparable data are available, some $35.9 billion in merchandise exports departed from LAX, while another $32.1 billion exited through SFO. By contrast, the ports of Long Beach and Los Angeles handled export shipments valued at $14.3 billion and $14.1 billion respectively.

Unfortunately, neither policymakers nor the public appreciate the crucial role that air-freight services play in the state's economy. As a 1998 report by UC Berkeley's Institute of Transportation Studies observed: "Little is known about the role of air cargo in California's goods movement."

Yet, as the UC report warned, the demand for air cargo is rapidly outstripping airport facilities, especially at LAX and SFO. This matters greatly to California's economy, key elements of which, including electronics and agriculture, are embracing just-in-time delivery practices and management strategies that involve the coordination of global supply chains. To remain competitive, more and more businesses will be turning to air cargo. The Southern California Assn. of Governments expects regional air-cargo demand to increase faster than the anticipated rise in passenger traffic in the next two decades.

In trying to meet growing demand for both passenger and air-cargo services, airport authorities face daunting obstacles. Not only must they cope with a bureaucratic befuddlement of cross-cutting responsibilities involving federal, state, regional and local agencies, but they also have to deal with litigious neighbors and environmentalists who have blocked expansion at virtually every major air terminal throughout the state. The situation is worse in the case of air-cargo operations, which elicit particularly intense opposition because so much freight flies by night.

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