Center for Agricultural Business

California State University, Fresno

The Role of Air Cargo

in California’s Agricultural

Export Trade

by

Jock O’Connell

Bert Mason

John Hagen
The Role of Air Cargo

in California’s Agricultural

Export Trade

Center for Agricultural Business

California State University, Fresno

Fresno, California

Published by the

California Agricultural Technology Institute

May 2005

CATI Pub. #050502

by

Jock O’Connell

Bert Mason

John Hagen

The Role of Air Cargo

in California’s Agricultural

Export Trade
Table of Contents

About the Authors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . vii

Acknowledgements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . vii

About CAB . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . vii

Executive Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

Preface . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

Outline . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

A Preliminary Word On Trade Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

Chapter 1: The Current and Future Role of Air Cargo Services in the Shipment

of California’s Agricultural Exports. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

The Current Picture . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

Future Prospects for Airborne Agricultural Exports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15

A Challenged Infrastructure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28

An Overlooked Mode of Transport . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31

The Logistics of Air Cargo . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33

Air Cargo and Perishables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42

An Air Cargo Airport for Agriculture? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45

The Demographic Imperative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51

Chapter 2: Measuring the Value of California’s Airborne Agricultural Export Trade . . . 57

The Root of the Problem . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58

Measuring California’s Farm Exports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66

ERS export data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66

UC Davis farm export data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68

WISER agricultural export data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70

Principal Findings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74

Chapter 3: The International Air Cargo System. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76

The Black Box of Transportation Logistics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76

The Evolution of Air Cargo Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79

Industry Structure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83

The Impact of Regulation/Deregulation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89

The Characteristics of Air Cargo . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92

Shipping Rates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94

The Economic Significance of Air Cargo . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 95

At the Airport: An Often Frantic Dance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 102

Air Cargo Shipping Containers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 104

Cargo Airports in the United States . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 107

Impact of New Aircraft Technology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 109

The Future . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 111

Boeing’s Air Cargo Forecast . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 114
Airbus Global Market Forecast 2003 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 118

MERGEGLOBAL Forecast . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 120

Rolls-Royce Forecast . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 121

Other assessments of the future of air cargo . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 122

Chapter 4: The Air Cargo System in California . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 124

Air Transport and California’s Economy: An Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 124

California’s Commercial Airports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 128

California’s Principal International Gateways . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 134

Los Angeles International Airport . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 134

San Francisco International Airport . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 140

Other Key Airports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 145

Air Cargo in Southern California . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 148

Air Cargo in the San Francisco Bay Area . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 152

Air Cargo in the Central Valley . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 158

Chapter 5: Air Cargo Transportation Viewed by California Agricultural Exporters . . 164

Cherries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 164

Desert Grapes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 169

Asparagus . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 173

Salad Mixes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 174

Strawberries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 174

Blueberries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 176

Industry Obervations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 177

Chapter 6: Principal Findings and Conclusions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 179

Summary of Findings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 179

Public Policy Issues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 180

Appendix A . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 185

Appendix B . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 188

Table of Contents (cont.)
About the Authors

Funding for this project has been made available by the Governor’s Buy

California Initiative, the California Department of Food and Agriculture and

the U.S. Department of Agriculture, through the California State University

Agricultural Research Initiative Program (ARI: Project #03-8-007). Additional

funding was provided through Cooperative Agreement 12-25-A-4248 between

California State University, Fresno and the Agricultural Marketing Service’s

Transportation Service’s Branch, USDA.

vii

Acknowledgments

Jock O’Connell (www.jockoconnell.com) is a principal consultant, The Clarkstreet

Group, Sacramento, California. Bert Mason is a professor, Department of Agricultural

Economics at California State University, Fresno. John Hagen is professor emeritus,

Department of Agricultural Economics, California State University, Fresno.

About CAB

The Center for Agricultural Business (CAB) is one of four research units

comprising the California Agricultural Technology Institute, located at

California State University, Fresno. For more information on programs and

research, contact us at the following address:

Center for Agricultural Business

California State University, Fresno

2910 E. Barstow Ave., M/S 0F 115

Fresno, CA 93740-8009

Phone: 559-278-4405

Fax: 559-278-6032

Web: cati.csufresno.edu/cab
1

The Role of Air Cargo Services in the Shipment of 

California’s Agricultural Exports 

 

Executive Summary

This study examines the expanding role of air cargo services in transporting 

agricultural exports from California. Although air cargo accounts for a seemingly 

modest share of the state’s farm export trade, California’s airborne agricultural 

exports in 2004 totaled $659 million, an increase of nearly 60 percent since 2000. 

Moreover, for several highly perishable, high value-added crops such as cherries, 

strawberries, asparagus and a range of fresh organically-raised produce, air cargo 

generally offers the only effective means for exploiting overseas markets. The 

principal destinations of California’s airborne agricultural export trade are in the Far 

East, primarily Japan, China, South Korea, Taiwan and Hong Kong. A much more 

moderate airborne export trade is conducted with Europe and Latin America. Not 

surprisingly, given the efficiency of modern trucking and rail operations, there is very 

little airborne trade with Canada and Mexico. 

Looking ahead, there are several reasons to expect that California’s agricultural 

exporters will be making even more extensive use of air cargo in the future. Chief 

among those are the following: 

● Maritime shipping – the customary mode for moving most farm products to 

overseas markets – is becoming an increasingly problematic partner for 

exporters of high value-added perishable farm products. 

● There has been a dramatic expansion of worldwide demand for high-quality 

and typically high value-added food products grown and processed under 

conditions conducive to wholesomeness and food safety. 

● Multinational food companies are embracing sourcing and logistics practices 

that place a heavy burden on transporting produce over vast distances in a 

timely and reliable fashion. 
2

● California agriculture’s progressive shift toward higher and higher valueadded crops that command premium prices will place more of the state’s 

agricultural output in the category of goods for which air transport is 

economical. 

● Efforts to liberalize both trade in agricultural products and international air 

transport regulations should open new markets while expanding existing 

markets for California farm exporters. 

A worrisome issue facing California’s transportation planners is whether the state’s 

air transport infrastructure will be able to cope with ever increasing levels of 

international passenger air travel as well as a volume of international air cargo that 

is expected to double or even triple by 2025. With approximately half of all air cargo 

shipped in the bellies of passenger aircraft, it is hardly surprising that much of the 

state’s airborne foreign trade passes through its two principal gateway airports, Los 

Angeles International Airport (LAX) and San Francisco International Airport (SFO). 

What is remarkable, though, is the extent to which these two airports have 

maintained an effective monopoly over the state’s foreign airborne trade. In 2004, 

for example, LAX and SFO together handled 98.8 percent of all airborne imports into 

California and 93.2 percent of all airborne exports from the state. Yet both airports 

face severe constraints on their ability to handle significantly greater levels of 

additional cargo. LAX has little room for expansion and faces very stiff political 

opposition from neighboring communities to any increase in flight operations. SFO 

suffers from high rates of weather-induced flight delays and diversions and has been 

slow to upgrade its air cargo handling capabilities. Highway access to both facilities is 

increasingly congested, posing a particular problem for shipments of perishable 

commodities. 

To be sure, exporters have a somewhat different take on airport congestion than do 

importers. For one thing, so long as there is a substantial trade imbalance, the lack 

of ‘back-haul’ cargos commensurate with the level of airborne imports serves to 

depress the rates air carriers can charge for outbound shipments. What should be of 

great interest to exporters are the efforts under way to relieve burden on SFO and 

LAX by shifting more passenger and cargo flights to other California airports. 
3

To better manage increasing air cargo traffic, aviation and surface transportation 

planners in Southern California have sought – so far with very limited success – to 

encourage air carriers to shift more air cargo activity away from LAX to other 

regional airports, most notably Ontario International Airport. By contrast, there is no 

similar strategy in Northern California to alleviate the burden on SFO. Indeed, SFO 

officials have consistently discouraged efforts to formally coordinate operations of 

the San Francisco Bay Area’s three major airports. 

A substantial portion of the state’s international air cargo capacity will necessarily 

migrate from LAX and SFO to airports further inland and, hence, nearer to 

California’s agricultural heartland. This migration will be spurred not merely by the 

need to ease the air cargo burden on LAX and SFO but also to provide better air 

transport services to the fast-growing population and industrial centers in California’s 

Inland Empire and Central Valley. It will also be shaped by investment decisions 

made by the so-called integrated carriers (most notably, FedEx, UPS and DHL) that 

are poised to seize larger and larger shares of the international air cargo market. 

Several inland airfields between Sacramento’s Mather Field and March GlobalPort in 

Riverside County have been aggressive in promoting themselves as future air cargo 

hubs. Clearly, not all will succeed, since airlines are typically reluctant to provide 

scheduled passenger service to the less densely-populated regions where some of 

these vying airports are located. Geographic remoteness would not necessarily be a 

disqualifying factor for a dedicated air cargo airport were it not for the fact that an 

airport needs to attract both air carriers and the myriad logistical and other support 

services needed to sustain significant air cargo operations. Freight-forwarders, 

customs brokers, trucking companies, aircraft servicing firms, and other providers of 

essential support services are more apt to be persuaded to establish a presence at or 

very near airports featuring passenger as well as air-freighter flights. For that 

reason, this report submits that demographic considerations – the presence of a 

burgeoning population and expanding economic base – will be critical in determining 

which of California’s airports garner significant shares of the state’s international air 

cargo trade. 

In Southern California, the migration will most likely benefit Ontario International 

and March GlobalPort. These airports are situated in San Bernardino and Riverside 
4

counties, two of the fastest growing counties in California. The airports also happen 

to be regional hubs for UPS and DHL, respectively. (The FedEx hub for Southern 

California is LAX.) Meanwhile, San Diego will have to resolve a long-standing 

controversy over if and where to build a major new airport before it attracts 

appreciable international air cargo, despite being California’s second largest city. 

In Northern California, Oakland International should gain larger shares of the San 

Francisco Bay Area’s international air cargo traffic, but SFO will remain Northern 

California’s dominant hub for international air cargo so long as passenger aircraft 

carry a substantial portion of air cargo. However, there is some expectation that 

some foreign air carriers will shift their all-cargo operations from SFO to Oakland. 

In the Central Valley, Sacramento International Airport (SMF) and Mather Field 

should emerge as important conduits for international trade. Even today, the 

passenger market served by SMF is reportedly large enough to warrant regularly 

scheduled non-stop passenger flights to Europe. The introduction of new aircraft 

such as Boeing’s 787 and a possible competitor in the Airbus 350 should only 

enhance the prospects that SMF will be offering overseas service in the next decade. 

Both the 787 and 350 are medium-sized, long-distance aircraft specifically designed 

to provide non-stop service between non-hub airports. Because of the synergies 

available to companies providing support services for air cargo operations at airports 

in such close proximity, Mather would enjoy an advantage in its efforts to attract allcargo operations. 

For grower-exporters in the Central Valley, the initiation of overseas flights out of the 

two Sacramento airports would offer easier and more direct access to foreign 

markets. There is a substantial likelihood that Mather will feature all-cargo service to 

markets in the Far East. Meanwhile, cargo space available on passenger flights from 

SMF to one or more European destinations will enable growers to better serve the 

European Union’s growing demand for California food products. 

Projections should come with caveats. Although proximity to a major metropolitan 

area presents a powerful lure for air transport providers, civic opposition to the 

noise, air pollution and surface traffic congestion associated with expanded flight 

operations could easily thwart airport expansion or construction plans. Less 
5

frequently acknowledged is the concern likely to be raised by growers themselves. 

Although the introduction of international air service to airports nearer to the state’s 

agricultural packers and shippers may seem an unmitigated boon, it is indeed far 

from clear whether the initiation of overseas flights would be cheered by growers 

justifiably nervous about the risks of disease or pest infestation that return flights 

might bring. Even though the almost relentless urbanization of agricultural land – 

especially in the Central Valley and Inland Empire – will almost certainly make 

regular international air service inevitable, growers have a legitimate reason to fear 

pest or disease invasion – either accidental or deliberate – into California’s 

farmlands. Appropriate prophylactic measures would have to be devised to protect 

state agricultural production. 

Ultimately, the issue of whether California’s agricultural exporters as well as other 

businesses will continue to enjoy the quality and frequency of air cargo services 

needed to sustain a presence in the global economy will hinge on the fostering of a 

political climate hospitable to increased flight operations. That climate is currently 

conspicuous by its absence in virtually ever corner of the state. As was seen in the 

defeat of proposals to establish a new regional airport at the former El Toro Marine 

base in Orange County, even those who make extensive use of air transport for 

personal or commercial reasons resist having a major airport in their neighborhood. 

Even though the need for greater air transport capacity seems self-evident, 

community resistance to expanded operations at existing airports and construction of 

new airports is strong and pervasive. It is also largely unbalanced by a business 

constituency that depends on efficient air links to the national and global economies. 

A generation of aggressive out-sourcing of logistical functions has evidently left 

many companies indifferent to the need to maintain and expand the state’s 

transportation infrastructure. That infrastructure projects are typically expensive, 

socially unsettling and environmentally sensitive make political leaders reluctant to 

tackle them. Undertaking massive infrastructure projects implies a major role for 

government, which makes the process ideologically offensive to some. Still, if 

California is to continue to enjoy the kind of transportation infrastructure essential 

for full participation in a global economy, a stronger constituency will have to be 

mobilized in support of an expanded and more diversified air transport system. 
6

PREFACE

Introduction 

This report examines the steadily expanding but generally unacknowledged role air 

cargo1

 services are playing in transporting California’s agricultural exports to 

worldwide markets. In this and in succeeding chapters, we will describe the use 

currently being made of air freight by California’s agricultural exporters, explain why 

agricultural exporters’ demand for air cargo services is likely to continue to increase, 

and illuminate the challenges both private industry and public agencies will have to 

overcome if a major segment of California’s agricultural economy is to compete 

successfully in foreign markets. 

There are two fundamental questions this report will seek to answer: 

To what extent and under what conditions does air transport offer a viable 

alternative to ocean-going vessels in transporting California’s agricultural 

exports to foreign markets? 

How will the air cargo industry meet the needs of California’s agricultural 

exporters over the next two decades? 

Outline

This introductory chapter provides a comprehensive overview of the facts, figures, 

and issues involved in transporting California’s agricultural products by air to 

overseas markets. Chapter 2 looks more closely at the available statistical data on 

California’s airborne agricultural export trade and also addresses the methodological 

challenges associated with finding numbers to accurately describe the state’s farm 

export trade. Chapter 3 provides a description of the air cargo industry worldwide. 

Chapter 4 looks more closely at the air cargo system in California and how various 

 

1

 “Air cargo” is customarily defined as any property carried on an aircraft with the exception 

of passenger baggage or items which are incidental to the carriage of passengers (e.g., inflight meals). However, the International Air Transport Association’s definition of cargo 

excludes mail and material owned by the air carrier. The term “air freight” is generally defined 

as airborne property other than mail and passenger baggage. For the purposes of this report 

and unless otherwise specified, the two terms will be used synonymously to indicate all thirdparty goods other than passenger baggage and mail. 
7

economic, technological and demographic trends are combining to alter that system 

profoundly. Chapter 5 describes the results of our survey of fruit and vegetable 

packers/shippers and other agricultural industry representatives. The report 

concludes with a statistical appendix displaying detailed data on airborne exports of 

250 agricultural commodities and processed food products from California in the 

period from 1999 through 2003. 

A Preliminary Word On Trade Data

As Chapter 2 will discuss in greater detail, there are at least three very different 

calculations purporting to describe California’s farm export trade. 

Agricultural Issues Center Export Data. The most precise California agricultural 

export figures are undoubtedly those compiled by the Agricultural Issues Center 

(AIC) at the University of California at Davis.2

 Since 1997, AIC has been working 

with the California Department of Agriculture to develop more accurate estimates of 

California’s farm exports. The collaboration was begun in response to widely 

acknowledged deficiencies in existing sources of state-level export statistics. AIC 

devised a commodity-specific methodology, focusing primarily on fifty commodities 

which together account for more than 90 percent of the value of California’s farm 

production. For each of those commodities, AIC tapped a variety of data sources, 

including industry sources who furnished AIC with both export data and guidance. 

AIC began by developing export data for 1995-1997 and has since published data 

through 2003. In the process, it has also refined some of its estimation techniques 

and revised some of its earlier estimates. Unfortunately for the purposes of this 

study, AIC does not seek to distinguish the various modes of transportation used to 

ship California’s farm products to foreign markets. 

USDA Export Data. A second but rather less informative set of state farm export data 

is published by the U.S. Department of Agriculture. Those figures are really 

apportionments of total U.S. farm exports based on USDA’s estimates of each state’s 

share of the overall production of the commodities in question. Thus, if California 

growers were known to produce ten percent of the nation’s kumquats, California 

would be credited with ten percent of the nation’s kumquat exports – even if all of 

 

2

 AIC describes its methodology for determining California’s agricultural exports at: 

http://aic.ucdavis.edu/pub/exports.html. 
8

the Golden State’s kumquats were consumed locally. (Despite their hugely different 

methodologies, AIC and USDA have yielded oddly consistent export figures, as Figure 

A indicates.) As with the AIC data, the USDA state export figures are of limited use 

for the purposes of this study. Perhaps because the vast bulk of U.S. farm exports 

have gone either overland to Canada and Mexico or by sea to more distant markets, 

USDA analysts have until very recently given scant attention to airborne agricultural 

exports. More importantly, USDA’s apportionment method of calculating a given 

state’s farm exports is not conducive to determining how vital air cargo may have 

been in supporting that state’s agricultural export trade. 

FIGURE A. 

Figure A

California Agricultural Exports:

Differing Perspectives

1999-2003

(In Billions of Dollars)

0.00

1.00

2.00

3.00

4.00

5.00

6.00

7.00

8.00

9.00

10.00

1999 2000 2001 2002 2003

USDA UC Davis WISER

Origin of Movement Export Data. The third source of state agricultural export figures 

is based on information provided by the exporter-of-record on the Shippers Export 

Declarations (or their electronic equivalent) that by law must be filed for all outbound 

shipments worth at least $2500. Compiled by the U.S. Customs and Border 

Protection Agency, the raw information is then processed and analyzed by the U.S. 

Census Bureau’s Foreign Trade Division. Since 1988, the Census Bureau has 

contracted with outside parties to refine the raw data to yield useful figures 

describing the exports of the individual states and of several metropolitan areas. 
9

Since at least the early 1990s, the data officially used by the State of California to 

describe California’s merchandise export trade has been provided by the 

Massachusetts-based Western Institute for Strategic Economic Research (WISER) 

and its forerunner, the Massachusetts Institute for Social and Economic Research 

(MISER). One major virtue of this data source is that it provides insight into the 

mode of transportation and point of departure not possible with the AIC or USDA 

data sets. In completing the Shippers Export Declaration, exporters are required to 

identify the state in which the export shipment was initiated as well as the port of 

embarkation, the mode of transportation, and the destination abroad. The WISER 

data do have some drawbacks, though. Probably the most troubling deficiency is that 

the data – despite considerable algorithmic efforts to the contrary – will inadvertently 

include some shipments of items that, while shipped from a California airport, were 

actually grown or processed outside of the state. As a result, WISER’s agricultural 

export totals for California are substantially higher than the estimates published by 

either AIC or USDA. Still, the WISER data are consistent year-to-year and do 

represent the only available source of data on California’s airborne agricultural 

export trade. Therefore, unless otherwise specified, the agricultural export figures 

cited in this report are derived from origin of movement data supplied by the U.S. 

Census Bureau’s Foreign Trade Division via WISER. 
10

Chapter 1 

 

The Current and Future Role of Air Cargo Services 

in the Shipment 

of California’s Agricultural Exports 

The Current Picture

During the past five years, a relatively modest but growing share of California’s 

agricultural exports has been transported by air (Figure 1-2). In 2004, for example, 

airborne shipments amounted to just 6.3 percent of the $10.4 billion value of all 

agricultural products exported from California in that year. Still, even this ostensibly 

meager percentage represents a substantial volume of business. More importantly, 

the nominal value of the state’s airborne agricultural exports has increased by nearly 

60 percent since 2000, from $414 million to $659 million in 2004 (Figure 1-1).3

FIGURE 1-1. 

Figure 1-1.

California’s Airborne Agricultural Exports California’s Airborne Agricultural Exports

1996-2004

(In Millions of Dollars)

0

100

200

300

400

500

600

700

2000 2001 2002 2003 2004

WISER DATA

 

 

3

 As of May 1, 2005, neither USDA nor AIC have released data on California’s agricultural 

export trade in 2004. For the period from 1999 through 2003, however, WISER reports a 31.4 

percent increase in California’s airborne agricultural export trade (from $411 million to $540 

million), while AIC reports an increase of 23.6 percent (from $6,061 million to 7,491 million). 

On the other hand, USDA reports a 32.5 percent jump in California’s overall farm export trade 

during those years (from $6,195 million to $8,210 million). 
11

FIGURE 1-2. 

Figure 1-2.

Air Cargo’s Share of California’s Agricultural Exports Air Cargo’s Share of California’s Agricultural Exports

1996-2004

(Source: WISER)

0.00%

1.00%

2.00%

3.00%

4.00%

5.00%

6.00%

7.00%

2000 2001 2002 2003 2004

% of Dollar Value

Furthermore, in the case of certain high value-added crops such as fresh cherries, 

strawberries, asparagus and a range of perishable organically-raised produce, air 

cargo simply may offer the only effective means for meeting some of the overseas 

demand for these highly perishable crops. Figures 1-3 and 1-4 show the leading 

agricultural and specialty-crop exports shipped by air from California in 2004. 
12

Figure 1-3. 

Figure 1-3.

Ten Top California Airborne Agricultural Exports and Their Share

of California’s Farm Exports By All Transportation Modes of California’s Farm Exports By All Transportation Modes – 2004

(In Millions of Dollars) Source: WISER

$12.7 (36%) $12.7 (36%) Seeds, fruits and spores for sowing (HS-120999)

$13.1 (94%) $13.1 (94%) Bovine Semen

$16.2 (90%) $16.2 (90%) Seeds of herbaceous plants, principally flowers 

(HS-120930) 

Odoriferous mixtures used in food or drink $16.5 (25%) $16.5 (25%)

(HS-330210)

Asparagus, fresh or chilled $22.2 (50%) $22.2 (50%)

$24.2 (5%) $24.2 (5%) Fresh Grapes

$30.6 (18%) $30.6 (18%) Fresh Strawberries

$77.9 (43%) $77.9 (43%) Vegetable Seeds for Sowing (HS-120991)

$91.5 (85%) $91.5 (85%) Fresh Cherries 

$174.0 (25%) $174.0 (25%) Food Preparations NESOI (HS-210690)

Figure 1-4. 

