Air-cargo volumes at Spokane International Airport are declining, reflecting a trend at airports across the western U.S and signaling a shift in the economy here as businesses cope with rising fuel costs by switching to surface transportation, observers say.


During the first four months of this year, roughly 17,400 tons of freight and mail passed through the airport, down 8.6 percent from the year-earlier period, says airport spokesman Todd Woodard. For all of last year, the airport handled about 57,400 tons in total cargo, slipping 0.4 percent from 2005.


That trend also is being seen at other western U.S. airports, including Seattle-Tacoma International Airport, Woodard says.


Fuel prices are finally catching up to the airlines and the cargo carriers, he says.


Though higher fuel prices raise costs for both cargo carriers and airlines, they affect the airlines passenger business somewhat differently, as people often now find they can fly to their destinations more cheaply than they can drive, says Randy Barcus, chief economist at Spokane-based Avista Corp. Meanwhile, a strong economy here is spurring more people to travel, Woodard says.


Through the first four months of this year, SIA handled more than 1 million passengers, up 4.2 percent from the year-earlier period, Woodard says. During April, the number of passengers who boarded planes at the airport jumped 5.6 percent, to 130,000, compared with April 2006, he says. For all of last year, total passenger counts at the airport edged up just 0.6 percent, to 3.22 million.


Barcus says, Passenger numbers are still strong, and thats a good indicator of business and leisure travel. Also, he says, Theres been a boost in leisure travel domestically in the West, and part of that is because its so darn expensive to drive your car.


Barcus says he doesnt think that a drop in air-cargo volume here means that businesses are producing fewer goods, since several other factors, such as housing growth and strong job growth here, point to a robust economy. Rather, he suspects businesses have switched to surface transportation to ship their products. Barcus doesnt expect them to switch back anytime soon, since fuel prices will continue to hover at what he calls a new plateau.


The shift in freight is evidence that businesses are the first people to make that pencil out, he says of the move to ground transportation in light of persistently higher fuel prices.


Switching to surface transportation requires businesses to increase inventories and adjust to slower shipment schedules, among other changes, he says. An air-cargo downturn indicates a long-term decision by businesses to use other modes of shipping because typically, theyre reluctant to change arrangements with shippers and suppliers if they think a spike in fuel costs is only temporary, he says.


With air freight, you get inertia and patterns built up, so it may take a couple of years for shippers to make the change, Barcus says. It wouldnt surprise me if this shift away from air cargo is happening all over the West, particularly because we have (in Spokane) a lot of subsidiaries of larger businesses.


United Parcel Service (UPS) charges about $41.50 to ship 100 pounds of goods by ground from Spokane to Los Angeles, Barcus says. In contrast, UPS charges $140.90 to ship 100 pounds by second-day air service. Since handlers typically tack on fuel surcharges as a percentage of the overall cost of a shipment, the gap between ground and air shipments can widen when fuel costs increase, because air typically already is more expensive than ground before a surcharge is added, he says.


Bill Haley, vice president at West Plains-based System Transport Inc., says demand at the big trucking operation has been fairly strong this year, but not as high as it was last year. That trend reflects an industrywide slowdown, due to a cooling of the national economy, Haley says.


Transportation is very sensitive to the real growth of the U.S. economy, he says.


System Transport, a flatbed carrier that handles investment goods and bulk commodities that typically arent transported via air, doesnt typically compete with airlines directly, Haley says. He adds, though, it makes sense that air-cargo volumes are down at SIA because decreased demand in the transportation industry, combined with higher fuel prices and customers placing a lower priority on timeliness, tend to hurt air transporters more than ground shippers. The orders placed by System Transports customers over the last year have been less time-sensitive than in the past. Thats because businesses inventories have been full lately, so quick deliveries arent as crucial, he says.


If the timing is not so critical, air transport loses much of its advantage, Haley says.


Not everyone in the air-cargo business, however, is seeing a decline in volume. Chad Hawley, district manager at the Spokane franchise operation of Pilot Air Freight, says that while businesses typically prefer surface transportation, rather than air, Pilot Air Freight has seen a spike in air-cargo orders here over the last few months.


Last month, Pilots Spokane station shipped 400,000 pounds of goods by air, exceeding its previous monthly record of 200,000 pounds, Hawley says. The Lima, Pa.-based international freight services Spokane operation has shipped 1.1 million pounds by air through May of this year, up from roughly 560,000 pounds during the year-earlier period, he says.


I think its a spike, and though I wish it was going to continue on for the next six months, it might not, Hawley says.


Says Hawley, Theres a lot of truth to the fact that nobody really wants to use air, because ground is less expensive. Rates in general for both air and ground are going up, though, and theres no sign of that really going away.


Two Spokane manufacturers, which Hawley declines to name, have accounted for much of the companys air-cargo growth lately, he says. For those customers, and others who choose to ship via air, being able to ship products quickly is worth the extra cost.


It depends on the customer. If customer service is important, they pay for air, Hawley says. If the bottom-line dollar is more important, theyll opt out of the air and go for the truck.


Contact Emily Brandler at (509) 344-1265 or via e-mail at [email protected].