Figure 1-4.

California’s Top Ten Airborne “Specialty Crop” Exports

and Their Share of the State’s Farm Exports

By All Transportation Modes Transportation Modes – 2004

(In Millions of Dollars) Source: WISER

Vegetables NESOI fresh/chilled (HS- $2.1 (10%) $2.1 (10%)

70990)

Tomatoes, fresh or chilled $3.3 (5%) $3.3 (5%)

Raspberries, blackberries, etc. Raspberries, blackberries, etc. $4.8 (24%) $4.8 (24%)

Peaches & Nectarines $5.7 (7%) $5.7 (7%)

Onions & Shallots, fresh/chilled $6.0 (14%) $6.0 (14%)

Lettuce, all varieties $9.2 (6%) $9.2 (6%)

Asparagus, fresh or chilled $22.2 (50%) $22.2 (50%)

Fresh Grapes $24.2 (5%) $24.2 (5%)

Fresh Strawberries $30.6 (18%) $30.6 (18%)

Fresh Cherries $91.5 (85%) $91.5 (85%)
13

California’s airborne agricultural exports go primarily to markets in the Northern Asia 

(Japan, China, Korea, Taiwan and Hong Kong) (Figures 1-5 and 1-6). By contrast, 

airborne shipments to neighboring Canada and Mexico are understandably limited by 

the ready availability of less expensive truck and rail routes. Japan, not surprisingly, 

has been the top destination for California’s airborne agricultural exports, although 

shipments there have plateaued in recent years. Most startling has been the huge 

surge in airborne shipments of California agricultural products to China in the brief 

period since that country joined the World Trade Organization in 2001. Over the next 

three years, the state’s airborne agricultural exports to China tripled, then 

quadrupled, and then doubled again for an overall thirty-fold increase in trade, from 

$3.1 million in 2001 to 94.4 million in 2004. By comparison, California’s overall farm 

export trade with China grew immensely during the same period, increasing from 

$186.3 million in 2001 to $663.6 million in 2004, a somewhat more decorous pace of 

growth. (The sharp increase in airborne shipments to China apparently did not come 

at the expense of California’s airborne agricultural export trade with Hong Kong, 

which saw a fairly robust 41 percent increase, from $11.1 million in 2001 to $15.7 

million in 2004.) 

Figure 1-5. 

Figure 1-5.

Leading Regional Destinations

of California Airborne Agricultural Exports

(In Millions of Dollars) Source: WISER

0

50

100

150

200

250

300

350

400

2000 2001 2002 2003 2004

NE Asia

"Old" Europe

Canada/Mexico

Latin America
14

Figure 1-6. 

Figure 1-6.

California Airborne Agricultural Exports California Airborne Agricultural Exports 

Leading Destinations, Leading Destinations, 2004

(Based on WISER Data)

Japan

PRC

Korea

U.K.

Australia

Taiwan

Netherlands

Hong Kong

France

Italy

E.B.E.

Of additional interest is the value of airborne exports to the advanced economies of 

Western Europe and to the developing economies of Latin America. Although the 

increase of California’s airborne agricultural exports to Europe parallels the recent 

strong growth in the state’s overall farm export trade with the European Union,4

 the 

findings in both cases are noteworthy for being somewhat counterintuitive, given the 

popular impression that the EU is intensely hostile to importing U.S. food products. 

That the conventional wisdom in this instance is evidently erroneous not only 

suggests that the state’s growers and shippers should reconsider their global 

marketing strategies but also regard in a new light the likely prospect that at least 

one Central Valley airport – most probably Sacramento International – will be 

offering direct or even non-stop flights to London and Frankfurt within a decade. As 

for the data on Latin American exports, there is considerable reason to believe that 

the available data actually understate the value of California’s airborne agricultural 

exports to Central and South America.5

 Considering the fast if sometimes turbulent 

 

4

 The European Union outdistanced Canada and Japan to become the leading destination for 

California farm exports in 2003, according to the Agricultural Issues Center at UC Davis. See: 

http://aic.ucdavis.edu/pub/03_table4.pdf. 

5

 Despite efforts to improve the quality of state export data, shipments of commodities 

originating in one state are often misreported as an export of the state from which the 
15

pace of economic growth in major Latin American economies like Brazil and Chile, 

California’s agribusiness strategists should not discount the possibility that urban 

areas throughout Latin America will emerge as significant markets for California’s 

high-quality, high value-added food products. 

Future Prospects for Airborne Agricultural Exports 

Looking ahead, there are at least five reasons to anticipate that demand for air 

freight services among California’s agricultural exporters will expand. 

1. Changes in the maritime shipping industry may not be especially 

conducive to the needs of food exporters. Maritime shipping – the customary 

mode for moving most farm products to overseas markets – is becoming an 

increasingly problematic partner for exporters of high value-added perishable farm 

products. The congestion plaguing the Ports of Los Angeles and Long Beach during 

much of 2004 has been well-documented in the media. But a transportation 

infrastructure over-stressed by surging cargo traffic is only one manifestation of 

broader developments that are reshaping the maritime shipping industry both here 

and abroad. 

To achieve new economies of scale, shipping lines have been investing heavily in the 

construction of larger and larger vessels capable of carrying more and more 

standardized shipping containers. Over the next four years, no fewer than 227 

container ships too large to pass through the Panama Canal will enter service. These 

so-called “post-Panamax” vessels account for more than half of the total number of 

container ships on order. By at least one authoritative estimate, two-third of the 

containers that will be imported into the United States in 2020 will arrive on ships 

too large to navigate the Panama Canal.6

Huge, new container ships bearing more than 8,000 twenty-foot equivalent units 

(TEUs) have begun calling at the Ports of Los Angeles and Long Beach. (Until a 

channel dredging project is completed in 2006, vessels of that size will be unable to 

 shipment leaves the U.S. See Jock O’Connell, “California's New Latin American Trade Strategy 

Based on Flawed Data,” Sacramento Bee, March 7, 1999. 

6

 Cited in The New York Times, “New York Port Hums Again, With Asian Trade,” November 

22, 2004. 
16

call at the Port of Oakland.) Yet, because of their size, these vessels and the even 

larger one now entering service can be handled by fewer and fewer of the world’s 

ports.7

 Even now there is an unprecedented level of congestion at major seaports as 

well as along the highways and railways that carry cargoes to and from inland 

locations. In many regions where rapidly expanding economies are spawning newly 

affluent customers and new geographic markets for value-added food products, 

surface transportation systems are often inadequate, especially for the purpose of 

moving perishable commodities. 

Inadequate infrastructure is not restricted to developing countries. In Southern 

California, traffic generated by the movement of containers through the twin Ports of 

Los Angeles and Long Beach has led to serious air pollution problems and to 

congested and frequently dangerous highway conditions. Those consequences have, 

in turn, spurred a political backlash that imperils plans to expand port operations to 

cope with an anticipated doubling or even tripling of cargo volumes by 2020. 

While virtually all of the media attention has been focused on lengthy delays in 

unloading vessels and transporting containers to railyards near downtown Los 

Angeles, exporters are likewise affected by congested ports for the simple reason 

that inbound ships lying at anchor cannot load containers filled with perishable 

agricultural exports. Such delays not only impose additional direct costs on shippers, 

they risk undermining the confidence of overseas customers who are often able to 

source the same goods they are importing from California from other regions of the 

world.8

 In several instances, congestion in San Pedro Bay prompted the diversion of 

vessels to other West Coast ports, a development which left exporters who had 

 

7

 Without completion of a multi-million dollar dredging project, it is problematic whether the 

Port of Oakland could accommodate the latest generation of container ships. 

8

 A plan announced in November 2004 to establish a new rail connection between the Port of 

Oakland and a transport facility in Shafter (Kern County) promises to afford agricultural 

shippers will access to maritime shippers that circumvents highway congestion in the San 

Francisco Bay Area. The port has entered a three-way alliance with an intermodal operator, 

Northwest Container Services Inc., and the city of Shafter, which developed the California 

Integrated Logistics Center. Imported containers would be rail-shuttled to the Shafter facility. 

Unloaded containers would be available for agricultural products to be shuttled back to 

Oakland for export. Construction has been initiated on an intermodal yard near the Oakland 

Army base to handle the new Shafter shuttle. 
17

already delivered their cargoes to the Southern California ports with little choice but 

to chase those ships up the coast. 

Traffic congestion in and around seaports is not, however, a condition idiosyncratic 

to Southern California. If anything, the problem is broadly endemic all up and down 

the Pacific coast at a time when trade volumes are burgeoning.9

 In Northern 

California, traffic problems linked to demographic trends have been especially unkind 

to agriculture. The infamous absence of sufficient stocks of affordable housing in the 

San Francisco Bay Area has been a major factor in propelling a population boom in 

adjacent San Joaquin Valley counties, where the resulting suburban sprawl 

increasing threatens valuable farm land. Yet, because many of those seeking less 

expensive housing in the San Joaquin Valley continue to work in the Bay Area, 

highways leading from the San Joaquin Valley into the East and South Bay have 

become a commuter’s nightmare. More to the point, highways leading from the 

farms and packing houses of the San Joaquin Valley to the Port of Oakland (as well 

as to Bay Area airports) have become among the most congested in the state.10 

Still, the situation in San Pedro Bay through 2004, which saw over 100 ships diverted 

to other West Coast ports, could prompt permanent changes in trade routes.11 The 

ports' last cargo crunch, which began in July 2004 and ended in November, stranded 

as many as 94 vessels at a time, up from the usual range of 30 to 50 ships. The wait 

to unload stretched as long as nine days. With the expiration of U.S. quotas on 

clothing and textile imports scheduled for January 1, 2005, it is expected that all 

West Coast ports will see a dramatic increase in shipments of these products from 

China, India and other East Asian sources. In short, the shipping crisis seen at the 

 

9

 See William Armbruster, “US Infrastructure a big challenge to China trade growth.” Pacific 

Shipper magazine, October 18, 2004. Armbruster comments that as much, if not more time is 

required to transport a container between Chengdu, a city of nearly 9 million 1,500 miles up 

the Yangtze River, and Shanghai as to transport the same container from Los Angeles to 

Shanghai. 

10 Leslie Fulbright, “I-580 home to 3 of Bay Area's worst traffic bottlenecks East Bay gridlock 

fueled by growth in San Joaquin Valley,” San Francisco Chronicle, January 7, 2005.

11 The Los Angeles Times reported on November 18, 2004, that Southern California “port 

officials and shipping lines expect another surge of cargo after global tariffs that have kept a 

tight cap on Chinese exports of textiles and apparel expire Jan. 1.” See “L.A. Ports Unclogged 

but Not in the Clear.” 
18

Southern California ports during the second half of 2004 could become a permanent 

condition. 

On November 16, 2004, the Financial Times observed that “express delivery 

operators such as UPS and FedEx report more customers switching to expensive air 

cargo for their most valuable products because of congestion elsewhere.” In a 

November 2, 2004 report, the California Farm Bureau Federation noted that shipping 

“delays at the ports of Los Angeles and Long Beach worry orange exporters as the 

peak shipping season looms.” 12 Maritime congestion is not limited to California 

seaports. In 2004, Hyundai Merchant Marine and the "K" Line announced they would 

halt service to the Port of Portland by the end of the year, leaving only Hanjin 

Shipping to handle oceangoing container traffic along the Columbia River to 

Portland.13 Both lines are shifting to larger vessels requiring deeper channels than 

the Columbia River port currently offers. The upshot, according to one prominent 

transportation analyst, is that shippers may increasingly opt to “overfly some of the 

congested West Coast ports.”14

 

2. Demand for the kinds of specialty crop products grown in California is 

increasing. There has been a dramatic expansion of the worldwide market for highquality and typically high value-added food products grown and processed under 

conditions conducive to wholesomeness and food safety.15 Prosperity has been 

spreading to ever-larger segments of populations in most of the world’s countries, 

especially in those often classified as Newly-Industrialized Countries (NICs). No 

longer are significant markets for imported food products confined to the largest 

metropolitan areas. With that prosperity comes more discerning and demanding 

tastes for food products that are considered nutritious, wholesome and safe to 

 

12 California Farm Bureau Federation, Food and Farm News. November 2, 2004. 

13 “Container Liners Pullout To Affect Western U.S. Farm Shippers,” Taiwan News, September 

6, 2004.

14 Kevin Neels, vice president of Charles River Associates, quoted in “China Provides Lift” by 

Ed McKenna in Traffic World magazine (December 20/27, 2004), p. 37.

15 According to a World Trade Organization report: “Since the mid-1980’s there has been a 

rather dramatic acceleration in the growth of world exports of highvalue and processed 

agricultural products. The share of this dynamic product category in world agricultural trade 

has increased from 39% in the early 1980’s to 52% on average in 1995-1997.” Market 

Access: Unfinished Business (Geneva: WTO, Special Study 6, 2001).
19

consume. As a June 2004 report from the Economic Research Service (ERS) of the 

U.S. Department of Agriculture observed: 

“High income-growth rates in developing countries portend higher 

rates of fruit and vegetable consumption and trade in the future. In 

the meantime, developed countries will dominate global consumption 

and trade of fruits and vegetables, not only because of their high 

income levels but also because of consumers’ increasing concerns 

about healthy eating, which tend to increase fruit and vegetable intake 

in their diets. The United States is well placed to take advantage of the 

potential for greater horticultural trade.”16

In an update issued in February 2005, the ERS forecast that U.S. horticultural 

product exports this year would reach a record $14.5 billion. That revision largely 

reflects generally higher prices due to increased foreign demand and a weaker dollar. 

A further depreciation in the U.S. dollar, and continued strength in the global 

economy support this forecast, which is up $1.2 billion from the previous year.17 

Historically, California’s food exports have gone to a small number of high-income 

countries. According to the Agricultural Issues Center at UC Davis, “California exports 

agricultural products to almost 150 countries, but the 10 principal destinations 

account for 85 percent of the export value, and the main four destinations—the 

North America Free Trade Area (Canada/Mexico), the EU, Japan, and China/Hong 

Kong—account for more than two thirds of that total.”18 While these are likely to 

remain major markets for California food products, the dramatic expansion of middle 

and upper-class populations in China as well as in a host of other developing 

countries suggests the emergence of important new markets for California’s 

agricultural exporters. The logistical challenge will be to ensure that California-grown 

 

16 Global Trade Patterns in Fruits and Vegetables by Sophia Wu Huang et al. Agriculture and 

Trade Report No. (WRS0406) 88 pp, June 2004 (Washington, D.C. USDA, Economic Research 

Service), p. iv. The report further notes that: “Demand-side factors, which include rising 

incomes and the creation of a middle class that demands quality produce in all seasons and is 

willing to pay, have had major consequences for trade.” 

17 See Outlook for U.S. Agricultural Trade/AES-45/Feb. 24, 2005 issued by the Economic 

Research Service, USDA.

 

18 José E. Bervejillo and Daniel A. Sumner. “California’s International Agricultural Exports in 

2002” (UC Davis: Agricultural Issues Center report no.23, 2003), p. 5. 
20

food products can be shipped to discerning consumers in geographically dispersed 

markets. An economically vibrant China, for example, boasts 166 cities with 

populations over one million (compared with nine in the United States). Yet the 

country is plagued with a shoddy surface infrastructure that will inhibit distribution to 

metropolitan centers not directly served by a major sea or river port. Similarly, the 

surface transportation infrastructure in Brazil, another fast-growing developing 

economy, is notoriously deficient.19 In India, nearly 35 metropolitan areas have 

populations exceeding one million. More importantly, India’s recent economic boom 

has been spreading to more and more of the nation’s second-tier cities.20 

USDA analysts expect economic growth in developing countries to exceed 6 percent 

in 2004 and 5.5 percent in 2005. Asia continues to be the fastest growing region.21

Overall growth in Asia is likely to exceed 7 percent in 2004 and 6 percent in 2005. 

India is continuing rapid GDP growth in excess of 7 percent in 2004 and its growth is 

expected to be near 7 percent again in 2005. Growth in South Korea and Southeast 

Asia will be in the 5 to 6 percent range in 2005, while Vietnam will continue growing 

at a rate over 7 percent. 

The five major economies in Latin America--Argentina, Brazil, Mexico, Venezuela, 

and Chile--are all experiencing strong growth. The region as a whole is likely to grow 

around 4 percent in 2004 and 2005. Growth in Brazil is expected to reach almost 4 

percent in 2004 and 2005 due in large part to growing exports to China. Argentina is 

likely to have growth of around 7 percent in 2004 and near 4 percent in 2005. The 

impact of peso depreciation on Argentine exports keeps Argentina a strong 

agricultural export competitor through 2005. Mexico’s economy is strongly tied to the 

United States. GDP in Mexico is likely to grow over 4 percent in 2004 and 2005. 

Chile, which has followed a strong export-oriented policy, continues to have growth 

of around 5 percent in 2004 and 2005. 

 

19 “Drive for Global Markets Strains Brazil's Infrastructure ,” The New York Times, October 

27, 2004. 

20 Saritha Rai, “India’s Boom Spreads to Smaller Cities,” The New York Times, January 4, 

2005. 

21 USDA Economic Research Service, Outlook for U.S. Agricultural Trade/AES-44/ (November 

22, 2004). 
21

GDP growth rates continue to be substantial in most of the countries of the former 

Soviet Union. While Africa’s GDP growth has improved markedly to an average rate 

exceeding 4 percent in 2004, performance varies considerably from country to 

country. 

Most pertinent was the standing of perishable items in a forecast of the fastest 

growing air shipper industry segments, ranking behind capital equipment, 

computers, and intermediate materials but ahead of telecommunications equipment, 

consumer products and textiles. As the forecast’s authors conclude: “The size of 

perishables flows testifies to rising consumer demand for cut flowers, exotic fresh 

seafood, and contra-seasonal vegetables.”22

As the world's population and food consumption continue to expand, so will the 

demand for the high-value products where California maintains a comparative 

advantage. Indeed, during the 1990s, world trade involving high-value and 

processed food products like those grown in California rose with particular vigor.23

Nationwide, exports of all agricultural products grew more than three times as fast 

as the total of all U.S. exports in the last year. The U.S. Department of Agriculture 

has forecast record agricultural exports of $61.5 billion through Sept. 30. The United 

States is the foremost exporter of fresh fruits and nuts and runs second in the export 

of fresh vegetables. 

Another demographic trend worth noting is the increasing urbanization of the world’s 

populations.24 According to a study prepared for the Asia-Pacific Economic 

Cooperation Forum Ministerial Meetings in Bangkok in October 2003: “The most 

significant demographic change in the Asia-Pacific region in the next two decades will 

be the rapid growth of urban populations. Future urban growth will test the efficiency 

and capacity of the region’s food system to deliver a continuous flow of safe, 

 

22 Brian Clancy and David Hoppin, “After The Storm: The MergeGlobal 2004-2008 World Air 

Freight Forecast,” Air Cargo World, May 2004. 

23 Tiffany Arthur, Colin Carter, and Alix Peterson Zwane, “International Trade and the Road 

Ahead for California Agriculture” in Jerry Siebert (ed.) California Agriculture: Dimensions and 

Issues (University of California Giannini Foundation of Agricultural Economics, 2003), p. 127. 

24 For a cursory survey of the history of urbanization, see Joel Kotkin, The City: A Global 

History (New York: The Modern Library, 2005), especially Part VI, “The Modern Metropolis. 
22

reasonably priced fresh and processed foods.”25 [Emphasis added.] The region’s 

urban population is projected to grow by over 580 million people between 2000 and 

2020, an increase of about 45 percent. During the 1990s, for the first time in history, 

the region’s urban population grew larger than its rural population. Urban diets 

typically differ from those of people living in rural areas, largely due to higher 

incomes and the substitution of animal products, fruits, and vegetables for more 

traditional food staples. In many urban areas in rapidly developing economies like 

India and China, residents are also developing an increasing appreciation for food 

products and dietary regimes normally associated with Western societies.26 

In the Far East, economic growth has been driven largely by fast-growing urban 

agglomerations in coastal China, Indonesia, Thailand, Malaysia, and Vietnam. Levels 

of urbanization in this region are not high by international standards (at 36 percent 

of the population in 2000), but they are set to rise dramatically, to over 50 percent 

by 2025. By then, half a billion more people will live in urban areas. Cities drive East 

Asia’s growth. Cities account for up to 70 percent of East Asian GDP growth. 27

 

Just fifty years ago, 103 cities worldwide had populations of more than a million 

people, with New York and Tokyo the only two with populations over 10 million. 

Today, there are 20 cities that have topped the 10 million mark, and an additional 

428 are above one million. Since 1980, for example, Bogota has grown from 3.7 to 

7.6 million people; New Delhi from five to 15 million; Lagos from 2.6 to 11.1 million; 

Bandung from 1.8 to four million; Sana'a from 240,000 to 1.6 million; and Bamako 

from 500,000 to 1.7 million. At the very top are Tokyo with a metro population of 35 

million followed by Mexico City, Mumbai, Sao Paulo, and New York City. Overall, 

three billion of the world's 6.2 billion people now live in cities. This is up from only 

1.7 billion in 1980, and forecast to hit five billion by 2030. Rural populations, 

meanwhile, have peaked and are expected to start declining by the end of the 

current decade. The United Nations’ Department of Economic and Social Affairs 

 

25 William Coyle, Brad Dilmour and William J. Armbruster, “Where Will Demographics Take 

the Asia-Pacific Food System,” in Amber Waves (USDA ERS), June 2004. 

26 See Monica Bhude, “As Cash Flows In, Indian Goes Out to Eat, The New York Times, April 

20, 2005. 

27 Asian Development Bank, Japan Bank for International Cooperation and the World Bank, 

“Connecting East Asia: A New Framework for Infrastructure” (March 2005), pp. 42-46. 
23

forecasts that almost all population growth expected for the world in the next thirty 

years will be concentrated in the urban areas.28 

Exports are crucial to California fruit, nut and vegetable growers. Four of our 

country's top 10 specialty crop exports -- almonds, wine, table grapes and raisins --

are grown principally in California. In 2002, over 90 percent of all table grapes, 

lemons, processed tomatoes and garlic that the U.S. exported were produced in 

California. More than 80 percent of the California almond crop -- over $1 billion 

worth -- is exported. Fresh lettuce and strawberries, two other commodities grown 

primarily in California, have increased their exports by 85 percent and 76 percent 

respectively since 1999. 

Exports to our traditional markets continue to grow. For example, fruit and nut 

exports to the European Union were nearly $1.1 billion in 2003, a 33 percent 

increase over 1999, while exports of fresh vegetables to Canada increased over 29 

percent in the same time period. 

Finally, given the growing importance of product differentiation in which California 

agricultural exporters may find it useful to emphasize the issue of food safety, air 

shipments of fresh produce minimize the risks associated with improperly shipped 

edible products. 

3. The business of feeding the world’s people is becoming increasingly 

consolidated and standardized along Western marketing lines. The 

multinational businesses that feed much of the world’s population are becoming 

more and more concentrated and globalized. The trend toward greater and greater 

consolidation in the wholesale, retail and food processing segments of the food 

industry continues not only in North America and Western Europe but throughout the 

world. In recent decades, there has been a distinct trend in the world’s food and 

beverage industries toward larger and fewer enterprises in production, processing, 

and distribution. Spurring this trend forward has been factors such as the ongoing 

progress toward economic integration in Europe, the continued consolidation of North 

American food processors, wholesalers and retailers through mergers and 

 

28 United Nations, Department of Economic and Social Affairs, World Urbanization Prospects: 

The 2003 Revision (New York, 2004), p. 4. 
24

acquisitions, and the imperative facing major North American and European 

corporations to expand beyond their respective domestic markets, which especially in 

Europe’s case, have limited growth potential.29 According to one leading food 

industry executive, both the globalization of the food industry and its consolidation 

are also being driven by the need to satisfy the expectations of stock markets, which 

have become an increasing source of capital for food companies.30 What could be 

called the first stage of consolidation in the global food and beverage industry, up to 

about the mid-1990’s, has predominantly been a matter of larger companies like 

Nestle, PepsiCo, Unilever, Danone, etc, steadily buying up smaller national or region 

companies in their areas of core business and strengthening their global market 

share in those areas. 

At the retail level, chains like France’s Carrefour have been busily opening or 

acquiring large stores in Asia and Latin America. In just the first six months of 2004, 

Carrefour opened 21 new hypermarkets in Asia, bringing its total in that region to 

165 – eleven more than it operates in Latin America and just 14 fewer than 

Carrefour has in France.31 Wal-Mart has more than 1,100 stores in Mexico, Puerto 

Rico, Canada, Argentina, Brazil, China, Korea, Germany and the U.K. This includes 

11 Supercenters in Argentina, 16 in Brazil and in Korea. The retailing giant plans to 

open 15 new stores in China next year as it competes for a foothold against 

Carrefour and the Metro Group. Wal-Mart already has 41 stores in 20 Chinese cities. 

In Latin America during the 1990s, the transformation of the food retailing system 

began in the 1980's and accelerated in the 1990's as countries opened their 

economies, often to satisfy conditions for loans from the International Monetary Fund 

 

29 By some estimates, the populations of several European countries are expected to shrink 

over the next few decades unless immigration restrictions are liberalized. A 2003 report from 

the Austrian Academy of Science in Vienna show that Europe’s population could decline by as 

much as 88 million people if present trends continue for another 15 years. The population of 

the European Union was about 375 million in 2000. See Mark Henderson, “Europe shrinking as 

birthrates decline,” The (London) Times, March 28, 2003. 

30 Reg Clairs A.O. is a former CEO of Woolworths Ltd. and Chairman - Supermarket to Asia 

Board. His remarks were presented at the 2001 World Food and Agribusiness Forum in 

Sydney, Australia. 

31 Carrefour also has 218 smaller “supermarkets” in Latin America. It is worth noting that, 

prior to troubles arising from financial reporting irregularities, the Dutch multinational food 

retailer, Royal Ahold, had a very strong presence in Latin America, the U.S. and Asia. It has 

since been obliged to dispose of many of these stores. 

 
25

and the World Bank.32 As foreign investment flooded in, multinational retailers 

bought up domestic chains or entered joint ventures with them. Supermarket chains 

went from controlling 10 to 20 percent of the region’s retail food market to 

dominating it, according to researchers at Michigan State and the Latin American 

Center for Rural Development in Santiago, Chile.33 By contrast, that degree of 

market penetration took fifty years in the United States. While the process is 

furthest along in Brazil, Argentina, Chile, Costa Rica and Mexico, the same trend is 

occurring in smaller, poorer economies like Guatemala. The chains now dominate 

sales of processed foods and their share of produce sales is growing, to as much as a 

30 percent share in Argentina and a fifty percent share in Brazil. 

According to a 2003 report published by the U.S. Department of Agriculture’s 

Economic Research Service: “The rapid expansion of supermarkets in Latin America 

and Asia are both changing produce retailing and well as deeply transforming the 

agrifood sector in these regions. The supermarkets have successfully established due 

to their ability to offer consistent quality products at competitive prices. This has 

been enabled by a decrease in costs due to consolidation of product procurement 

and adoption of modern logistics, and an increase in food quality and safety due to 

implementation of private and public standards.”34 

Just as in other industries which have engineered new forms of worldwide production 

and distribution, the global food industry will likely place greater reliance on fast, 

reliable and efficient modes of moving both raw materials and finished products from 

one region of the globe to another. A premium will be placed on being able to meet 

tight supply schedules.35 

 

32 See Thomas Reardon, C. Peter Timmer and Julio A. Berdegué, “The Rise of Supermarkets 

in Latin America and Asia: Implications for International Markets for Fruits and Vegetables” in 

Anita Regmi and Mark Gehlhar (editors). 2003. Global Markets for High Value Food Products, 

Agriculture Information Bulletin, USDA-ERS. 

33 Celia W. Dugger, “Supermarket Giants Crush Central American Farmers, “ The New York 

Times, December 28, 2004. 

34 Ibid.. The authors define “supermarkets” as self-service stores, whether in chains or 

independent, that are typically from about 350 to 4000m2 in size and are equipped with three 

or more cash registers. Hypermarkets are even larger establishments. 

35 See Hoy F. Carman, Roberta Cook and Richard J. Sexton, “Marketing California’s 

Agricultural Production” in California Agriculture: Dimensions and Issues, Jerry Siebert 

(editor), University of California Giannini Foundation of Agricultural Economics, 2003, pp. 89-

119. The authors specifically call attention to “a recent trend throughout the developing world 
26

4. The value of California’s farm exports will increase. California agriculture’s 

progressive shift toward higher and higher value-added crops that command 

premium prices will continue as its farmers strive to remain competitive in the face 

of aggressive competition from foreign growers. As the value-to-weight ratio of 

California farm products increases, air cargo becomes a more economically viable 

alternative to maritime shipping, especially for “vine-ripened” produce and other 

perishable farm products where harvest-to-market delivery times are short and 

where care in handling is at a premium. In a 2004 report from the Public Policy 

Institute of California, the authors postulate that the rapidly changing composition of 

international trade toward goods with higher and higher value-to-weight ratios 

“suggests an increasing reliance on airports relative to seaports.”36 Organicallygrown produce should also continue to see increasing markets.37 This trend could 

accelerate if strategies to market California food products as distinctively wholesome 

and nutritious prove successful. Smaller volume hyper-specialty crops which 

command comparatively extravagant prices at gourmet markets and high-end 

restaurants (such as the strawberry variety known as fraises des bois as well as an 

increasingly wide array heirloom fruits and vegetables) are also probably candidates 

for air shipment.38

 away from wet markets and toward supermarkets [that] bodes well for international fresh 

produce trade, and hence, California producers.” The paper’s authors estimate that the 30 

largest retail grocery chains now account for at least 10 percent of world food sales. “Many of 

these chains have stores located on several continents and their global procurement practices 

and cold chain management investments and exigencies mean that these modern produce 

departments must be kept full year-round.” 

 

36 See Jon D. Haveman and David Hummels, California’s Global Gateways: Trends and 

Issues (San Francisco: Public Policy Institute of California, 2004, p. 45.

37 Ironically, there are those in the organic food sector who decry the use of air freight in 

shipping produce to distant markets. Claims that “Air freighting produce uses around 30 times 

as much fuel as transporting it by sea. This not only produces 30 times the carbon dioxide 

emissions, but also 50 times the emissions of hydrocarbons, which contribute to smog and 

general poor air quality. Abel & Cole, an organic foods provider in the United Kingdom, plays 

up its refusal to use air-freighted goods in its advertising. The Christian Ecology Link, another 

UK organization, likewise decries the use of air cargo. http://www.christianecology.org.uk/loaf-principles.htm 

38 One California grower of the intensively flavored fraises des bois told The New York Times

that one crate of a dozen three-ounce baskets fetches as much as $50. He also stated that he 

ships “a few crates” by air to New York, primarily for the restaurant trade. See David Karp, 

“Strawberries and Dreams,” The New York Times, April 13, 2005. 

 
27

5. Barriers to trade will continue to diminish. Efforts to liberalize both trade in 

agricultural products and international air transport regulations will continue apace. 

On the one hand, it is likely that current barriers to trade in agricultural products will 

be reduced, creating new markets and expanding existing ones for California growers 

and food processors. At the same time, there are solid prospects for continued 

liberalization of air transport accords that should increase the likelihood that more 

California municipalities will enjoy non-stop or direct air service to international 

destinations.39 

U.S. trade negotiators have also been helpful in establishing new markets and 

reducing barriers to old ones. For example, there has been a nearly 10-fold increase 

in the amount of fruits and nuts exported to China. Meanwhile, fruit and vegetable 

exports to South Korea jumped over 250 percent in the past five years. In the past 

two years, the U.S. has negotiated free trade agreements with eleven countries: 

Bahrain, Chile, Singapore, Morocco, Australia, Guatemala, Costa Rica, El Salvador, 

Honduras, Nicaragua and the Dominican Republic. The combined population of these 

countries represents a market of 117 million people. U.S. trade officials are also 

working on agreements with ten additional countries: Panama, Colombia, Peru, 

Ecuador, Thailand, and the five nations of the Southern African Customs Union 

(Botswana, Lesotho, Namibia, South Africa and Swaziland). These new and pending 

free-trade partners, taken together, would constitute America's third largest export 

market and the fifth largest economy in the world. When enacted and implemented, 

these free trade agreements should expand opportunities for California’s agricultural 

exporters. For example, Australia has agreed to immediately remove tariffs on 

imports of grapes and almonds, and Morocco has committed to phasing out its tariffs 

on California walnuts and pears over the next five years.40

 

39 While the definition of a non-stop flight is self-evident, there is frequent confusion over the 

meaning of a ‘direct’ flight. Unlike a non-stop flight, a direct flight involves one or more stops 

en route to a final destination. However, passengers (and cargo) remain on the originating 

aircraft throughout. 

40 Allen F. Johnson, “Trade plays important role for California's Ag producers,” August 18, 

2004, Ag Alert, a weekly publication of the California Farm Bureau. Ambassador Johnson is the 

chief agricultural negotiator in the Office of the U.S. Trade Representative. 
28

A Challenged Infrastructure 

Although there is ample reason to expect that air freight will become an increasingly 

attractive shipping option, especially for exporters of the high value-added specialty 

crops that have become the hallmark of California’s agricultural economy, it is far 

less certain how well the state’s international trade infrastructure will be able to 

accommodate expected growth in the volume of air freight, especially on transpacific 

routes. Even if concerns about terrorism do not yield security measures that severely 

inhibit the carriage of air cargo, especially on passenger flights,41 the air cargo 

industry in this state faces considerable challenges. 

The nation’s airline industry is in the grips of a daunting financial crisis that may see 

the demise of one or more of the six “legacy” carriers -- Delta, United, American, 

Continental, USAirways and Northwest -- which have collectively provided the bulk of 

the nation’s passenger and cargo air service. Low-cost carriers, today’s most 

competitive airlines, offer low-fare service to passengers but contribute little to the 

nation’s air cargo capacity. If anything, the quick turn-around business models of 

most budget carriers are simply not conducive to the carriage of air freight.42 For 

example, at Los Angeles International Airport (LAX), United Airlines carried halfagain as many passengers as Southwest Airlines in 2002 but handled over six times 

the freight tonnage of the low-cost carrier. Similarly, American Airlines, which carried 

just 13 percent more passengers as Southwest that same year, handled over 300 

percent more freight.43 

Closer to home, there are growing concerns that California’s airports will find 

themselves increasingly by-passed as international trade gateways as both U.S. and 

foreign-flag carriers shift cargo service to better situated and more accommodating 

 

41 Tom Ridge, former Secretary of the U.S. Department of Homeland Security, described 

cargo security as “a linchpin issue, not only for the security of our homeland, but also for our 

economic security as well.” See his commentary “Security Responsibilities” in Air Cargo World, 

January 2005. 

42 In the words of John Kasarda, professor of management at the Kenan-Flagler Business 

School at the University of North Carolina: “The key to airline profitability is keeping the plane 

in the air -- that’s the only time you make money.” Quoted in Mark Skertic, “Where the Skies 

Are Cloudy All Day,” Chicago Tribune, December 28, 2004. 

43 “LAX Airline Market Share Summary For January 2002 To December 2002,” Los Angeles 

World Airways website. 
29

airports elsewhere in the country.44 The historic stature of LAX and San Francisco 

International Airport (SFO) as vital entrepôts in America’s transpacific trade is being 

dramatically eroded as more international flights over-fly the West Coast entirely. 

This has been particularly evident in the case of SFO, which, between 2000 and 

2004, saw the value of airborne imports fall by 35.4 percent while the value of 

airborne exports ebbed by 41.9 percent.45 

At the same time, increasingly sophisticated logistical practices and ever-faster expedited 

trucking operations ensure that international cargo can be flown to and from a variety of 

“secondary” airports throughout the U.S. and still meet desired delivery schedules. More 

and more of the nation's air freight capacity is being moved inland, especially as 

major importers like Wal-Mart, Costco, Target, and Home Depot establish huge new 

distribution centers outside of but within easy reach of major metropolitan areas. 

Further contributing to the shift away from use of traditional gateway airports is the 

rise of integrated carriers (most notably FedEx, UPS and DHL), which have generally 

opted to avoid the congestion typically found at the nation’s larger, busier hub 

airports.46 As a result, airports such as Memphis, Louisville and Indianapolis have 

achieved great prominence in the global air cargo system as hubs for the integrated 

carriers. At the same time, ever larger volumes of transpacific air cargo are being 

transshipped through Anchorage’s Ted Stevens International Airport because that 

airport sits on a more direct route between Midwestern and East Coast cities and 

airports in Japan, Korea, China and Taiwan.47 

 

44 See, for example, Aaron Karp, “Cargo's New Gateways? Congestion at traditional U.S. west 

coast hubs could push international freighter traffic to secondary airports,” Air Cargo World, 

August 2004. 

45 According to WISER, SFO’s export trade shrank from $41.8 billion in 2000 to $24.3 billion 

in 2004. Its import traffic likewise declined from $46.9 billion in 2000 to $30.3 billion in 2004. 

The drop in the value of international cargo handled at SFO was the most pronounced of any 

of the nation’s top 25 international freight gateways. See U.S. Bureau of Transportation 

Statistics, America's Freight Transportation Gateways Connecting Our Nation to Places and 

Markets Abroad, 2004. See in particular Table 3. Percentage Change in the Value of 

Merchandise Trade Handled by the Top 25 U.S. Freight Gateways: 1999 and 2003. 

46 DHL, for example, recently announced that it would be establishing its West Coast air 

cargo hub at March Global Port on the site of what was formerly March Air Force Base in 

Riverside County. UPS has a hub at Ontario International Airport in San Bernardino County. 

FedEx operates a hub at Oakland International Airport. 

47 In a typical transshipping arrangement, smaller aircraft will carry cargos between 

Anchorage and airports throughout the U.S. and Canada. Larger, long-haul aircraft carry 
30

Then there is the issue of airport congestion. At a time when the volume of 

shipments moving through California airports is expected to double or even triple by 

2020, the state’s two principal international air gateways – Los Angeles International 

and San Francisco International – face similarly severe constraints on their ability to 

expand their cargo handling capacities. Yet the responses mounted by airport 

officials and transportation planning agencies in Northern and Southern California 

could not be more different. 

The management of Los Angeles World Airports,48 along with regional transportation 

planners in Southern California, has devised a strategy that seeks to divert a 

significant share of air cargo operations from LAX to Ontario International (ONT) in 

Riverside County or even to Palmdale Regional Airport in a fairly remote corner of 

Los Angeles County known as the Antelope Valley. As yet, however, the strategy has 

not generated the hoped-for level of enthusiasm from air carriers, passengers, 

shippers, and freight-forwarders. As a result, LAX continues to monopolize 

international air cargo traffic in Southern California, with a 99.5 percent share of the 

value of all airborne merchandise exports flown from Southern California airports in 

2004.49 (Air transport planning in Southern California was thrown a new twist on May 

17, 2005, when Los Angeles voters elected Antonio Villaraigosa as the city’s next 

mayor. Villaraigosa had opposed an ambitious plan to expand Los Angeles 

International that had been devised by outgoing mayor James Hahn. Villaraigosa had 

campaigned instead for a broader regional air traffic strategy that would shift more 

of Southern California’s air transport burden to other airports. Three days after the 

election, however, the Federal Aviation Administration approved Hahn’s $11 billion 

plan to expand and modernize LAX even as Villaraigosa renewed his commitment to 

sharply scale back the massive project.) 

 cargos on the transoceanic routes. The connection between Anchorage and Tokyo’s huge 

Narita Airport is especially vital since approximately half of all air freight moving from East 

Asia to North America passes through Narita. 

48 Los Angeles World Airports is a self-supporting branch of the City of Los Angeles and is 

governed by a Board of Airport Commissioners whose seven members are appointed to 

staggered five-year terms by the Mayor of Los Angeles with the approval of the Los Angeles 

City Council. LAWA owns and operates four airports: LAX, Ontario International, Palmdale 

Regional, and Van Nuys Airport in the San Fernando Valley, which is billed as the world’s 

busiest general aviation airport. 

49 LAX handled $33.9 billion in exports in 2004. The Southern California airport with the next 

highest export volume was San Diego International with a mere $78.3 million in foreign 

shipments. 
31

Elsewhere in Southern California, efforts to provide air transport facilities commensurate 

with the region’s relentless population and industrial growth have been less coherent. In 

Orange County, hopes that El Toro, the former U.S. Marine base, might become the site 

of a new regional airport were quashed by public opposition. Further south in San Diego, 

officials in California’s second largest city are trying to resolve a long-standing 

controversy over whether to build a new regional airport to replace Lindbergh Field or to 

greatly expand Lindbergh’s capacity for both passengers and air cargo. Currently, 

Lindbergh Field plays a negligible role in supporting California’s international trade.50

Formally known as San Diego International Airport, the facility is the nation’s busiest 

single-runway commercial airport. Despite its rapid population and industrial growth in 

recent decades, the San Diego region has remained singularly dependent on airports 

and seaports in Los Angeles County for its overseas transportation links. Even if the 

community aggressively rallies behind a single airport option,51 it likely could be several 

years before the region could offer the kind of airport facilities that would attract 

regularly scheduled air service involving destinations outside of North America. 

In Northern California, SFO management has consistently rebuffed calls for formally 

integrating flight operations at the Bay Area’s three major airports (SFO, Oakland 

International and Mineta San Jose International). As a result, far from collaborating 

under a well-conceived master plan, airports within the Bay Area as well as in 

neighboring counties in the San Joaquin Valley are likely to remain engaged in a hurlyburly and potentially wasteful competition to lure air carriers, passengers, and cargo. 

An Overlooked Mode of Transport

The task of ensuring that California has the international air cargo links its industries 

need to remain competitive in a global economy is made more difficult by the fact 

that few Californians are fully aware and appreciative of the vital role air cargo 

 

50 The airport reports having handled 155,000 international passengers and just 583 tons of 

international cargo in 2004. By contrast, SFO reported handling 7.6 million international 

passengers and 278,545 tons of international cargo in 2004. 

 

51 A public vote on this issue is scheduled for 2006. At present, a variety of options are being 

weighed by a commission charged by the State Legislature with the task of recommending 

final options for resolving San Diego’s airport dilemma to the region’s voters. The San Diego 

County Regional Airport Authority was established by state law in 2003 to operate San Diego 

International Airport and to address the region’s long-term air transportation needs. The 

Airport Authority is governed by a nine-member appointed Board representing all areas of the 

County. 
32

services play in the Golden State’s export trade. Legislative hearings and 

conferences convened to examine the state’s transportation system or the plight of 

the goods movement industry often dwell exclusively on surface modes of transport. 

Yet the truth is that, when measured by dollar value, California’s economy is 

arguably more dependent on air cargo than on ships, trucks and trains. The reason is 

simple: More of California’s merchandise exports are shipped by air than by either 

sea or land (Figure 1-8).52 Waterborne shipments typically account for less than onefifth of the total value of California’s merchandise exports.53 The state’s huge 

maritime complexes are principally conduits for imported goods and for the export of 

bulky cargos or shipments with low value-to-weight ratios. 

Figure 1-8. 

Figure 1-8.

California Exports By Dollar Value

Share By Mode of Transport 1997 Share By Mode of Transport 1997 - 2004

(Source: WISER)

0% 20% 40% 60% 80% 100%

1997

1998

1999

2000

2001

2002

2003

2004

Air Sea Land

 

52 In 2004, airborne shipments accounted for 54.7 percent of California’s $110 billion 

merchandise export trade according to data supplied by WISER. That was a historically 

meager share of exports. In 2000, prior to the collapse of the dot.com bubble and the events 

of 9/11/2001, air cargo’s share of California’s export trade was 65.1 percent. 

 

53 In recent years, the maritime share of the state’s export trade has ranged from 14.1 

percent in 2000 to 21.1 percent in 2003. In 2002, for example, exports accounted for just 

16.8 percent of the total dollar value of international shipments through the Ports of Los 

Angeles and Long Beach. 

 
33

That situation is markedly different, though, in the case of California’s agricultural 

export trade. The vast bulk of the state’s farm exports – whether calculated by 

weight or by value - continue to move either by sea or by overland routes to Mexico 

and to Canada.54 Even so, it would doubtless surprise many Californians to learn 

that, in terms of sheer tonnage, vegetables, fruits and nuts comprise the largest 

single category of air freight exported through Los Angeles International (LAX), the 

state’s busiest airport.55 For certain highly perishable, high value-added specialty 

crops like cherries, strawberries, and asparagus, air shipments offer the only 

practical means for supplying lucrative overseas markets.56 In 2004, for example, 

85 percent of the state’s fresh cherry exports reached their destinations by air, as 

did 50 percent of the state’s exports of fresh or chilled asparagus. In general, 

perishable products now account for about 20 percent of total U.S. food and 

agricultural exports, and an even larger share of imports.57

The Logistics of Air Cargo

Many if not most California policymakers are ill-informed about modern logistics. 

What is more surprising is that such lack of understanding extends into the business 

world to include the management of companies which routinely ship and/or receive 

large volumes of merchandise. Over the past decade or two, companies of all sizes 

have tended to outsource their logistics functions. While beneficial economically, 

such outsourcing has had the effect of diminishing the ranks of those who might 

otherwise help promote the interests of the goods movement sector. 

 

54 Although California ships agricultural products to nearly 150 countries, four markets — the 

European Union, the North American Free Trade Area (Canada and Mexico), Japan, and 

China/Hong Kong— account for more than two thirds of the state’s total farm export trade. 

55 Measured by weight, farm products account for over 13 percent of the outbound cargo 

handled by LAX, according to the website of Los Angeles World Airways (LAWA). LAWA is the 

entity charged with operating not only Los Angeles International Airport but also Ontario 

International Airport, Van Nuys Airport, and Palmdale Regional Airport. 

56 For the purposes of this study, the term Specialty Crop refers to any agricultural 

commodity except cotton, feed grains, oilseeds, peanuts, rice, tobacco and wheat. California is 

principally known as a producer of specialty crops and, as such, has a remarkably distinctive 

agricultural economy, one that is far less reliant on government programs than is the case in 

much of the rest of the country. 

57 William Coyle, William Hall, and Nicole Ballenger, “Transportation Technology and the 

Rising Share of U.S. Perishable Food Trade” in Changing Structure of Global Food Consumption 

and Trade / WRS-01-1 (USDA: Economic Research Service, 2001), p. 31. 
34

Although there are sound reasons to expect increased worldwide demand for 

California specialty crop products, there is one issue that is seldom addressed by 

agricultural leaders. How, specifically, do we transport the state’s farm products to 

market. In this case, how does air transport serve California agriculture’s current and 

future export marketing needs? 

Air cargo is carried on all-cargo freighters, in the lower-deck holds or “bellies” of 

passenger aircraft, and aboard “combis” – aircraft that are configured to carry both 

passengers and freight on the main deck. Historically, about half of all air cargo has 

been transported in the bellies of passenger planes. (A November 2000 report by the 

Bay Area Economic Forum stated that 58 percent of the air freight shipped through 

SFO traveled in the bellies of passenger aircraft.58) However, that share is 

diminishing as major airlines expand their freighter fleets and as integrated carriers 

like FedEx, UPS and DHL grab larger and larger shares of the air cargo trade.59 Still, 

for shippers of perishable commodities such as fresh fruits and vegetables, scheduled 

passenger flights will often be the preferred option. For even though freighters offer 

greater cargo capacity, passenger aircraft generally offer better reliability, greater 

frequency, and more competitive shipping rates.60 One major drawback for 

exporters, though, is that international passenger flights typically leave from some of 

the nation’s most congested airports, where surface access frequently pose 

worrisome issues for shippers of perishable items. 

The logistics of moving air cargo are more complicated than the business of 

transporting passengers. It involves packaging, document preparation, arranging 

insurance, picking up goods from shippers, facilitating customs clearance both at the 

point of origin and at the destination, and completing final delivery (Figure 1-9). In 

the late 1940s, the Berlin Airlift provided an extreme demonstration of the ability of 

 

58 “Air Transport and the Bay Area Economy: Phase Two,” Bay Area Economic Forum 

(November 2000), p. 10. 

59 The air transport industry customarily measures air cargo traffic in revenue mile tons 

(RTMS). According to the Federal Aviation Administration, all-cargo carriers increased their 

share of the international RTMs flown by all U.S. carriers from 52.0 percent in 1996 to 59.7 

percent in 2004. That share is expected to increase to 63.6 percent by 2016. Note that the 

FAA data do not include foreign carriers and do not reflect the value of the goods being 

shipped. See the FAA’s Aerospace Forecasts: Fiscal Years 2005-2016, p. III-50. 

60 See the comments of Scott Dolan, president of United Airlines, in the December 20/27, 

2004 issue of TrafficWorld. 
35

air cargo flights to circumvent barriers to surface transportation. Today’s logistical 

barriers to goods movement more typically take the form of transportation 

bottlenecks caused by an imbalance between growing volumes of trade and 

perennially lagging programs to provide infrastructure commensurate with the needs 

of shippers. 

Even though California exporters may look to the air as an option to sluggish 

conditions at the state’s maritime gateways, air cargo may not always prove to be a 

panacea for congested and constricted sea lanes. Any appreciable increase in air 

freight shipments – as is predicted for the next two decades – gives rise to a host of 

vexing logistical and public policy issues. Ultimately, the key question is whether the 

state’s airports will be able to accommodate higher volumes of air cargo. As we shall 

see, the answer remains far from clear. 

A number of recent studies have raised disturbing questions about California’s 

international air cargo infrastructure. LAX and SFO currently dominate the 

international air cargo scene in California, handling between them more than 93 

percent of all airborne foreign trade entering or leaving the state.61 Both airports face 

serious ground access and capacity issues as well as strident political opposition to 

expansion plans from neighboring communities and environmentalists. The master 

plan guiding the $11 billion renovation of LAX allows millions of additional airline 

passengers a year, but fails to provide more freeway lanes or significant mass-transit 

projects to handle the expected crush.62

 

61 See Chapter 4 for a detailed examination of California’s air cargo system. 

62 “LAX Traffic Crunch,” Los Angeles Daily News, November 20, 2004. 
36

FIGURE 1-9. 

Figure 1-9.

A Typical Agricultural Shipping Scenario A Typical Agricultural Shipping Scenario

Grower

Packing House

Freight 

Forwarder Air Carrier Integrator

Air Carrier Air Carrier

For the state’s agricultural shippers, the attractiveness of LAX and SFO lies chiefly in 

the number and frequency of non-stop and direct passenger flights departing each 

day for numerous destinations throughout the world. SFO serves 30 foreign airports 

with 369 flights per week; London’s Heathrow and Tokyo’s Narita are the top two 

destinations, with 35 weekly flights to each.63

LAX is the world's fifth busiest passenger airport and ranks sixth in air cargo tonnage 

handled. 926 scheduled weekly International Departing Operations to 64 foreign 

destinations. Of these, 749 of the scheduled weekly operations are non-stop, 127 are 

one-stop, and 50 are two-stop.64

 

63 These figures, on the SFO website, were valid for June 2004. 

64 These figures for LAX were valid as of November 4, 2004. They were obtained via email 

from LAX flight operations center. 
37

However, traffic congestion on streets and highways in the vicinity of LAX poses a 

serious problem for California’s agricultural exporters. In recent years, shippers of 

agricultural products have grown increasingly reliant on LAX.65 (See Figure 1-10.) 

The Southern California Association of Governments warned in a 2001 report that: 

“Failure to adequately address and plan for significant growth in airport demand will 

not only result in major air and ground congestion, it will also seriously jeopardize 

Southern California’s position as a national and international trade center.”66 A more 

recent review of the air transport situation in Southern California concluded that the 

region’s airports “threatened to become the Achilles’ heel of L.A.’s trade future.”67 

FIGURE 1-10. 

Figure 1-10.

Airborne Agricultural Exports Airborne Agricultural Exports 

By Customs District By Customs District

(In Millions of Dollars) (In Millions of Dollars)

Source: U.S. Census Foreign Trade Division and WISER

0

100

200

300

400

500

600

1999 2000 2001 2002 2003 2004

San Francisco Los Angeles San Diego

 

65 In 2000, 43.0 percent of California’s airborne agricultural exports departed the San 

Francisco Customs district as opposed to 55.5 through the Los Angeles Customs District. By 

2004, however, the LA Customs District’s share of the state’s airborne export trade had 

swollen to 74.9 percent, while the San Francisco Custom District’s share had dwindled to 24.2 

percent. Much of this shift reflects a substantial increase in exports of food preparations and 

other processed agricultural products through LAX, rather than a commensurable re-direction 

of shipments of fresh produce from SFO to LAX. The available data suggest a greater 

concentration of food processing activity in the Los Angeles area. 

 

66 SCAG, Draft Regional Transportation Plan: Task Forces – Aviation (February 2001), p. 1.

67 Steven P. Erie, Globalizing L.A.: Trade, Infrastructure and Regional Development (Palo 

Alto: Stanford University Press, 2004), p. 172. 
38

Numerous studies have similarly determined that SFO is not adequately equipped to 

provide the extensive global connections that Northern California businesses will 

require in the years ahead. Indeed, the latest of these reports -- an April 2004 study 

published by the San Francisco-based Public Policy Institute of California -- presents 

compelling evidence that SFO’s competitiveness as an international air cargo hub has 

been waning since at least the mid-1990s.68 

The PPIC report echoes complaints about SFO’s air cargo operations that have been 

voiced in recent years by freight-forwarders, customs brokers, airline officials, and 

others involved goods movement.69 In a January 2003 study for the Pacific Council 

on International Policy, author Sarah Bachman pulled no punches: “Inefficient 

Oakland and San Francisco airports and marine ports are losing business to their 

rivals, particularly those in Southern California. Some freight forwarders truck 

shipments to Los Angeles to avoid congestion and delays in the Bay Area.”70 More 

recently, a September 2004 commentary in Air Cargo World by the executive 

director of the Airforwarders Association of America chastised SFO management for 

its neglect of air cargo: “San Francisco International Airport in particular is critical to 

Northern California's economic success. But the management of SFO has fallen short 

in ensuring that the airport's cargo infrastructure is as accessible for users as its 

passenger facilities.”71 

What may be more ominous, though, is that the 2004 PPIC study also identifies 

changes in global trade patterns that, by “compromising the ability of California’s 

 

68 Jon D. Haveman and David Hummels, California’s Global Gateways: Trends and Issues

(San Francisco: Public Policy Institute of California, April 2004. In particular, see pp. 47-57 for 

their discussion of “Are California’s Gateways Keeping Up?” 

 

69 For example, see “Airports keep their terminals simple” by Ian Putzger, Journal of 

Commerce, February 23, 2004. Putzger observes that: “Tight space for cargo activities has 

long been a problem at San Francisco International Airport. Some airlines use off-airport 

terminals, and there is off-and-on talk about moving freighter operators to a less-congested 

nearby airport.” For an earlier expression of the same concerns, see “What about air cargo? 

Air cargo carriers complain that San Francisco International Airport is a difficult place to do 

business” by Chris Barnett, Journal of Commerce, March 12, 2001. 

70 Sarah Bachman, Globalization In The San Francisco Bay Area: Trying to Stay at the Head 

of the Class (Los Angeles: Pacific Council on International Policy, The Western Partner of the 

Council on Foreign Relations, January 2003), p. 1. 

71 David E. Wirsing, “San Francisco is a too-familiar example of airports that neglect the 

needs of air cargo.” Air Cargo World, September 2004. 

 
39

gateways to raise revenues through fee increases,” could undermine efforts to 

construct and maintain the logistical infrastructure needed to cope with projected 

increases in the volume of domestic and international trade.72 

 

Such findings have disturbing implications for agricultural exporters in Northern and 

Central California. On the one hand, there is absolutely no question that the 

presence of an efficient air cargo facility boasting extensive national and 

international flight connections is an indispensable asset for any region whose 

businesses aspire to participate in the global economy of the 21st century. On the 

other hand, SFO’s ability to finance any substantive upgrading, updating or 

expansion of its air cargo capacity may be in doubt. After more than three years as 

the only major airport in California with a negative credit watch rating,73 SFO saw its 

credit outlook upgraded to “stable” in January 2005 by the major bond rating 

agencies.74 Unfortunately, this marginal improvement in the airport’s credit status 

has collided with a Federal Reserve Bank policy of gradually increasing basic interest 

rates. 

At a time when the volume of air cargo is expected to swell, that conclusion would 

understandably cause air cargo carriers to migrate to other airports offering a higher 

grade of service, greater convenience, and lower rents and fees. In that respect, 

Anchorage is widely seen to be well-positioned to capture more of the air cargo 

traffic flowing between the Pacific Far East and the major metropolitan areas of the 

American Midwest and East Coast. Similarly, air freighters are even expected to 

over-fly SFO to land at airports in Denver and Salt Lake City, locales that were once 

considered part of SFO’s natural hinterland. To the extent that happens, the 

frequency of flights to a wide variety of overseas destinations -- and hence the 

competition between air carriers -- will diminish to the detriment of exporters. 

 

72 Haveman and Hummels (2004), p. 56. 

73 As of November 10, 2004, Standard & Poor’s assigned SFO a rating of A/Negative. An 

obligation rated 'A' is somewhat more susceptible to the adverse effects of changes in 

circumstances and economic conditions than obligations in higher rated categories (i.e., AAA 

and AA). However, the obligor's capacity to meet its financial commitment on the obligation is 

still considered strong. Negative indicates that the rating is more likely to be lowered than 

raised. 

74 SFO press release dated January 26, 2005. 
40

And then there is the prospect of seeing even more of Northern California’s air traffic 

load shift to Los Angeles International Airport and Ontario. According to one 

consultant’s report, “over one-half of the local air-eligible production” in the Bay Area 

was trucked to LAX for international flights in 2001.75 Whether Northern California 

shippers will be able to find sufficient trucking capacity at reasonable costs to move 

goods to Southern California airports is problematic. Traffic congestion not only 

poses all of the risks associated with the delayed shipment of perishable items; it 

also cuts into the profitability of trucking companies and the earnings of drivers by 

reducing the number of loads they can expect to carry within a specific time-frame.76 

As the 2004 PPIC report makes clear, however, there is a growing risk that 

California’s entire trade infrastructure – both airports and seaports – will see 

valuable cargos avoiding the state. That point was further underscored by new data 

indicating a recent rise in the volume of containerized cargos from Asia being 

shipped by sea directly to East and Gulf Coast ports, thus by-passing the West Coast 

and land-bridge routes.77 Such evidence reinforces a comment in another report 

from the Public Policy Institute of California that “it is not clear that there is enough 

consideration of how the state trade infrastructure – in particular its airports and 

seaports – fits with the nation’s or the state’s importing and exporting needs.”78 

If noise and other environmental issues stifle growth at the primary airports, 

development will occur at secondary airports. Such was the case in Europe recently 

when DHL canceled plans for a hub at Brussels Airport after the express carrier failed 

 

75 An Origin of Movement export data set (Series EA-938) available from the U.S. Census 

Bureau’s Foreign Trade Division indicates that just over one-third of value of air cargo exports 

generated by companies in the Bay Area leaves the U.S. through SFO. 

76 At a June 2004 trade logistics symposium in Oakland organized by the Bay Area World 

Trade Center, one San Joaquin Valley agricultural shipper claimed that his company needed its 

trucks to make two roundtrips per day from the Modesto area to the Port of Oakland in order 

to justify its investment in maintaining its own trucks. He reported that, owing to traffic 

congestion in the Bay Area, it was seldom possible for his truckers to make two trips per day. 

As a result, the company was considering sending its European-bound export shipments by 

rail to the Port of Houston. 

77 Address by Stephen Petracek of Booz, Allen Hamilton at an international trade forum 

organized by the Bay Area World Trade Center in Oakland, California, June 11, 2004. 

78 Howard Shatz, “Business Without Borders: The Globalization of the California Economy” 

(San Francisco: Public Policy Institute of California, 2003), p. 87. 
41

to win approval to operate additional night flights and larger aircraft. DHL has 

instead chosen Germany's Leipzig/Halle Airport as a European hub. 

Here in California, it is not unusual for a community with an under-utilized airport 

sporting an 11,000-foot runway to harbor hopes of becoming a major air cargo hub. 

In a state that has seen the full or partial decommissioning of several military 

airfields since the end of the Cold War, there is no shortage of such aspirations. Not 

all, however, will realize their ambitions because, while the path to your door may be 

a world-class runway, that is not nearly enough to attract the air carriers, freightforwarders, truckers, logistics specialists, and the rest of the complex infrastructure 

needed to support a modern air cargo operation. 

There are two primary determinants of which airports will emerge as major air cargo 

facilities. The first involves what is effectively the overriding business imperative of 

the air cargo industry: finding the best way of serving the needs and interests of 

importers. The other determinant is demographic in nature. Very simply, air 

transport services are drawn to centers of population and industry. 

On the transpacific flights that account for the vast majority of international air cargo 

moving into and out of California, the demand for cargo space is most intense and 

the shipping rates are accordingly highest on the eastbound routes. By contrast, 

aircraft returning from North America to the Far East typically confront a serious 

“back-haul” problem. With a substantially larger volume of goods moving eastward 

than westward along transpacific air cargo routes, there is a resulting excess 

capacity on the westbound routes from North America to the Far East. In what is 

then effectively a buyers-market for westbound air cargo space, the revenues from 

cargos transported westbound are often described as ranging from “poor” to 

“disappointing.” (Although data on unused air cargo capacity are not available, it is 

instructive to note that at the nation’s busiest seaport, the Port of Los Angeles, over 

60 percent of all outbound shipping containers have been empty in recent years.79) 

In short, the air cargo system is geared to serve the needs of those importing goods 

into the United States. Airports that are not ideally situated by virtue of location or 

 

79 The Port of Los Angeles reports that, in the 2003 calendar year, 63.74 percent of outbound 

containers were empty, as opposed to just 2.03 percent of inbound containers. In the 2002 

calendar year, 60.12 percent of outbound containers were empty, in contrast to 3.89 percent 

of the inbound containers. 
42

proximity to surface transportation networks to facilitate the rapid distribution of 

cargos to end-users in markets throughout the United States would likely not 

succeed in capturing new air cargo operations. Airports which principally aspire to 

serve America’s export trade are missing a vital point. For the foreseeable future, air 

cargo services for exported goods will essentially be generated as a by-product of air 

cargo services designed to move imported goods. 

The other primary factor in determining which communities will be rewarded with 

greater air transport service is demographic. Cities with booming populations and 

rapidly expanding industrial bases will invariably attract more airline passenger 

service. California has a surplus of military-surplus airfields, most of which were built 

far from population centers. Some of them are still located in remote areas of the 

state and therefore have little prospect of attracting passenger air service. They 

similarly are apt to have problems generating back-haul cargos for carriers flying 

imported merchandise into the state. On the other hand, the state also features 

numerous municipal airports serving metropolitan areas of varying sizes. In a state 

with a fast-growing and sprawling population, some of these airports will grow along 

with their communities. And while these airports will most likely see increased 

passenger service, there will also be an increase in air cargo capacity, if only from 

the cargo space that would be available aboard passenger aircraft.80 In general, 

airports serving large metropolitan areas can be expected to be more successful in 

luring not merely air carriers but the complex infrastructure needed to support a 

modern air cargo operation. 

Air Cargo and Perishables

Perishables are estimated to comprise between 14 percent and 18 percent of the 

world’s air cargo, according to one leading figure in the air freight industry.81 They 

also represent “one of the fastest growing and most important sectors in air cargo.”82

 

80 As we shall see, not all passenger carriers are created equal when it comes to the 

provision of air cargo space on passenger aircraft. Chapter 3 of this report will discuss the 

impact of low-cost airlines on the air cargo industry in some detail. 

81 Christian Helms is a founder and board member of the Cool Chain Association, a non-profit 

organization dedicated to improving the cool supply chain industry. 

82 Frederik Jacobsen, President and CEO, Tampa Airlines Cargo, during his presentation 

before The International Air Cargo Association meetings in Bilbao, Spain on September 16, 

2004. 
43

Perishable products include a broad range of low to very high value products, 

including horticultural products as well as certain pharmaceuticals and chemicals. All 

share the same sensitivity to time, temperature and treatment, the three main foes 

of perishables. By some estimates, upwards of 30 percent of shipments perish 

reaching the customer.83 

From the perspective of the freight-forwarder and the air carrier, perishable food 

products present at least three distinctive problems. The first is that the trade is 

generally seasonal. As opposed to businesses that generate a fairly regular flow of 

cargo, agricultural shippers tend to enter the air freight market during a period that 

is seldom longer than twenty weeks in any given year. (The California Cherry 

Advisory Board advertises Bing cherries from California as a “6-Week Vacation From 

The Ordinary.”) Carriers are understandably reluctant to accord priority treatment to 

shippers who are less than regular, year-round customers. Not surprisingly, 

agricultural shipments are more apt to be bumped from flights in favor of a carrier’s 

priority customers. 

The second is the issue of the special handling generally required of perishable farm 

products. Like anything needing pampering, both costs and hassle quotients 

increase, often to the point that many freight-forwarders as well as air carriers are 

leery of handling perishable shipments. 

The third is a relatively poor revenue yield for the amount of space required to 

transport agricultural products by air. Compared to products associated with the 

state’s high-technology industries, food products tend to require greater volume of 

space to transport the same amount of weight. A pound of cherries may weight as 

much as a pound of computer chips, but the latter can be shipped in smaller 

containers. An aircraft flying below its weight capacity because it is carrying cargo with 

a relatively low value-to-weight ratio is not earning the carrier its maximum yield. 

From the perspective of the grower-shipper or the freight-forwarder, not all airports 

and air carriers are created equal. Interviews with shippers and freight-forwarders 

 

83 Manuel Aragon, September 16, 2004 presentation before The International Air Cargo 

Association meetings in Bilbao, Spain. Mr. Aragon is president of Teqflor, a Miami-based 

company specializing in importing and exporting perishable products. 
44

invariably yielded complaints and some genuine “horror stories” about the cargo 

handling procedures employed by certain airlines or about the risks of transporting 

goods through specific airports. 

Any significant growth in the demand for air cargo services from agricultural 

exporters will test the resourcefulness of the air cargo industry In California. This will 

be especially true for those fresh crops and processed food products requiring that a 

cold-chain be maintained at every stage of shipment. Rising demand for air cargo 

services will also challenge policymakers at both the state and local level to devote 

more attention and resources to adapting California’s international trade 

infrastructure to the increasing globalization of the world’s food supply. 

Nearly all airborne agricultural exports from California now depart through two 

airports, LAX and SFO. The roadways leading to both airports are among this state’s 

most crowded. And there is absolutely no prospect that traffic congestion will 

diminish. For agricultural shippers, traffic congestion poses a two-fold problem. The 

more obvious is that perishable cargos may miss intended flights and be stranded for 

several hours or even days in less than optimal storage conditions. The less obvious 

problem is that the more time trucks spend in traffic, the more difficult it is for truckowners to realize a favorable return-on-investment. In general, though, traffic delays 

en route to the state’s principal international airports unavoidably add to shipping 

costs which, in turn, can make the party initiating the shipment less competitive in a 

global market. 

The most apparent solution – shifting more international air cargo operations to 

airports closer to the state’s primary agricultural regions – may not be the eminently 

sensible option it may initially seem. Approximately half of all air freight is carried in 

the bellies of passenger planes.84 In the case of perishable food items, the 

percentage is reportedly even larger because passenger flights to any particular 

overseas destination are more numerous and frequent than all-cargo flights and are 

thus more attractive for shippers of time-sensitive products. This dependence on 

passenger aircraft to move perishable goods suggests that the bulk of the air cargo 

 

84 We should note that the balance may be shifting in favor of all-cargo flights. According to 

the Federal Aviation Administration, the amount of international cargo (measured in revenueton-kilometers) flown on all-cargo aircraft rose from 49.3 percent in 1995 to 62.6 percent in 

2003. 
45

operations needed to service the needs of California’s agricultural exporters are likely 

to remain centered at SFO and LAX until economic forces more powerful than a rising 

demand from agricultural exporters drive a migration of cargo operations to other 

California airports. 

That does not necessarily imply, though, that other California airports will see few 

international air cargo flights. There are reasons to expect that the air cargo 

industry’s reliance on passenger aircraft may be growing more tenuous for economic 

as well as security reasons. Indeed, the incestuous relationship between passenger 

airlines services and all-cargo operations shows definite signs of waning in Europe. 

There, public opposition to expanded (and particularly night-time) use of existing 

airports has been prompting air cargo operators to seek facilities more congenial to 

air cargo flights.85 

An Air Cargo Airport for Agriculture?

In the 1980s, Farmington Fresh established a packing house for fresh produce 

alongside a taxiway at Stockton Metropolitan Airport. The facility was (and still is) 

well-situated to serve the air transport requirements of San Joaquin Valley growers. 

The venture proved to be a disappointment, however, in part because serving the 

interests of California exporters has not been a foremost consideration in 

determining which airports handle cargo. Serving the interests of importers, though, 

is a very high priority. And it will continue to be so long as the U.S. maintains a 

substantial merchandise trade deficit. The air cargo industry is principally geared to 

transport goods from foreign producers and manufacturers to U.S. end-users and 

their intermediaries. 

If one were to establish one or more airports specifically designated to handle 

agricultural exports, where in California should that facility be sited? The San Joaquin 

Valley contains almost half the state’s farmland, nearly 70 percent of its cropland, 

and 75 percent of its irrigated land. Six counties -- Fresno, Tulare, Monterey, Kern, 

 

85 In the fall of 2004, DHL abandoned plans to build its international hub at Zaventem Airport 

in Brussels in the face of local opposition to a plan that originally would have involved 34,000 

night flights. Instead, DHL is considering Vatry, a cargo-focused airport built by the French 

government northeast of Paris, and Leipzig in the former East Germany. According to 

TrafficWorld magazine, DHL’s move “will widen the gap in between passenger airline cargo 

services and the freighter world in Europe, where several airports are focused on wooing cargo 

operators away from the congested major airports.” (November 8, 2004, p. 28.) 
46

Merced and San Joaquin -- account for about half of California’s total value of 

agricultural production.86 But the Central Coast leads in the production of artichokes, 

asparagus, broccoli, Brussels sprouts, cabbage, carrots, cauliflower, celery, garlic, 

herbs, lettuce, mushrooms, peppers, and spinach, plus a number of more minor 

vegetables.87 Growing regions in Southern California likewise produce a wide range 

of similar horticultural products. 

Even if demand for air cargo services from California’s agricultural shippers continues 

to surge, the level of demand will not, contrary to some hopes and expectations, 

appreciable alter the current air cargo system. There is no reason to assume, for 

example, that air carriers will initiate regular cargo service into a San Joaquin Valley 

airport merely to serve agriculture’s shipping needs. 

However, there are more powerful economic forces that may prompt airlines to shift 

some portion of their international air cargo operations to airports other than SFO 

and LAX. We have already alluded to the logistical liabilities associated with traffic 

congestion around SFO and LAX. Another factor is that the growing population of 

inland regions of the state will inevitably prompt airlines to offer more and more 

flights to airports serving these regions. 

Much will also depend on how a fundamental disagreement about the future of 

aviation will play out between the world’s two principal aircraft manufacturers. Airbus 

believes airlines want to resolve the problem of airport congestion by using much 

bigger planes such as its enormous four-engine A380 to make more use of finite 

landing slots. Boeing, however, thinks the bulk of future demand lies in airlines 

wanting to fly passengers on more non-stop routes from more airports, thereby 

taking the pressure off the 'hub' airports. With this vision in mind it dropped the idea 

of developing an all-new successor to its 747 jumbo jet and instead developed the 

787 (known as the Dreamliner), a mid-sized plane with two engines tuned either for 

long or short hops and capable of carrying between 200 and 300 passengers. The 

 

86 Nicolai V. Kuminoff , Daniel A. Sumner and George Goldman, “The Measure of California 

Agriculture,” (University of California at Davis Agricultural Issues Center, 2000). 

87 Warren E. Johnston, “Cross Sections of a Diverse Agriculture: Profiles of California’s 

Agricultural Production Regions and Principal Commodities,” in Jerry Siebert (ed.), California 

Agriculture: Dimensions and Issues (Berkeley: University of California Giannini Foundation of 

Agricultural Economics, 2003), pp. 34-35. 
47

first 787 is expected to enter service in 2008. Airbus is meanwhile proceeding with 

its super-jumbo A380, a plane that will carry 555 passengers on two decks and is 

expected to enter service with Singapore Airlines in 2006. (By late 2004, Airbus 

seemed to be hedging its bet by announcing that it, too, would build a medium-sized 

plane which it designated the A350. It would be a longer-range version of the 

company’s A330.)88 

Introduction of the 787 and a possible Airbus competitor represents a boon for 

airports such as Sacramento International Airport (SMF) which could finally see the 

advent of overseas flights. Although SMF is capable of handling larger aircraft, the 

787 and A350 would provide a tighter fit between aircraft capacity and passenger 

demand. Already, the catchment area served by SMF generates sufficient passenger 

demand to warrant daily non-stop flights to London and five weekly non-stops to 

Frankfurt. (Demand for non-stop flights from SMF to the Far East is much weaker, 

suggesting that Northern California’s passenger air traffic with the Orient will 

continue to be funneled largely through SFO for the foreseeable future.)89 

The strong likelihood that airports in the San Joaquin Valley and Inland Empire might 

see the introduction of non-stop passenger service to European destinations within 

the foreseeable future is particularly intriguing in light of the recent emergence of 

the European Union as California agriculture’s largest foreign market. According to 

the Agricultural Issues Center at UC Davis, the EU in 2003 became, for the first time 

in recent history, the number one destination for California’s agricultural exports, 

accounting for about 25 percent of the total. Canada was the second largest market 

for California exports with 23 percent of the total, and Japan was third with 15 

percent.90

 

88 On December 21, 2004, Spain's Air Europa became the first customer for Airbus's proposed 

A350 when it signed an MOU for 10 A350-800s, with options for two more. The aircraft are 

scheduled to be delivered between 2010 and 2012. The version selected by Air Europa will 

seat 245 passengers in a three-class configuration and will have a range in excess of 8,600 

nautical miles (15,900 km.). Airbus also plans to offer a larger model, the A350-900, which 

will seat 285 passengers in three classes with a range of more than 7,500 nautical miles. 

89 Data on passenger demand at SMF was provided by Fred Davis, an aviation industry 

consultant to that airport. 

90 “California’s Agricultural Exports in 2003,” (forthcoming). 
48

Understanding the economic and practical considerations that constrain the air cargo 

industry in California is a necessary prelude to appreciating how the industry can 

best serve the needs of California’s agricultural exporters. Unfortunately, even the 

packer/shippers whose crops are most likely to be air-shipped to foreign markets 

often have little appreciation of the logistics involved once the shipment leaves the 

packing shed.91 

Most of California’s airborne export trade goes to the Far East and thus benefits from 

the significant imbalance between eastbound and westbound trade across the Pacific. 

With demand for cargo space on aircraft traveling from the Far East to the US 

significantly greater than demand for cargo space on westbound flights, freight rates 

are substantially less for cargos being air-shipped from the West Coast to markets in 

the Far East. Air carriers, after all, have to fly their planes back to the Far East to 

pick up premium-priced shipments, and attracting westbound shipments for “backhaul” has traditionally been a key concern. In effect, eastbound shipments subsidize 

westbound shipments across the Pacific. 

Whether this imbalance persists has profound implications for all California 

exporters. Recent diplomatic pressure on China, Japan and other Asian nations to 

permit their currencies to appreciate in value against the US dollar is likely to have 

the unintended effect of increased transportation charges for US exporters. In certain 

cases – especially where exporters are operating on slender margins – an 

appreciable rise in shipping costs could be enough to offset the export-stimulating 

impact of a cheaper dollar. 

In practice, if not by definition, most air cargo is time-sensitive. Usually, the goods 

are either highly perishable or must arrive at their destination in accord with a 

schedule set by the customer. The need to expedite shipments poses challenges for 

shippers and freight-forwarders that are far more acute than for goods traveling by 

ship, rail or truck. Airplanes are delicately balanced instruments of flight. Even with 

identical aircraft, cargo capacity can vary substantially depending on such factors as 

 

91 In our survey of cherry packers/shippers, we found that many believed that the bulk of 

their overseas shipments went through LAX “because of the availability of more flights to more 

destinations.” However, the export data indicate that SFO handles the majority of California’s 

fresh cherry exports. 
49

humidity, temperature, winds, altitude of the departure airport, distance to 

destination, fuel load, etc. 

So long as most air freight moves in the bellies of regularly scheduled passenger 

flights, air cargo operations will be centered primarily upon airports that feature the 

largest volume of such flights. For international cargos, LAX and SFO are therefore 

likely to remain the state’s dominant international air hubs for the foreseeable 

future. 

In the Los Angeles basin, airport authorities have been trying to lure more of the air 

cargo carriers serving that region to transfer their operations from LAX to Ontario 

Airport (ONT). No similar strategy has been embraced in Northern California, even 

though congestion at SFO has been leading the region’s shippers and freightforwarders to seek out other routes for air-freighting cargo to distant locations.92 

The emergence of low-cost carriers both domestically and internationally will also 

have an important impact on air cargo operations in the state by contributing to a 

shift from shipping cargos in the bellies of passenger aircraft to the greater use of 

dedicated air-freighters. Low-cost carriers such as Southwest, Jet Blue and Ryan Air 

utilize operational strategies emphasizing quick turn-around times that tend to 

discourage the transport of cargo other than passengers’ baggage. As the economic 

pressures generated by such airlines force other carriers to adopt similar practices, 

fewer flights will be available for handling air cargo. Cargo operations would then be 

liberated from their dependence on hub airports. 

Finally, there is the dire prospect that concern over terrorism may ultimately prompt 

the Transportation Safety Agency to choose between two unpleasant options – more 

extensive and thus expensive screening of freight carried on passenger planes or an 

outright ban on passenger aircraft carrying anything other than the checked baggage 

of ticketed passengers.93 That latter prospect is apt to create a broad new set of 

 

92 See Sarah L. Bachman, “Globalization in the San Francisco Bay Area” (Los Angeles: Pacific 

Council on International Policy, January 2003. 

93 Some members of Congress, most notably Rep. Edward Markey of Massachusetts, have 

been concerned that the 300 tons of high explosives recently unaccounted for in Iraq could 

pose a dire threat to commercial airlines and air-freighters. According to Rep. Markey, the 
50

incentives for air carriers to transfer more of their all-cargo operations to less 

congested airports able to accommodate air cargo flights. This, in turn, is likely to 

spur even more vigorous competition in the Central Valley and other agricultural 

regions of the state to develop their strengths as air cargo terminals.94 

How that competition plays out will have a major bearing on how competitive 

California’s agricultural exporters will remain. So, too, will the actions taken by 

private industry and government leaders to insure that California will continue to 

have an international air transport infrastructure that well serves the needs of cargo 

as well as passengers. 

It is imperative that California’s growers and food processors get ahead of the curve 

as the nature of the state’s aviation links to the global market changes. To an extent 

that is generally unacknowledged, California’s farm export trade is governed by pulls 

as well as pushes. While there certainly are California companies which have 

assiduously developed overseas markets for their farm products, it is also true that a 

large portion of the state’s “export” trade should be more accurately described as 

another country’s “import” trade. In other words, a substantial portion of this state’s 

agricultural exports are being “pulled” abroad because foreign buyers have been 

opting to source farm products from California rather than elsewhere.95 

In an increasingly competitive environment, the push-pull nature of the state’s 

agricultural export trade is inherently unstable, especially for those products or in 

those markets where “Grown in California” is not considered a significant asset. 

Decisions to continue sourcing food products from California will increasingly hinge 

on the ability of the air cargo operations serving California to move goods on 

schedule and at reasonable costs. And that, in turn, will depend on the quality of the 

state’s international air transport infrastructure. 

 explosives are similar in type to the 16-ounce bomb used to bring down Pan Am 103 over 

Lockerbie, Scotland in 1989. 

94 Although Stockton Airport features the presence of Farmington Fresh, a large 

packer/shipper of fresh produce that once had aspirations of becoming a major air cargo 

conduit, Sacramento’s Mather Field would be a principal contender for emerging as Northern 

California’s leading air cargo hub outside the Bay Area. 

 

95 This topic, and especially its implications for the marketing of California food products and, 

ultimately, for the future of California agriculture needs more extensive study. 
51

California is the nation’s leading agricultural exporter, with $6.5 billion in annual 

shipments. Nearly 20 percent of California’s agricultural production is shipped to 

foreign markets, much of it through the Port of Oakland; nearly 40 percent of the 

Port of Oakland’s export volume is comprised of agricultural products grown in 

Central and Northern California. Fruits, vegetables and nuts account for nearly 60 

percent of California’s agricultural exports. When all categories of grape exports – 

wine, table grapes, raisins and grape juice – are combined they constitute the largest 

single category of California agricultural exports, valued at more the $1 billion. 

Asia is the state’s largest regional market for agriculture, absorbing 40 percent of 

total California exports by value. The second largest export region is North America, 

at 29 percent. Canada and Japan are the state’s two largest single export markets 

and together account for a quarter of the state’s total agricultural exports. Other 

major markets include Mexico, South Korea, the United Kingdom, Taiwan, Hong 

Kong, Germany, the Netherlands and Spain. Asia purchases 50-60 percent of the 

state’s exports of fruits, field crops such as rice, and animal products. North 

American markets absorb a 70 percent of the state’s vegetable exports, and Europe 

a majority of the state’s exports of nuts. 

The Demographic Imperative

Serving the import trade is a powerful priority in the international air cargo industry. 

But so is serving the indigenous needs of important population centers. During the 

past 10 years, the Central Valley has gained one million new residents. By 2003, its 

population reached 6.2 million, approximately as many people who live in the State 

of Washington. Indeed, the Central Valley’s population exceeds that of 36 other 

states. But that is merely prelude to the real story. Over the next five decades, the 

population of the Central Valley is expected to grow at twice the statewide rate. By 

2050, current population projections indicate that the region stretching from Shasta 

County in the north to Kern County in the south will be the home of 12.92 million 

people. 

As a November 2004 report from the Public Policy Institute of California pointed out, 

the Central Valley is really four distinct sub-regions.96 There is the rather thinly-

 

96 Hans P. Johnson and Joseph M. Hayes, The San Joaquin Valley at a Crossroad: Migration 

and Its Implications (San Francisco: Public Policy Institute of California, 2004). 
52

populated Upper Sacramento Valley with 645,000 people, the Sacramento 

metropolitan area with 2 million people, the northern San Joaquin Valley centered on 

Stockton with 1.4 million people, and the southern San Joaquin Valley with 1.7 

million people, largely residing in the cities of Fresno and Bakersfield. 

By mid-century, Sacramento County will be by far the most populous county in the 

Central Valley, with 2.86 million residents. Even now, the Sacramento metropolitan 

area has one of the strongest regional economies in the state, with historically strong 

job growth and low unemployment rates. The new residents it is attracting tend to 

be more skilled and better educated than the new residents moving into other parts 

of the Central Valley. In future years, the City of Sacramento will form the core of a 

metropolitan area that will by then encompass nearly five million residents. 

In the southern reaches of the Central Valley, Fresno and Kern Counties will also see 

their current populations double to 1.65 million and 1.55 million, respectively. San 

Joaquin County’s current population is forecast to triple in size by 2050, to 1.71 

million. 

Population growth on this order will bring many undesirable consequences, but it 

will, ineluctably, also result in more extensive air transport service for Central Valley 

residents and businesses. And, owing to technological improvements in aircraft 

design, there will be non-stop and direct international flights into and out of airports 

that, by 2050, will be serving a population base equivalent in size to the current 

populations of Illinois or Pennsylvania. 

On the passenger transport side, there is at present a very modest amount of nonstop international air service between Central Valley airports and Mexico. Although 

Fresno-Yosemite International Airport (FAT) boasts of several daily flights to four 

Mexican destinations (Mexico City, Cancun, Guadalajara and San Jose Cabo) and one 

Canadian city (Vancouver, British Columbia), all trips require at least one and 

sometimes two changes of plane en route – most commonly at LAX. SMF is the only 

Central Valley airport with daily non-stops to Mexico. SMF will be adding regular nonstop connection to Vancouver in the spring of 2005. 
53

Although demographic trends strongly suggest that international air service in the 

future will be much more extensive in mid-century, there is ample reason to expect 

that the wait will not be that long. Indeed, a recent market analysis of the demand 

for passenger air service in the “catchment area” served by SMF indicates that there 

is already sufficient demand to warrant daily non-stop flights between SMF and 

London, and five flights per week between SMF and Frankfurt, Germany.97 The same 

analysis, however, indicates that Northern Californians will continue to rely on SFO 

for non-stop passenger service to the Far East. 

Sacramento County airport officials have been aggressively pursuing airlines in the 

hope of initiating non-stop or at least direct passenger air service to the United 

Kingdom and Continental Europe. What may if not hasten success but at least make 

their task easier will be two developments, one certain, the other more problematic. 

The first is the introduction of the Boeing 787 into the world’s airlines fleets 

beginning in 2006. Especially in its 787-8 and 787-9 configurations that would enable 

airlines to economically transport 217 to 257 passengers in a three-class format on 

routes of 8,500 and 8,300 nautical miles, respectively, it is an aircraft that appears 

ideally suited to provide global reach for non-hub airports such as SMF. 

 

The other pending development is a new air accord with the European Union that 

would, among other things, permit European air carriers to play a much more active 

role in flying passengers between Europe and a multiplicity of American 

municipalities. That would increase the likelihood that SMF will attract at least one 

carrier willing to introduce regular non-stop service to the state capitol. During its 

first term, the Bush Administration embraced an “open-skies” stance in negotiating 

air transport agreements with other nations. Further liberalization of international 

restrictions on the provision of air transport services will be a boon to airports not 

now served by non-stop flights to foreign destinations. 

These trends are most likely to benefit airports like Sacramento International and 

Ontario International because they already serve large and growing population areas. 

 

97 Information provided by Fred Davis, a former airline executive now retained as a 

consultant by SMF. The airport’s catchment area encompasses nearly all of Northern California 

except for the areas immediately adjacent to San Francisco, Oakland and San Jose airports. 
54

By contrast, airports like Stockton Metropolitan Airport (SCK), which has struggled over 

the years to retain even minimal passenger air service, are less likely to benefit. 

On the cargo side, the future is more ambiguous. There is no question that more and 

more international all-cargo flights will be diverted away from LAX and SFO. In 

southern California, there has been a concerted effort by Los Angeles World Airports 

(LAWA) officials to encourage more all-cargo carriers to use ONT to alleviate the 

burden on LAX. There is no similar diversion strategy in Northern California, where 

airports are much more apt to compete than collaborate. In that context, the most 

immediate “threat” to SFO’s dominance of the international air cargo scene in 

Northern California is Oakland International Airport (OAK). 

Yet the same demographic forces that will result ultimately yield more extensive 

passenger air service at inland airports work on the cargo side as well. While part of 

the incentive for redirecting all-cargo flights to inland airports involves the desire to 

avoid congestion and delays at SFO and LAX, another incentive is simply to provide 

air-cargo services to rapidly growing centers of commerce in the Central Valley and 

the Inland Empire. Still, who the beneficiaries will be is an open question. 

In Northern California, the primary inland airport is Sacramento International. It is 

the nation’s 42nd and California’s sixth largest airport, with 8,778,163 passengers in 

2003.98 It is by far the Central Valley’s leading passenger terminal, handling eight 

times the passenger volume of the runner-up, Fresno Yosemite International Airport 

(FAT). As stated previously, SMF even now has the passenger base to justify nonstop passenger service to London and Frankfurt several times a week. The 

introduction of new aircraft and further trade liberalization will hasten the 

inauguration of such service. Given current demand levels, it is not at all likely that 

any other Central Valley airport will see similar service within any reasonable timeframe. 

 

98 For 2003, the Airports Council International placed SMF behind LAX, SFO, San Diego’s 

Lindbergh Field (SAN), Oakland International (OAK), and Norman Mineta San Jose 

International (SJC) and just ahead of Orange County’s John Wayne Airport (SNA) in terms of 

the number of passengers handled. Within the San Joaquin Valley, SMF handled more than 

eight times the passenger volume at Fresno Yosemite (FAT) in 2003, while Bakersfield’s 

Meadows Field Airport (BFL) handled only 180,167. Stockton Metropolitan Airport (SCK) 

offered no scheduled passenger service in 2003. 
55

The major issue for other Central Valley airports is whether they will see international 

all-cargo service. At the present time, Sacramento’s Mather Field (MHR) and Stockton 

are the most obvious candidates. MHR is a former U.S. Air Force base that once served 

as the home of B-52 bombers. There are certain similarities between the two facilities. 

Both are situated adjacent major transportation thoroughfares and near extensive 

warehousing and distribution centers. MHR has a certain advantage in being in the 

Central Valley’s largest population center. MHR also has a decided advantage because 

of the economic development taking place in the Sacramento region more closely 

parallels the mix of industries found in the Bay Area. 

 

As discussed elsewhere in this report, high-technology industries are particularly 

heavy users of air freight services, and there is more likely to be much more of these 

sorts of industry in the Sacramento region than further south in the Central Valley.99 

For those shipping agricultural produce to distant markets, Stockton does offer two 

definite advantages. The first is that it is closer to the agricultural epicenter of the 

Central Valley than is Mather. Perhaps more importantly, Stockton boasts a large 

cold-storage facility whose doors open directly on a parking area able to 

accommodate as many as two Boeing 747 cargo planes.100 To properly service the 

interests of agricultural shippers, a similar facility would have to be constructed at 

Mather. 

 

But whether either cargo airport will emerge as an important hub for the Central 

Valley’s agricultural export trade will necessitate sizeable investments by public and 

private sectors. Here the edge seems to lie with Mather Field, which has mounted a 

comparatively well-financed effort to attract regular air cargo service, especially from 

foreign (largely Asian) carriers. By its nature, agricultural exporting is a seasonal 

business. By itself, it is not likely to generate the air cargo traffic that will attract 

airlines to provide all-cargo service to airfields proximate to the state’s agricultural 

 

99 The presence of the University of California at Davis and California State University, 

Sacramento provides the Sacramento area with a substantial edge in both attracting and 

spawning high-technology companies that elsewhere have been important users of air cargo 

services. 

100 The facility, owned by Farmington Fresh, was originally built back in the mid-1980s in the 

hope of servicing a newly opened market for California fruits and vegetables in Japan. The 

expectations of the time were soon frustrated by the economics of air transport and the 

availability of ample, cheaper space on aircraft flying to Japan on a more frequent basis from 

SFO and LAX. 
56

regions. For example, the shipping season for the state’s leading farm export – fresh 

cherries -- is approximately two months long. 

The principal findings and conclusions of this chapter may be summarized as follows: 

● Even though airborne shipments represent just over five percent of California’s 

agricultural export trade, certain high value-added farm products – most notably 

fresh cherries, strawberries, asparagus and organically raised fruits and vegetables 

– have become acutely dependent on air transport to meet overseas demand. 

● California’s airborne agricultural exports have been increasing at a more rapid 

pace than its overall farm export trade. 

● Air transport will become an increasingly attractive alternative to oceanshipping for California agricultural exporters. Indeed, shipping rates for airborne 

cargoes on westbound transpacific routes should become even more 

competitive as more air cargo capacity is added on transpacific routes to serve 

a burgeoning eastbound trade in U.S. imports from the Far East. 

● LAX has displaced SFO as the primary gateway for California’s airborne export 

trade in recent years, but more and more of the state’s international air cargo 

operations, now concentrated at LAX and SFO, can be expected to migrate to 

other airports, including airports closer to agricultural production in the Central 

Valley and Inland Empire.101 

● The establishment of international air cargo service at airports nearer many of 

the growing areas producing the high value-added specialty crops most apt to 

be air-shipped to distant markets will open new opportunities for California 

growers to access lucrative overseas markets in Europe as well as Asia. 

However, airport officials and air carriers will have to address the concerns of 

growers about the possibility that international flights might import pests that 

could prove harmful to California’s agricultural economy. 

 

101 While a major impetus behind this shift will be the desire to relieve congestion at SFO and 

LAX, the turned will also be driven by rapid population growth in inland areas of the state and 

by the advent of a new generation of aircraft which appear to ideally suited to provide 

international service to medium-sized cities. 
57

Chapter 2

Measuring the Value of California’s 

Airborne Agricultural Export Trade 

Determining the values and volumes of exports by their state-of-origin has long 

posed methodological challenges for researchers.102 As we shall see, the problems 

are even more perplexing in the case of agricultural exports. In this section of our 

report, we examine the difficulties of explicating merchandise export data – and 

particularly agricultural export data – by the state in which the exported goods were 

produced. We also review the steps that have been taken to produce data that 

reasonably describe California’s export trade. 

Accurately tracking shipments of fresh fruits and vegetables as well as nuts and dried 

fruits is difficult enough. But what of food products derived from fresh produce? To 

what extent should processed or manufactured food products be considered part of a 

state’s agricultural export trade? In the case of California and other states which 

grow perishable fruits and vegetables on a very large scale, companies engaged in 

the preserving through canning, freezing or other packaging technologies which 

extend product life have long been considered an integral part of the agricultural 

economy. So, too, have companies which use farm products as ingredients in 

manufacturing food products or which produce food preparations derived from farm 

products.103 Indeed, food preparations – derived largely from fruit juices -- 

represent one of California’s foremost agricultural exports. For the purposes of this 

study, we have opted to include these products in our calculations of California’s 

agricultural export trade. 

 

102 This is not to say there are few problems in reporting and interpreting other types of 

agricultural data. See Timothy A. Wise, “Understanding the Farm Problem: Six Common Errors 

in Presenting Farm Statistics” (Tufts University Global Development and Environment 

Institute, Working Paper No. 05-02, March 2005. 

103 According to the California Employment Development Department, 155,100 Californians 

were employed in the food manufacturing sector in 2004. Of these, 35,400 worked for firms 

involved in fruit and vegetable preserving. 
58

Inevitably, as we shall see, state export totals are “contaminated” with merchandise 

actually produced in other states. As a result, not all of the reported exports of food 

products from California’s airports involve crops, livestock or other food items are 

produced here. One reason for this is the highly imperfect manner in which export 

data are collected. Another reason is that modern agribusiness and food processing 

operate with less and less regard for formal boundaries. Befitting the increasingly 

global nature of the world’s food business, California has emerged as an important 

crossroads of agricultural trade, importing produce from other states and from 

abroad for processing into a remarkably wide range of food products that are then 

shipped around the world. Even cooperatives such as Sunkist, explicitly formed to 

market citrus fruit grown by member-farmers in California and Arizona, have begun 

to engage in the overseas outsourcing of fruit for the global market. As a 

consequence, any listing of California’s Top 250 agricultural exports will include some 

products that were not grown in California but which were either processed, 

packaged or shipped from the Golden State. 

 

The Root of the Problem

Although various organizations traffic in data that purportedly classify exports by 

their state-of-origin, the fact is that there is no way to precisely allocate U.S. exports 

to the state responsible for the production of the exported merchandise. U.S. export 

data provide a poor gauge of how much each state exports for the simple reason 

that the data collection system was never designed to track U.S. exports back to the 

state in which the exported goods were actually produced. Data collection is an 

enormously expensive business, and the system for collecting U.S. trade statistics – 

when not serving an explicit regulatory or revenue-collection function of the federal 

government – was geared to cast light on the movement of goods over the nation’s 

transportation system. Historically, the only entities outside the federal government 

who were interested in detailed merchandise trade figures were groups with vested 

financial interests – banks, traders, transportation planners, and, perhaps most 

prominently, the transportation industry. 

Things changed in the early 1980s with the emergence of a sizeable U.S. trade 

deficit for the first time in the post-World War II era. The deficit, which yawned ever 

wider as the decade proceeded, grew into a major political issue at virtually every 
59

level of government throughout the country. America's economy seemed to be under 

siege from Japan and Western Europe. A hitherto obscure economic statistic, the 

monthly merchandise trade deficit, became the most closely watched barometer of 

the nation's plight. And, as it soared during the decade, the American public grew 

more and more alarmed. 

That rising level of anxiety drove elected officials at every level of government to 

cast around for ways in which they could help restore a trade surplus and return 

American industry to a competitive footing. Ignoring the advice of most economists 

that trade deficits arise from macroeconomic forces over which state and local 

leaders have absolutely no control, governors and legislatures throughout the 

country initiated state export promotion programs, ultimately in many instances 

featuring chains of trade offices overseas. At the local level, ‘Buy America’ policies 

were adopted to guide public procurement practices. 

The interest now taken in international trade inevitably spawned a desire for data on 

how well (or poorly) each of the states was faring with their newly devised export 

promotion programs. It was then that governors and state legislatures throughout 

the country began to lobby aggressively for a statistical barometer by which to judge 

each state’s contribution to the nation’s overall export trade. 

At that time, though, there was no means for generating the kinds of statistical 

information most desired by state government leaders. The ideal system would have 

determined with a high degree of accuracy and timeliness the quantity and value of 

goods produced in a given state that were eventually exported. The nearest 

approximation to that was to be found in the Census Bureau’s Census of 

Manufactures, conducted every five years. In most state capitols, the three major 

drawbacks of using data derived from that source to determine a state’s export trade 

were: (1) a lack of timeliness at a time of fast-paced developments on the world 

trade scene; (2) the absence of any data on non-manufactured merchandise exports 

such as agricultural produce or raw materials; and (3) the lack of information about 

the overseas markets for any given state’s export trade. 

Initially, state government officials turned to another approximation, this one in the 

form of data measuring the flow of international trade through the 42 U.S. Customs 
60

Districts into which the U.S. is divided. In California’s case, the Security Pacific 

National Bank was in those years in the practice of publishing an annual booklet that 

purported to describe California’s international trade. What the booklet really 

depicted was the value of foreign trade that was moving through the three Customs 

Districts that collectively comprise California. There were obvious limitations to the 

use of data from the San Francisco, Los Angeles and San Diego Customs Districts as 

a surrogate for data purporting to describe the role of trade in California’s economy. 

The most evident drawback was that the data did not distinguish exported 

merchandise by state-of-origin. Nor did the data sort imports by state-of-destination. 

As America’s principal gateway to the Pacific Rim, California’s transportation system 

has always been awash in goods that were neither produced nor consumed within its 

borders. (Fully forty percent of the nation’s container trade moves through the 

neighboring Ports of Los Angeles and Long Beach alone.) By the same token, exports 

of goods that were indeed produced in California would be ‘lost’ to California’s export 

totals if the goods exited the country via an out-of-state Customs District. As a 

consequence, California’s “trade figures” tended to be skewed toward Asia and 

away from Europe.104 

Under intense political pressure from governors, state legislators and their 

congressional representatives, federal government officials sought to adapt the 

existing methodology for compiling national export data to the needs of the several 

states. It would prove to be an adaptation that generally satisfied all but those who 

looked too closely at the resulting data. 

Historically, U.S. international trade data have been collected by the Customs 

Service, now part of the U.S. Department of Homeland Security,105 and were 

compiled and distributed by the Census Bureau of the U.S. Department of 

Commerce. The data are now displayed using the United States' Harmonized Tariff 

Schedule (HTS) of 10-digit codes to describe the merchandise being shipped. In the 

case of merchandise exports, the raw data are not generated at the location where 

the goods being exported were manufactured, grown, mined or processed. Instead, 

 

104 See the California State World Trade Commission’s 1987 study, “California Export 

Statistics,” for a discussion of the various data series that could then be used to shed some 

light on the export performance of California-based industry. 

105 The Customs Service is now the Bureau of Customs and Border Protection (CBP). 
61

U.S. export data derive from information supplied at the time of export on a 

standardized Shippers Export Declaration (SED) form (or its electronic equivalent) 

which must, by law, be filed in conjunction with any shipment valued at or above a 

specific level (currently $2,500.00).106

The SED (see the accompanying copy) solicits information on the kind of the goods 

being shipped and on their weight and value, their destination abroad, the mode of 

transport, and the port of departure. The SED also asks the shipper to identify the 

“point (or state) of origin.” In filling out that particular block, the shipper is given 

immense discretion – so much so that efforts to determine where the exported 

merchandise was truly manufactured, grown, mined or processed are often 

transformed into a fool’s errand. 

Federal regulations permit the shipper to use any of following three criteria to 

determine the export shipment’s state-of-origin: 

(1) The point from which the merchandise actually starts its journey to the 

port of export. The state-of-origin might indeed be where the goods were 

produced. Alternately, it could merely be a state where the goods were 

warehoused prior to shipment abroad. For example, owing to a lack of secure 

warehousing in Mexico, goods bound for that country are frequently held at 

warehouses or distribution facilities along the U.S. side of the border until 

delivery is actually required to the customer or end-user in Mexico. Since the 

vast bulk of U.S.-Mexico trade moves through Texas, the Lone Star State is 

frequently identified as the state-of-origin for an untold volume of products 

actually produced in other parts of the United States simply because those 

products were temporarily held in storage in Texas. (This accounts for the 

dubious claim that Texas – whose gross state product is approximately 56 

 

106 The Census Bureau is moving to do away with paper SEDs. In a February 17, 2005 

posting in the Federal Register, the Census Bureau formally proposed to require mandatory 

filing of export information through the Automated Export System (AES) or through the 

AESDirect for all shipments where a Shipper's Export Declaration is currently required. 
62

percent of California’s107 – is reportedly the nation’s leading exporting 

state.)108 

 

(b) The state of the commodity of the greatest value. Any given shipment 

may include items produced in more than one state or even in different 

regions of the country. Rather than obliging the shipper to apportion the 

shipment among the relevant states, the shipper is permitted to assign the 

entire value of the shipment to the one state thought to have been 

responsible for contributing the greatest value to the shipment. The 

determination of the state-of-origin is thus reduced to guesswork. 

(c) The state in which the shipment was consolidated. The fact that shippers 

are given the leeway to designate as the state-of-origin the state in which the 

shipment was consolidated accounts for the fact that Louisiana has long been 

reported to be the nation’s foremost agricultural exporter. (For a further 

discussion of the ‘Louisiana Syndrome,’ see below.) 

Only in 1987 did the Census Bureau’s Foreign Trade Division (FTD) begin to publish a 

breakdown of U.S. merchandise exports by state. The figures were derived from a 

box on the SED requiring the shipper to identify not the state in which the goods 

were produced but rather the state from which the merchandise began its journey to 

the port of export. 

The FTD has been unfailingly candid about the limitations of the so-called state-oforigin figures. Unfortunately, other parties that have trafficked in such data have not 

always been so forthcoming in warning that the so-called state-of-origin export data 

do not tell state officials what they really want to know: namely how much of what 

was produced by the hands and minds of the citizens of my state was exported and 

to where. 

 

107 Source: Bureau of Economic Analysis, http://www.bea.doc.gov/bea/regional/gsp.htm. 

108 For a more detailed explication of this issue, see Jock O’Connell, “State’s Trade Going 

South?” in the June 4, 1999 San Francisco Chronicle. http://www.sfgate.com/cgibin/article.cgi?file=/chronicle/archive/1999/06/04/ED76240.DTL 
63

The problem stems from confusion of the meaning of the state-of-origin. To federal 

government trade statisticians, the term primarily refers to the origin of movement 

of goods as they commence their journey into international trade. Not all goods are 

produced specifically for immediate export. In many cases, title to goods will pass 

through any number of hands (and physical locations) before being shipped abroad. 

A consignment of California computers sold to a U.S. wholesaler, for example, may 

languish in a Texas warehouse before being shipped to a retailer in Mexico. In such a 

case, the export transaction would most likely be attributed to Texas, the state from 

which the computers began their journey across the border, and not to California, 

where the computers were manufactured. Yet, to most state government officials, 

the origin-of-movement data are often (and mistakenly) taken to mean the state in 

which the goods were produced. 

The data problem becomes more attenuated in the case of highly fungible products 

like coal or grains. Whenever shipments are consolidated, the state-of-origin of 

movement will generally be defined as the consolidation point. This effect is 

particularly noticeable for agricultural shipments. Intermediaries located in inland 

states ship agricultural commodities down the Mississippi River for export from the 

port of New Orleans. In this case, they would report Louisiana, the state where the 

port of New Orleans is located, as the state-of-origin of movement. 

It is not unusual for significant levels of manufactured exports to be attributed to 

states that are known to have little manufacturing capability. One reason is that 

commodities produced by a company in one state may be shipped abroad from a 

distribution center or warehouse situated in another state. In that case, there is a 

significant probability that the transaction will be attributed to the latter state. 

Similarly, reporting rules permit export shipments to be attributed to the state that 

are arranged by exporters located out-of-state. In both cases, manufactured exports 

from the non-industrial state are magnified in the OM series. The problem has grown 

more acute as more and more manufacturers and agricultural shippers have outsourced their logistics functions to third-parties who typically manage goods 

movement for a multiplicity of corporate clients. 

Beginning in 1993, the Census Bureau experimented with an alternate measure of 

the state-of-origin known as the Exporter Location (EL) Series. These export 
64

statistics were based on the zip code address of the exporter of record – more lately 

termed the U.S. Principal Party in Interest (defined as the party in the United States 

that receives the primary benefit monetary or otherwise, from the shipment). 

Effective with January 2003 export statistics, however, the Exporter Location Series 

was discontinued. 

The EL series always had limitations, especially in identifying individual locations for 

companies with more than one production facility. Very commonly, the series 

identified the location of a company’s headquarters rather than the location of any of 

its production facilities as the state-of-origin. A shipment of wheat might be 

attributed to a company’s headquarters in Omaha, even though the wheat was 

grown in Iowa or Kansas. In fact, an astonishing volume of farm exports were linked 

to zip codes in Manhattan. 

With the rampant consolidations and mergers that characterized the U.S. economy 

through the 1990s and into the current century, the Exporter Location data series 

grew increasingly unstable. Significant shifts in export values by state were 

beginning to show up in the data in late 1999. According to the Census Bureau, the 

resulting “aberrations destroyed the continuity of the series.” For these reasons, 

Census discontinued the series. 

For U.S. exports to Canada, import data compiled by the Canadian government are 

used. (Because nations have long collected duties and administered quotas on 

imported goods, procedures for monitoring a country’s imports have traditionally 

been much more rigorous than the methods used to track exports.) 
65

Further detracting from the quality of the nation’s export statistics is the fact that 

shipping and freight-forwarding clerks know that SEDs are reviewed by federal 

officials only to insure completeness, not accuracy. Certainly prior to September 11, 
66

2001, those filling out the SEDs had no incentive to be exacting in their provision of 

information about the true origin of the goods being exported. Even now, in an era 

when documents pertaining to the movement of goods through vital airports and 

seaports are regarded with a new seriousness, there remain numerous reasons to 

take shortcuts. Of these, perhaps the common is to identify an entire shipment as 

having originated in whatever state the shipper or freight-forwarder is located. For 

example, it is entirely permissible under federal guidelines to report California as the 

state-of-origin for a shipment of cherries grown in the Pacific Northwest, if that 

shipment was repacked for air shipment from a California airport. As a consequence, 

state-of-origin export statistics have always enjoyed a dubious status. 

Measuring California’s Farm Exports

Devising accurate measures of state exports of agricultural commodities has been 

especially problematic, especially in a state like California which grows and exports a 

multiplicity of crops. 

Over the years, a series of attempts have been made to refine the data collection 

methodology so as to yield a more accurate picture of California’s agricultural export 

trade. For many years, the only estimates of the state’s agricultural export trade 

were derived from California’s known share of the total U.S. production of exported 

commodities. Thus, if California growers were known to produce one-fourth of the 

nation’s flax, then one-quarter of the nation’s flax exports would be attributed to 

California – regardless of whether any California-grown flax was actually shipped 

abroad. 

That rough-edged methodology works well for those crops like almonds, walnuts, 

pistachios, raisons, figs and olives where California effectively accounts for the entire 

national output. For most other crops, though, there are fairly obvious drawbacks 

associated with this method of counting California’s farm exports. Still, it is a 

methodology that remains in use by the USDA’s Economic Research Service (ERS). 

ERS export data. As we have seen, data on the value of U.S. agricultural exports 

by the state in which they were produced are not collected by the U.S. Census 

Bureau. Instead, ERS estimates state shares of agricultural exports using Custom 

District-level export data compiled by the U.S. Census Bureau and state-level 
67

agricultural production data supplied by USDA's National Agricultural Statistics 

Service (NASS). These approximations are adjusted for exports of agricultural 

products for which NASS does not collect state-level production data. Using these 

approximations, a state that is the largest producer of an agricultural commodity will 

also account for the largest share of U.S. exports of that commodity. Countries of 

destination for each state's exports cannot be determined using this data series. 

Most U.S. agricultural commodity exports are produced in inland states. From the 

farm, a commodity like wheat is typically sold to a local elevator, which in turn may 

sell it to a larger elevator located at a major transportation hub, which then moves 

the commodity to a port of export. The transportation hub may not be located in the 

same state as the producer. Sometimes, even the local elevator is located in another 

state. Indeed, an agricultural commodity is likely to pass through any number of 

states before being exported, and the actual state-of-production is easily lost as 

commodities move from the farmgate to the port. 

Further complicating matters, bulk agricultural commodities may be mixed with other 

lots of the same commodity in storage or transporting at any stage along the way to 

the port, effectively commingling commodities with differing states of origin. 

There are two key sources of data. Export data used by ERS are national-level 

Foreign Agricultural Trade of the United States (FATUS) data from USDA Foreign 

Agricultural Service's U.S. Trade Internet System, which are not separable by state. 

ERS also uses state-level historical production data from NASS to determine state 

export shares for U.S. crops and livestock. In ERS' state export estimates, each 

state's share of production of the commodity is simply applied to the total 

commodity export figure to derive the state's estimated export value. 

In addition, these approximations are adjusted for exports of agricultural products 

for which NASS does not publish annual state-level production data, such as 

prepared foods. For these products, some production data by state is found every 

5th year in the Census of Agriculture and the Department of Commerce's Product 

Summary, 1997 Economic Census, Manufacturing, Subject Series. If these data are 

not available for a given commodity, then generally an average of the state's share 

of the raw products' production is applied to any "other" products included in that 
68

group's export total (such as wheat's share for pasta). Production and export data 

are revised annually reflecting updates by NASS and Census. 

Besides ERS, three other organizations—the U.S. Census Bureau; PIERS by Global 

Intelligence Solutions and the Journal of Commerce; and MISER (now WISER) —

estimate the state of origin of U.S. exports. Estimates of state exports made by 

these organizations cover total merchandise trade, including, but not limited to, 

agriculture. However, these estimates are based on the data available at the port 

from Shippers Export Declaration Forms. Consequently, for agricultural commodities, 

because of the limitations mentioned above, these organizations' estimates of state 

of export origin tend to inflate the relative exports from port states (such as 

Louisiana) and undercount those of inland states (such as Kansas). 

 

UC Davis farm export data. During the late 1970s and into the 1980s, California 

Department of Food and Agriculture statisticians sought to devise a more refined 

methodology that relied more extensively on information provided by the state’s 

growers and shippers and especially the various government-sanctioned 

organizations responsible for administering marketing orders. In 1997, CDFA entered 

into an agreement with the Agricultural Issues Center (AIC) at the University of 

California at Davis to measure the value of the state’s agricultural export trade. 

AIC employs a more exacting methodology than ERS does in compiling its farm 

exports estimates. Indeed, AIC employs separate procedures for each of the 50 

primary agricultural products of California. Products originated in another state and 

exported via California ports are not included in AIC’s statistics. 

In most cases the final AIC report presents the export data at the individual 

commodity level (see Table 2-1). For example, exports of fresh, canned, and dried 

apricots are reported under a combined the heading as "apricots", although, for 

estimation purposes, fresh apricots follow a different methodology than canned and 

dried apricots. If the California export price was not available for a particular 

product, AIC used the U.S. export price for that commodity in order to provide a 

dollar value for exports. 
69

Table 2-1. Agricultural Issues Center (UC Davis) California 

Commodity Exports, 2001-2003 Nominal Values and Rankings
70

WISER agricultural export data. The “state-of-origin” export data used in this 

chapter as well as elsewhere in this report were obtained from the World Institute for 

Strategic Economic Research (WISER). 109 WISER was established in 2004 to 

continue the international trade data work of its predecessor, the Massachusetts 

Institute for Social and Economic Research (MISER). From 1988 through 2004, 

MISER had been one of the U.S. Census Bureau’s Business and Industry Data 

Centers. Its special focus had been on foreign trade statistics developed by the 

Census Bureau’s Foreign Trade Division from Shippers Export Declarations (SED) 

filed in conjunction with most export shipments from the U.S. 

MISER’s particular contribution lay in devising an imputation algorithm to refine the 

state-of-origin export data that first became available in 1987 following changes in 

the SED. Over the ensuing years, MISER became the leading provider of U.S. and 

state-level trade statistics. Software devised by WISER is currently used by some 25 

state international trade offices, several World Trade Centers, and a wide variety of 

data providers and data users throughout the U.S. and abroad. Until its 

disestablishment in 2004, the California Technology, Trade and Commerce Agency 

used MISER data in all of its official reports on California’s export trade. 

Notwithstanding the lengths to which MISER and now WISER have gone to refine 

state level export data, we readily acknowledge that the WISER data used in this 

study include some agricultural goods and food products that were not produced by a 

California farm, ranch or dairy. The WISER data also include categories of food 

products that can be best labeled as ingredients and preparations, some of which 

may have been manufactured in laboratories or processing plants. Nonetheless, we 

submit that the WISER data represent the best available statistical depiction of 

California’s airborne agricultural export trade. 

For the purpose of this study, the chief advantage of WISER is that, unlike the AIC 

figures, the data can be sorted by mode of transportation. As noted earlier in this 

report, WISER reports that California shipped -- by air -- $659.4 million in 

agricultural products to foreign markets in 2004. That represents just 6.3 percent of 

 

109 WISER is located at Holyoke Community College in Holyoke, Massachusetts and is part of 

the school's new Kittredge Business and Technology Center. 
71

the total value of agricultural exports WISER attributed to the Golden State in that 

year ($10.4 billion).110 

To be sure, WISER’s totals for California’s overall farm exports have been 

considerably larger than either USDA’s or AIC’s estimates. (See Figure 2-1.) In 2003, 

the most recent year for which comparable data are available, WISER pegged the 

state’s overall farm export trade at $9.8 billion in contrast to AIC’s $7.5 billion and 

USDA’s $8.2 billion. 

Figure 2-1 

Differing Perspectives on California’s Agricultural Export Differing Perspectives on California’s Agricultural Export 

Trade

(in Billion of Dollars)

0.00

2.00

4.00

6.00

8.00

10.00

12.00

1999 2000 2001 2002 2003 2004

USDA UC Davis WISER

As WISER readily concedes, the system for collecting U.S. export data – especially 

when commodities are involved – tends to ensure that gateway states like California 

will be credited for the export of products that were actually produced in other 

states. In one revealing example, WISER’s data indicate that California’s fresh cherry 

exports to Japan in 2003 were nearly 70 percent higher than reported by the 

 

110 As we shall see, there are significant methodological issues involved in parsing California’s 

agricultural export trade. For example, WISER/MISER readily concedes that gateway states 

like California are credited for unknown volumes of agricultural commodities actually produced 

in other states but shipped abroad via a California seaport, airport or border crossing. 
72

California Cherry Advisory Board.111 As we shall see, much of the difference can be 

attributed to the misreporting of fresh cherries grown in Oregon and Washington that 

were shipped to Japan via California airports. 

In a typical year, California’s cherry harvest is complete by the end of June. There is 

normally a brief period in which California cherries are entering the market as the 

cherry harvest in Washington and Oregon is beginning. Nonetheless, by July 1, 

commercial cherry shipments are generally coming only from the Pacific Northwest. 

An examination of monthly reports on fresh cherry exports in the month of July in 

recent years reveals that a substantial volume of fresh cherries continues to be 

shipped abroad from California airports. For example, in 2001, the last commercial 

shipment of California-grown cherries was recorded on June 22. Consequently, any 

fresh cherry exports attributed to California in July of that year must have come from 

another state. Nonetheless, WISER reports that $5.4 million in fresh cherry exports 

went from California airports in July 2001 as did just over $800,000 that August. 

The misidentification arises in most instances because cherry exporters in 

Washington and Oregon must rely to extent on flights leaving California airfields in 

order to serve customers in the Far East. Both SFO and LAX feature a substantially 

larger number of daily flights bound for Japan and other destinations in the Far East. 

Owing to the highly perishable nature of the crop, shippers and freight-forwarders 

engage in a spirited dance to find room aboard flights bound for Asian Pacific 

markets. Indeed, some cherries from Washington and Oregon reach destinations in 

the Far East via Anchorage and Honolulu airports. 

Fresh cherries are typically shipped to airports in refrigerated trucks which deliver 

wooden pallets laden with cherries packed in either 18-pound or 20-pound boxes. 

California shippers use 18-pound cartons and typically stack 90 of them on a pallet, 

 

111 The California Cherry Advisory Board’s 2003 Annual Report indicates that 1,146,029 18-lb. 

boxes (or 9,376,601 kg.) of all varieties of fresh cherries were shipped to Japan by California 

growers in 2003. By contrast, WISER reported 11,859,112 kg. of airborne cherry shipments 

from California to Japan in that year. Another data set that simply records the value and 

weight of U.S. merchandise exports by Customs District shows 12,393,307 kg. in fresh 

cherries were air-freighted from the San Francisco and Los Angeles Customs Districts in 2003. 

Meanwhile, airborne export data supplied by USDA reports 19,602,082 units (whether pounds 

or kilos is not specified.) 
73

which is then enclosed in a plastic wrapping. Upon arrival at the airport, the handling 

of the truckload depends on the precise configuration of space available on the 

specific aircraft leaving for the desired destination. 

A chartered 747-400 air-freighter, for example, can hold as many as 100 wooden 

pallets of cherries, while a chartered DC-10 can accept up to 75 pallets. In most 

instances, however, cherry shippers and their logistics providers scramble during the 

relatively brief fresh cherry harvest to find space on virtually every flight leaving for 

major overseas markets. 

It is not altogether uncommon that the contents of the wooden pallets must be 

broken down and the cartons repacked into containers suited to the space available 

on specific flights. Whenever that occurs, there is an exceptionally strong likelihood 

that the clerk filling out the Shippers Export Declaration will indicate that the cherry 

shipment began its journey into international trade from the spot at which the 

repackaging occurred – usually an air cargo terminal on or near an international 

airport. As a consequence, commodities shipped from the Pacific Northwest to the 

overseas destinations via SFO or LAX are likely to be formally identified as exports of 

California. That problem is not likely to be resolved until the emerging technologies 

for tracking individual shipments become sufficiently sophisticated and inexpensive 

to permit tracking of agricultural shipments from the point-of-production or the 

packing house to the final destination abroad. 
74

Principal Findings

The WISER data yield several interesting conclusions. 

 

Some overseas markets – Japan above all – loom particularly large in California’s 

airborne agricultural export trade. Indeed, Japan has been the principal overseas 

market for several of California’s top ten airborne specialty crop exports. However, 

the identity of other primary overseas markets differed widely depending on the 

commodity in question. 

For California’s fresh cherry growers, Japan took just over three-quarters of all the 

state’s airborne cherry exports in 2003. Indeed, just four destinations (Japan, 

Taiwan, Australia and the United Kingdom) accounted for approximately 95 percent 

of California’s airborne exports of fresh cherries that year. 

Japan likewise dominated the airborne trade in California’s fresh strawberries, taking 

the lion’s share (61.4 percent) of 2003 shipments. Just four countries (Japan along 

with the U.K., France and Ireland) accounted for approximately 95 percent of 

California’s airborne fresh strawberry exports that same year. 

In the case of California’s airborne asparagus exports, Japan again was the largest 

market in 2003, taking in 55.6 percent of the state’s airborne export trade. In this 

case, though, the next largest market was Switzerland, followed at some distance by 

Taiwan, Italy and Spain. In all, five countries accounted for 92.5 percent of 

California’s airborne asparagus shipments in 2003. 

For fresh grapes, a mere two countries (albeit widely-spaced) accounted for 95 

percent of California’s airborne exports in 2003. They were the United Kingdom and 

Australia. By itself, the U.K. took in three-quarters of the state’s airborne fresh table 

grape export trade. 

Airborne wine exports were similarly concentrated, with Japan alone taking in 90 

percent of the trade. 
75

The disproportionate role played by a handful of overseas markets appears to explain 

much of the volatility in California’s airborne agricultural export figures from year to 

year. Airborne wine shipments, for example, saw a remarkable ten-fold jump in 2002 

and then fell by nearly half in 2003 and by more than half again in 2004. 112 Not 

surprisingly, the spike coincided with abnormally large airborne wine shipments to 

Japan in late 2002 and early 2003, albeit much less so in the latter year. The most 

likely reason for the surge in airborne wine exports had nothing to do with a sudden 

Japanese affinity for California wine or a more aggressive marketing campaign by 

California vintners. Indeed, overall wine exports by all modes of transportation in 

2002 showed only a meager one percent increase over the preceding year. Instead, 

the jump in airborne shipments to Japan was most probably an unintended 

consequence of the disruption in normal ocean shipping routes caused by the West 

Coast dock lock-out in the fall of 2002. To keep production lines operating (as in the 

case of the NUMMI plant in Fremont, California) or ensure adequate supplies of 

electronics and other products to U.S. retailers in the run-up to the Christmas 

shopping season, a host of Japanese companies – most notably, Toyota -- were 

obliged to charter air-freighters. The abrupt rise in airborne imports through LAX and 

especially SFO created a serious back-haul problem for air carriers seeking cargos to 

fill the chartered air-freighters returning to Japan. The Wine Institute reports that 

California wine shipments to Japan in 2003 totaled $76 million.113

 

112 Airborne wine exports from California, which totaled $3.5 million in 2001, soared to $35.4 

million in 2002, before falling back to $18.5 million in 2003 and then to $7.2 million in 2004. 

113 The deregulation of Japan’s wine, beer and spirits retailing market in September 2003 

may have contributed to the continuation of a historically abnormal level of airborne wine 

shipments that year. However, data for all of 2003 and particularly for 2004 would suggest 

that the use of air cargo services to ship wine from California to Japan is returning to more 

modest levels. The four years immediately preceding the 2002 surge in airborne shipments 

saw, on average, just $3.1 million in wine shipped from California to Japan by air. 
76

Chapter 3 

The International Air Cargo System

This chapter describes the international air cargo system. Although some of the 

material contained in this chapter may not seem immediately relevant to California’s 

airborne agricultural export trade,114 the purpose of this chapter is to illuminate the 

principal forces currently reshaping the air cargo industry worldwide and to highlight 

those changes that will most likely come to affect California’s agricultural exporters – 

for better or for worse. (The next chapter will describe California’s international 

aviation links and the challenges that government and industry face in ensuring that 

the long-term air transport needs of California’s agricultural exporters are adequately 

met.) 

The Black Box of Transportation Logistics

For most Californians and even for many exporters, the movement of goods occurs 

within a figurative black box. We place an envelope in a mailbox and assume it will 

arrive at its address without having any understanding of what is involved in 

delivering it to a recipient hundreds if not thousands of miles away. Similarly, in the 

case of a steel container loaded with electronics hardware or several pallets laden 

with cartons of fresh fruit, the manufacturer or grower frequently out-sources the 

business of arranging transportation to an intermediary, most commonly a freightforwarder but, with increasing regularity, a company like FedEx or UPS or DHL.115

Yet, regardless of who assumes the role of the intermediary, in the vast majority of 

international shipments the shipper or exporter has effectively entrusted the details 

of shipping to another party.116 

 

114 Although this report is explicitly concerned with air cargo’s role in California’s agricultural 

export trade, certain of the findings here may still be relevant to shipping to domestic 

customers, especially in the $22.8 billion gourmet grocery sector. According to the National 

Association for the Specialty Food Trade, the U.S. market for specialty foods grew by 24.1 

percent from 2001 to 2003 and was expected to increase by a further 10-12 percent in 2004. 

115 Companies such as FedEx, UPS and DHL are commonly known as ‘integrators.’ 

116 Sometimes known as the “architects of transport,” freight-forwarders are agents who use 

their logistical expertise and their ability to generate large cargo volumes to negotiate the 

most favorable shipping rates and transportation scheduling for their clients’ goods. 
77

By permitting various parties to concentrate on their own areas of specialty, this 

disintermediation of business functions has proven enormously beneficial. But it has 

a generally unacknowledged downside. To protect their proprietary interests, parties 

performing specialized services are typically reluctant to discuss their methods of 

operations in any useful detail. Freight-forwarders, for example, are notoriously 

averse to talk about their working relationships with specific air carriers. So as the 

practice of outsourcing logistical functions grows more common, more and more 

consumers of logistical services have at best a sketchy view of the actual shipping 

process. A packer/shipper of fresh produce will know that a particular shipment is 

bound for Japan because of certain packaging and fumigation requirements. But the 

specific route that shipment takes and what airlines are used to convey it to its final 

destination are not matters that strictly concern the packer/shipper so long as the 

shipments arrives on schedule and in good condition.117 

An importance consequence of the popular practice of outsourcing transportation 

logistics functions is to diminish the size and breadth of a constituency that might 

otherwise have been a more powerful voice commanding the attention of 

transportation policymakers. Not surprisingly, public policy relating to our 

international trade infrastructure is sometimes made based on some fundamental 

misapprehensions about the logistics of international trade. Equally, because 

business function that have been outsourced are often ignored, companies that are 

acutely dependent on fluid transportation systems may be left perilously blind to the 

dynamic forces that are reshaping the logistics of international trade.118 One purpose 

of this chapter, then, is to shed light on how goods move through the world’s air 

cargo system. 

One common misapprehension shared by the general public and a high percentage 

of public policymakers is that international trade is an activity largely confined to the 

nation’s seaports and to border crossings with Canada and Mexico. There is no 

 

117 This is especially likely to be the case when the California packer/shipper is a “passive 

exporter” who is merely filling an order placed by an overseas buyer who very often will 

assume responsibility for arranging transportation. In such cases, the involvement of the 

packer/shipper in California will generally end when he delivers the shipment to a staging area 

adjacent to a gateway airport. 

118 The emergence of so-called Fourth-Party Logistics Providers (4PLs) indicates that a 

number of businesses which had earlier outsourced their logistics operations to Third-Party 

Logistics Providers (3PLs) now perceive the need to pay closer attention to these formerly inhouse functions by retaining 4PLs to monitor and assess the services furnished by 3PLs. 
78

question that the heavy lifting when it comes to moving America’s exports is done by 

ships, trucks and trains -- as Figure 3-1 indicates. But as Figure 3-2 indicates, when 

the nation’s export trade is calibrated in dollar terms, the picture changes 

dramatically. (As we shall see in the next chapter, California’s export trade is even 

more reliant on air transport.) 

FIGURE 3-1. 

Figure 3-1.

Air Cargo and U.S. Exports

Share by Weight Share by Weight

Source: Bureau of Transportation Statistics

0% 20% 40% 60% 80% 100%

2001

2002

2003

Air Water Land Other
79

FIGURE 3-2. 

Figure 3-2.

Air Cargo and U.S. Exports

Share by Dollar Value

Source: Bureau of Transportation Statistics

0% 20% 40% 60% 80% 100%

1999

2000

2001

2002

2003

Air Water Land Other

The Evolution of Air Cargo Services

Air freight began largely as a sideline to the modern airlines’ primary role in 

transporting passengers and mail. In many respects, the cost structure of much of 

the modern air cargo trade reflects that incidental origin. In the early days of civil 

aviation, cargo was simply regarded as a way to earn extra revenue from space not 

needed for passengers, their luggage or mail (which had become essential to the 

financing of many early airlines).119 Even now, cargo space aboard passenger aircraft 

is often priced accordingly. As a result, rates charged for cargo carried aboard 

passenger aircraft are typically lower than rates charged for cargo carried aboard airfreighters, where cargo is the sole source of revenue and must therefore pay its own 

way. 

In a most dramatic fashion, the Berlin Airlift (1948-49) demonstrated the 

effectiveness of air cargo for moving an exceptionally wide range of goods and 

 

119 See F. Robert van der Linden, Airlines and Air Mail: The Post Office and the Birth of the 

Commercial Aviation Industry (University of Kentucky Press, 2002) and Camille Allaz, La 

Grande Aventure de la Poste et du Frêt Aeiens: du 18e siècle à nos jours (Paris: Presses de 

l'Institut du Transport Aérien (1998). 
80

helped spur a growing air freight market in the United States and Europe. In 1949, 

the Flying Tiger Line became the first scheduled air cargo airline in the U.S., offering 

regular service between the Los Angeles and San Francisco on the West Coast and 

Boston on the East Coast. By the 1960s, several passenger airlines had even 

introduced scheduled all-cargo services on dedicated air-freighters. In that era of 

narrow-bodied aircraft, passenger planes had relatively little capacity for freight and 

were not especially suitable for carrying heavy or bulky items. So as the demand for 

air cargo rose during the decades immediately following World War II, scheduled allcargo services took an increasingly large share of the air cargo market, peaking at 

around 43 percent in the mid-1970s.120 

Two major developments during the 1970s severely undermined the vitality of allcargo flight operations. The first was a five-fold jump in fuel prices related to political 

unrest in the Middle East and Persian Gulf and to the emergence of the Organization 

of Petroleum Exporting Countries (OPEC) as a serious force in determining world oil 

prices. The other was the entry into service of the Boeing 747 “jumbo jet” beginning 

in 1970. 

The precipitous surge in fuel prices affected all airlines. But because fuel costs 

represented a much larger portion of an air-freighter’s total operating costs, the rise 

in fuel prices hurt the balance sheets of all-cargo operators more than it did 

passenger airlines.121 More or less at the same time, the all-cargo airlines had to 

contend with the enormous increase in the cargo-carrying capacity of passenger 

aircraft that came with the introduction of the 747 on long-haul routes and 

eventually the Boeing 767 and Airbus A310 on medium-haul routes.122 Everything 

about the new 747 was enormous. The passenger cabin was almost twice the width 

of the 707's, and the aircraft was 79 feet longer than the 707-300. It also came with 

 

120 Rigas Doganis, p, 302. 

121 Until the latest run-up in fuel costs in 2004, labor costs were a bigger expense for airlines 

than fuel. Labor thus represented a larger share of the operating cost of an all-cargo flight 

which, of course, had a much smaller crew component than a typical passenger flight. 

Conversely, fuel represented a bigger proportion of the cost of operating an all-cargo flight. 

122 Another attractive feature of the new aircraft was that they were designed to carry large 

containers and other Unit Load Devices (ULDs) that made for significantly more efficient cargo 

handling, not unlike the use of standard 20-foot and 40-foot steel containers in the maritime 

trade. 

 
81

a new abundance of cargo capacity in its belly. Indeed, by redefining the cargo 

capacity differential between what could be carried on passenger aircraft as opposed 

to all-cargo freighters, the jumbo jet had a profound effect on the cargo distribution 

system. With a capacity exceeding 15 metric tons, the passenger version of the 747 

could carry, by size, up to 90 percent of all cargo offered.123

The 747 was also designed to serve as an all-cargo transport. Indeed, that is why it 

sports its distinctive hump. In order for the aircraft to be used both as a cargo plane 

and a passenger aircraft, Boeing designed the 747 with the flight deck positioned 

above the passenger cabin to permit containers shipped on the freighter version to 

be loaded through the nose, which swung upward on a hinge. The first 747-200 

freighter, introduced in 1971, could carry 100 tons (90,000 kg.) of cargo non-stop 

coast-to-coast or across the Atlantic. Its operating cost was 35 percent less per ton 

mile than the 707 freighter.124 

By the late 1970s, more and more cargos were being shifted from narrow-body 

freighters to the bellies of the new wide-body passenger aircraft. Because the 

shipping rates charged for cargo carried aboard passenger aircraft undercut the rates 

charged by operators of air-freighters, several all-cargo airlines went out of business 

or greatly reduced their operations. 

There was a reversal of fate for air-freighters starting in the early 1990s that 

resulted largely from the surging demand for air cargo space from the exportoriented economies of the Far East. On several major air routes, belly-space capacity 

on even wide-body passenger aircraft could no longer meet the new demand. In 

response, airlines began to add both scheduled and chartered all-cargo aircraft. By 

2000, the proportion of international air cargo moving on scheduled all-cargo flights 

had returned to mid-1970s levels. 

 

123 Geoff Bridges, past president of The International Air Cargo Association, quoted in Bob 

Saling, “The Building of an Industry: Freighters and Air Cargo Help Shape the World” (Boeing 

Commercial Airplanes Feature Releases, 2003). 

124 For more on the evolution of Boeing aircraft, see Clive Irving, Wide-Body – The Triumph of 

the 747 (New York: William Morrow and Co., Inc., 1993). Donald M. Pattillo, Pushing the 

Envelope: The American Aircraft Industry (University of Michigan Press, 1998), and Eugene 

Rodgers, Flying High: The Story of Boeing and the Rise of the Jetliner Industry (New York: The 

Atlantic Monthly Press, 1996). 
82

In the months prior to September 11, 2001, demand for air cargo services had 

begun to fall off as the electronics and telecommunications industries went into a 

slide after the boom years of the 1990s.125 Still, the terrorist attacks certainly did 

push demand down even further while businesses and governments around the 

world sought to fathom the unfortunate new world. The period following the World 

Trade Center and Pentagon attacks produced a sharp decline in passenger air travel 

worldwide but especially within the United States. Since at least half of all air cargo 

shipments was being carried in the bellies of scheduled passenger flights, the drop in 

passenger traffic had a direct and dramatic impact on the air cargo business. 

At most major American airports, passenger volumes did not return to pre-9/11 

levels until 2003 or 2004. For example, at Atlanta, the world’s busiest airport, 

passenger volumes only began to match the levels seen in 2000 during the first 

quarter of 2004.126 The same appears to be the case at Chicago’s O’Hare, the world’s 

second busiest passenger airport.127 That has still not been the case at California’s 

premier airports. 

Perhaps reflecting shifts in the market and the emergence of new air routes, 

passenger volume has fallen off appreciably at LAX and SFO, according to data 

compiled by Airports Council International.128 In 2000, LAX and SFO ranked third and 

ninth, respectively, among the world’s busiest crossroads for air travelers. In that 

year, LAX handled 66.4 million passengers, while SFO handled 41.0 million. By 2003, 

however, LAX’s rank had slipped to fifth place while SFO’s standing had plummeted 

to 22nd.

129 By the end of 2004, SFO international passenger traffic was still about six 

percent below 2000 levels. International passenger traffic at LAX had likewise not 

 

125 In California, the electronics and telecommunications sectors sharply contracted during 

the winter of 2000-2001, according to California Employment Development Department data. 

126 Source: Hartsfield-Jackson Atlantic International Airport, Operating Statistics for August 

2004. 

127 Source: O’Hare International Airport operating statistics. 

128 Airports Council International, see Data Center at www.airports.org. 

129 A major additional reason for the drop in overall passenger traffic at SFO was the 

departure of Southwest Airlines. By far the largest carrier of passengers within California, 

Southwest moved its Bay Area hub from SFO across to Oakland International in 2001. As a 

result, Oakland is today the sixth busiest airport in the Southwest system in terms of daily 

departures, with 130 daily nonstop departures to 20 cities (as of March 4, 2005). 
83

returned to 2000 levels by 2004.130 At SFO, international cargo traffic in 2004 was 

still fully 35 percent below the tonnage recorded in 2000.131 

In a relatively short time, however, overall demand picked up again in the air cargo 

industry.132 One industry forecast released in May 2004 predicted that worldwide air 

freight (measured by freight ton kilometers flown) will average 5.6 percent annual 

growth between 2003 and 2008. Expansion of intercontinental markets is expected 

to be greater, at 6.1 percent average annual growth.133 

Industry Structure

The air cargo industry features several functional categories of participants who may 

be engaged in moving a shipment from an exporter to its destination abroad. The 

most critical of these are: the freight-forwarders or other third-party logistics 

providers (3PLs), the airports and the air carriers. 

A typical shipping scenario begins with the shipper contacting a freight forwarder 

when there are shipments ready for delivery to the consignee. As a consequence of 

9/11, freight-forwarders and other 3PLs are required by law and regulation to be 

more cautious about accepting cargos from shippers, especially those with whom the 

freight forwarder may not be familiar. U.S. regulations now distinguish a category of 

“known shipper” whose shipments are subject to less exacting pre-flight security 

 

130 According to the LAX website, the airport handed about 6.6 million fewer passengers in 

2004 than in 2000. Overall cargo tonnage was up some 5.7 percent over 2000. The airport 

handled 17,415,749 international passengers in 2000 as opposed to 16,472,911 in 2004. The 

site does not distinguish domestic from international cargo. 

131 These figures are from SFO’s website. In 2000, international passenger traffic totaled 

8,036,691 and international cargo 430,478 metric tons. The comparable numbers in 2004 

were 7,562,076 international passengers and 278,545 metric tons of international cargo. 

132 “Growth and challenge: A snapshot of the U.S. cargo airline industry.” Air Line Pilot,

March 2004. The magazine’s commentary noted that “Nearly every segment of the U.S. airline 

industry has suffered catastrophic losses and painful reductions in both the number of 

customers and profits for nearly 3 years. The terrorist attacks of Sept. 11, 2001, were final 

blows to an already declining U.S. economy, airlines were already losing their business and 

leisure passengers, large numbers of airline employees were being put on the street, and 

aircraft manufacturers and parts suppliers were beginning to feel the brunt of carriers’ loss of 

revenue. One segment of the airline industry, however, has managed to survive and even 

grow slightly during this period—cargo airlines and cargo divisions of passenger airlines.” 

133 Brian Clancy and David Hobbin. “After The Storm: The MergeGlobal 2004-2008 World Air 

Freight Forecast,” Air Cargo World, May 2004. 
84

measures.134 Once the freight-forwarder agrees to arrange the shipment for the 

shipper, the freight forwarder then evaluates the flight connections offered by those 

air carriers serving the desired route and determines which carrier offers the best 

overall deal for the shipper. The freight-forwarder then books space for the cargo. 

Once an air carrier has confirmed the booking, the freight forwarder often but no 

always arranges for the cargo to be picked up from the shipper and brought to the 

airport. After the required documentation is completed, the cargo is checked-in at 

the airport terminal. Terminal operators or ground handlers are responsible for 

loading cargo into the air carrier (airplane) for transport. When the air carrier arrives 

at the destination airport, the cargo is unloaded and taken to the terminal, where the 

freight forwarder receives it from the ground handlers. The cargo is then sorted and 

delivered to the consignee(s). The accompanying chart sketches the generic flow of 

air cargo. 

Cargo can be checked-in to the terminal loose or palletized. Loose cargo is a 

shipment that has not been combined with any other shipments. Palletized cargo is a 

combination of many shipments to be shipped as a ULD (Unit Load Device). A ULD 

can be a closed container or an open pallet where shipments are wrapped and tied 

with nets to form a solid block. The size of palletized cargo varies according to the 

aircraft type and the location of the pallet in the aircraft. 

Checking-in loose cargo is generally inefficient, requiring additional work at the 

terminal as well as additional space for built-up areas. As there are many departure 

flights per hour during the peak period, building up full pallets in time for each 

flight’s departure may be a challenging task due to space and staffing constraints. 

In most cases involving the shipment of fresh farm produce, fruits and vegetables 

are sent from the growers to packing houses, where the produce is prepared for 

 

134 Immediately following 9/11, the Transportation Security Administration moved to 

enhance security of air cargo transported on passenger air carriers. Cargo not originating 

from approved shippers or forwarders who were regular customers and familiar to the carrier 

was prohibited on passenger planes. The Known Shipper Program - now TSA's primary cargo 

security program - has been subsequently strengthened. TSA continues to prohibit all cargo 

from unknown shippers aboard passenger air carriers. Cargo not from a known shipper 

cannot be accepted by a passenger carrier and must be diverted to an all-cargo aircraft or 

another form of transport. Although TSA’s mandate from Congress was to upgrade security of 

cargo transported on passenger flights, TSA is working with the air transport industry to 

establish a system to screen, inspect or otherwise ensure the security of cargo transported in 

all-cargo aircraft. 
85

shipment to market. The packing house may be owned by one or more growers or 

may be an entirely independent business. It is typically the proprietor of the packing 

house who serves as the shipper/exporter. 

Few shippers, though, handle the often complicated logistical arrangements 

associated with transporting goods abroad. Indeed, many shippers have only a 

passing familiarity with logistics.135 Instead, they tend to rely upon freightforwarders or consolidators whose role is somewhat akin to that of a travel agent 

booking an airline flight. Freight-forwarders do not ordinarily operate airlines. 

Instead, they are wholesale purchasers of airline capacity. Specifically, the freightforwarder is expected to obtain the best possible freight charges for the shipper but 

 

135 This was certainly our impression when researching this report. For a second, more 

broadly-based opinion, see S. Kurvers’ Master’s Thesis, “Airport Conversion: An analysis of the 

conversion process from military airport to civil cargo airport,” (October 2002), Faculty of 

Aerospace Engineering, Delft University of Technology and Faculty of Economics, Erasmus 

University Rotterdam, p. 31. 

 
86

also to minimize the risks involved in transporting valuable merchandise to a foreign 

destination. Indeed, it is largely to reduce the possibility that goods will arrive in 

poor condition that air freight – even with its significantly higher costs -- is preferred 

over other modes of transport. As a result, freight-forwarders will be expected to 

select carriers and routes that best minimize such risks, even if the chosen carrier is 

more expensive or the route slightly less direct.136 

Because of the large volume of business they can generate for air carriers, freightforwarders have long enjoyed considerable leverage in bargaining for favorable 

rates. The larger the freight-forwarder, the greater the leverage that freightforwarder usually has. Furthermore, the freight-forwarder’s expertise can be brought 

to bear in selecting carriers and routes that are most apt to guarantee that the 

shipment arrives on time and in optimal condition. 

Although freight-forwarders normally arrange transport on regularly scheduled 

passenger and all-cargo aircraft, they do at times resort to the use of chartered 

aircraft to supplement scheduled services. Typically, that option is used during 

periods of peak demand or a transport crisis. For example, when West Coast ports 

were closed for 10 days in September and October 2002 by a lockout of 

longshoremen, many transpacific ocean shipments were diverted to air. During and 

after the lockout, one company, Expeditors International, organized 104 charter 

flights out of Asia. During the same period a year earlier, the same company had 

orchestrated just four charters.137 

Air carriers can be divided into three distinct groups. The first group is the so-called 

combination airlines such as United, American, British Airlines, Lufthansa, Japanese 

Airlines, Delta, and Northwest which normally focus on transporting passengers but 

also carry cargo in the lower-deck or “belly” of the aircraft. Some but not all of these 

 

136 Freight-forwarders and other frequent shippers are acutely aware that not all air carriers 

and certainly not all airports are created equal. Some carriers enjoy excellent reputations for 

handling of precious or perishable cargos, while others are regarded as less reliable. Similarly, 

certain airports are notorious for their cavalier handling of cargos, not to mention their 

pilferage rates. 

137 Journal of Commerce, July 7, 2004. 
87

airlines also operate all-cargo aircraft or air-freighters.138 A few also operate combi 

aircraft – usually wide-bodied planes in which part of the aft portion of the main deck 

is partitioned off and used to carry freight. Combination carriers account for 

approximately one-half of all air cargo transported worldwide.139 

A second group of air carriers includes companies which solely operate air-freighters, 

either on a scheduled or charter basis. Prominent in this group are Cargolux, 

Evergreen International Airlines, and Polar (a wholly owned subsidiary of Atlas Air 

Worldwide Holdings, Inc.). They may also lease cargo aircraft to combination carriers 

needing to bolster load capacity on certain routes. Historically, both the combination 

carriers and the all-cargo carriers solely provided airport-to-airport transportation. 

That proved to be a gap in service the third group of carriers – the so-called 

integrators – deftly exploited. The most prominent of the integrators are the express 

carriers FedEx, UPS and DHL. Each company operates its own fleet of all-cargo 

aircraft, but they also provide door-to-door delivery services. The express segment 

of the air cargo industry now claims 11 percent of the international air cargo 

market.140 

Since 1975, the express business has grown into a global enterprise. UPS began its 

European operations in 1976, expanding to Asia in 1988 and Latin America in 1989. 

FedEx began its service to Asia and Europe in 1984, and DHL expanded to Latin 

America, Africa, the Middle East, and China by 1986. While these three companies 

are not the only ones providing domestic or international express service, they are 

the largest in the world. 

Freight-forwarders still dominate international air freight markets, accounting for 

more than 80 percent of tonnage as recently as 2001.141 Yet the integrators are 

 

138 Among the major carriers, United Airlines does not operate air-freighters, although it has 

said that it would consider doing so on transpacific routes once it emerges from bankruptcy. 

139 Randolph Hall, “Alternative Access and Locations for Air Cargo” (Los Angeles: METRANS 

Research Center, 2002). 

140 Boeing Air Cargo World Forecast 2004-2005, p. 4. 

141 Brian Clancy and David Hoppin, “Converging on Air Freight: The MergeGlobal 2001 World 

Air Freight Forecast,” Air Cargo World, May 2001. The authors also observed that: “the 

vertically-integrated express carriers have a natural advantage in moving documents and 

small packages that are "conveyable" - that is, packages that can be fed through the conveyor 

belts at the sorting hub. Non-integrated freight forwarders have the advantage in moving 
88

making dramatic inroads as they expand their international networks and move up 

the weight spectrum to capture heavier consignments. 

At the end of 2003, there were 890 airlines worldwide that offered scheduled service 

either internationally or domestically. Of those, 808 offered scheduled passenger 

service, while 84 operated scheduled air-freighter service. (Eighty carriers offered 

both passenger and all-cargo flights.)142 These distinctions are increasingly being 

blurred. Some passenger carriers (e.g. Lufthansa, SAS and Singapore Airlines) have 

spun off their cargo divisions into independent companies which, in addition to 

operating the airlines air-freighters often contract with the main carrier for belly 

space. Some industry analysts expect that, to survive, more of the traditional air 

cargo operations will have to aggressively emulate the more extensive value-added 

model of the integrators.143 

Until the mid-1970s, European and American airlines dominated the world’s air 

freight business. Between them, European and American carriers held nearly 74 

percent of the worldwide air cargo market in 1972. Since then, airlines such as Japan 

Airlines, Singapore Airlines, Korean Air and Cathay Pacific dramatically increased 

their market share. By the end of the 20th century, the center of gravity had moved 

decisively toward the Pacific. Today, more than 80 percent of the world’s air freight 

is international, and more than 70 percent of total air cargo traffic worldwide is 

carried by non-U.S. airlines.144 

 larger consignments, from unitized small packages (multiple small packages loaded together 

onto a pallet) up to heavy or outsize pieces that could not pass through the integrated 

carriers' sorting systems.” They hasten to add, though, that the “dividing line between 

integrator and forwarder traffic is hazy, however, and hotly contested.” 

142 2003 Annual Report of the International Civil Aviation Organization (September 2004). It 

should be noted that there is an additional player in the international air cargo market, 

contract freight operators. These are essentially leasing companies which operate all-cargo 

aircraft primarily on behalf of other airlines. A fixed fee covers the aircraft, crew, maintenance 

and insurance. Such arrangements are known as ACMI leases or wet-leases. 

143 This is the view, for example, of Rigas Dogatis. See his Flying Off Course: The Economics 

of International Airlines, 3rd Edition (New York: Routledge, 2002), p. 334. “Air freight is about 

providing a delivery service and about supply chain management.” 

144 Boeing Air Cargo World Forecast 2004-2005, p. 8. 
89

The Impact of Regulation/Deregulation 

As recently as 1975, only four U.S. carriers – Pan American (PanAm), Trans World 

Airlines (TWA), Northwest, and Braniff – were authorized to fly overseas.145 The 

gateway airports for scheduled overseas service were JFK for transatlantic 

destinations; LAX and SFO for transpacific flights; and Miami International for Central 

and South American flights.146 That restrictive regime began to crumble in 1978, 

when U.S. airlines were deregulated. Following deregulation, several other U.S. 

carriers such as American, United, and Delta obtained authority to fly international 

routes. Gradually, American, United, Braniff, and Delta also brought international 

flights to other hubs, thus expanding the number of America’s aviation gateways for 

passengers as well as freight. (As of January 2004, there are some 115 U.S. airports 

designated to handle international flights.147) 

Deregulation within the U.S. ultimately had an effect on international regulation of 

air transport. Until 1979, the International Air Transport Association (IATA) set fares 

and rates, subject to government approval. In that year, the Civil Aeronautics Board 

(CAB) withdrew blanket antitrust protection from IATA. International fare-setting 

continued to be subject to case-by-case approval of the CAB and, later, the U.S. 

Department of Transportation (USDOT). As competition among U.S. carriers 

increased, however, the USDOT loosened its oversight of international pricing, 

thereby effectively deregulating first charter flights and ultimately air freight 

operations. Today, foreign governments rarely attempt to thwart U.S. carrier pricing 

initiatives, and pricing regulation in U.S. international markets is largely a thing of 

the past.148

The frequency, load capacity and specific destinations of international flights remain 

subject to extensive regulation, however. In general, international air cargo services 

 

145 U.S. Department of Transportation, The Changing Face of Transportation, p. 4-12. 

146 These were in addition to air travel between the U.S. and its immediate neighbors, Mexico 

and Canada. Mexicana Airlines’ first scheduled international flight was between Mexico City 

and Brownsville, Texas and was piloted by Charles Lindbergh. Air Canada established service 

between Vancouver and Seattle as early as 1937. 

147 On January 5, 2004, the Department of Homeland Security designated 115 airports as 

airports of entry in conjunction with the department’s US-VISIT program. 

148 U.S. Department of Transportation, The Changing Face of Transportation (2000), p. 4-11. 
90

have been regulated by the same bilateral air service agreements as passenger air 

services. Historically, the United States has negotiated air service rights for U.S. 

airlines on a bilateral basis. The agreements reached between the United States and 

each foreign country typically outline services and business practices that will govern 

operations by airlines of each country. Such agreements normally include provisions 

regarding the cities that can be served by carriers of each country, the number of 

flights that they can operate for both passenger and cargo scheduled services, as 

well as charter services, and various business rules that will govern the services of 

each country’s carriers. 

The United States has bilateral aviation agreements with 97 countries. Of those, 59 

are “open skies” agreements. Under these pacts, airlines of both countries enjoy the 

right to operate air services from any point in one country to any point in the other, 

as well as to and from third countries. 

Given the inter-connected services provided through airline alliances, the U.S. has 

been aiming to negotiate more aviation agreements that encompass services 

involving more than one foreign trading partner. The first such multilateral open 

skies agreement was signed in 2001 with Brunei, Chile, New Zealand, and 

Singapore. There have been hopes that a similar accord could be reached with the 

European Union, but negotiations have remained stymied through 2004.149 Still, an 

agreement appears eventual and its terms would likely lead to a vast expansion of 

international passenger and air cargo service to a wider array of U.S. airports. 

For example, U.S. negotiators have proposed to give carriers in all EU member states 

- including the 10 new states - open access to all points in the United States for 

service from any point within the EU. European airlines also would be permitted to 

set up hubs to operate freight and passenger flights from an American city to Latin 

America and other regions of the world. Enactment of that proposal would ensure 

 

149 A major sticking point in the US-EU negotiations is whether European airlines would be 

permitted to pick up passengers or cargo in one U.S. city and then fly on to another American 

destination. This right (known as cabotage) is being sought by European carriers, who 

question the potential profitability of simple point-to-point cargo routes. Instead, they are 

demanding the option, especially for cargo flights, of flying on to at least one additional U.S. 

destination. However, U.S. law would have to be changed to allow for such cabotage rights, 

and U.S. Transportation Secretary Norman Mineta has indicated he is not prepared to take the 

proposal to Congress. 
91

that those American cities that are rapidly growing out of their second-tier status 

would not necessarily have to rely exclusively on U.S. carriers to introduce regular 

air service between their airports and international destinations. 

Japan and China account for more than 50 percent of the transpacific air cargo 

tonnage, which is approximately twice as large as the volume of air cargo traffic 

between Europe and North America. Japan remains the largest market in Asia, but 

its market share continues to decline, dropping from 33.9 percent in 1983 to 32.0 

percent in 1993 and 25.8 percent in 2003. Japan’s decline can be attributed in part 

to China’s continuing strong growth, with its market presence increasing from a 2.1 

percent share in 1983 to an 11.7 percent share in 1993 and a 25.2 percent share in 

2003. The recent China-U.S. bilateral agreement further ensures continuing strong 

growth for China’s air cargo market. 

In 1999, the U.S. and China concluded a bilateral air services agreement which 

permitted each country's carriers to increase their weekly flights in the U.S.-China 

market from 27 to 54, and each side was allowed to designate one additional airline 

--- for a total of four --- to serve the market. In July 2004, the two countries signed 

an expanded agreement that will allow five additional airlines from each country to 

serve the U.S.-China market. The United States may name one additional all-cargo 

airline, while China may name either a passenger or cargo airline, to start service by 

the end of 2004. The other four new-entrant airlines may be either passenger or 

cargo carriers, with one new carrier entering the market in each of the years 2005, 

2006, 2008 and 2010. United Airlines, Northwest Airlines, Federal Express and 

United Parcel Service currently serve China. 

The agreement also will allow an additional 195 weekly flights for each side (111 by 

all-cargo carriers and 84 by passenger airlines) resulting in a total of 249 weekly 

flights at the end of a six-year phase-in period. A total of 14 of these flights will be 

available for new U.S. passenger services in late 2004. 

The two sides also agreed to allow each country's carriers to serve any city in the 

other country. Currently, Chinese carriers are limited to 12 U.S. cities, and U.S. 

passenger carriers may fly to only five Chinese cities. The agreement also will permit 
92

unlimited code-sharing between U.S. and Chinese airlines, thus expanding on the 

current agreement, which allows code-sharing only to a limited number of cities. 

The agreement also provides that when carriers establish cargo hubs in the other 

country, they will be afforded a high degree of operating flexibility, and expands 

charter opportunities beyond those provided by the existing agreement. The two 

sides will resume talks in 2006 to review the aviation relationship and make further 

progress on liberalizing the agreement. 

The Characteristics of Air Cargo

Air cargo has long been the preferred mode of transportation for a wide range of 

merchandise where the cost of shipping is less important than expedited delivery.150

Not surprisingly, the air cargo trade often involves emergency freight, which may 

include everything from medicines to machine parts or components needed to keep a 

manufacturing line in operation. During the fall 2002 lock-down of West Coast ports, 

for example, officials at the NUMMI automotive plant in Fremont, California were 

obliged to airfreight key automobile components from Japan by air.151 Similarly, the 

Sony Corporation more recently chartered Russian Antonov-124 cargo planes to fly 

the latest version of Sony’s hugely popular Play-Station 2 video games console to 

Europe after an oil tanker had run aground in the Suez Canal on November 8, 2004 

and halted canal traffic for the first time since 1875.152 In general, however, air 

shipments typically involve items with high value-to-weight ratios, the very kinds of 

 

150 In order to move the 504,000 bottles of Beaujolais Nouveau from France to Japan in time 

for the traditional third Thursday in November release date, FedEx operated seven charters, 

including five MD-11s. Six of the flights moved from the Lyon-Saint-Exupery Airport to Tokyo, 

and one charter went from Stansted Airport in the U.K. to Sapporo, Japan. Material Handling 

Management (November 2004). 

151 The New United Motor Manufacturing, Inc. (NUMMI) is a joint venture of the General 

Motors Corporation and Toyota Motor Corporation. The San Francisco Chronicle reported that 

NUMMI was flying in about eight cargo containers worth of parts daily via San Francisco 

International Airport, enough for a day's production of 900 cars. The plant’s truck line 

remained closed, however. See Vanessa Hua, “Auto plant takes to the air; Alternative to 

locked-out ports is extremely expensive,” San Francisco Chronicle, October 8, 2002. 

152 The New York Times, “Japan: Air Freight Rescue for Playstation,” December 8, 2004. See 

also “Manufacturers Cope with Costs of Strained Global Supply Chains” in the Wall Street 

Journal, December 8, 2004. The WSJ article observes: “Some companies are turning to more 

expensive but more reliable modes of transport, like air freight, which is faster and less probe 

to delays than ocean shipping.” 
93

products that are the hallmark of the world’s more dynamic industrial economies. 

Prominent among these high value-to-weight ratio cargos are the products of 

California’s electronics, telecommunications and other advanced technology 

companies.153 In the case of exceptionally valuable but non-perishable cargos like 

jewels, furs, art work, precious metals, air shipment is commonly preferred because 

it minimizes the length of time the goods are in transit and therefore at maximum 

risk. 

In the case of perishable items – whether fruits, vegetables or today’s newspaper – 

the purpose of air transport is obviously to deliver the shipment to market before its 

commercial life expires. A foreign grocery chain can be expected to pay premium 

prices for fresh fruit or vegetables only if the produce arrives in good condition (i.e., 

retaining its attractive physical and nutritional characteristics) and during a period of 

time in which local consumers are themselves willing to pay premium prices. That 

window is often relatively brief for agricultural produce. In some instances, the sole 

point of using air-freight is to reap the financial rewards of being first to market with 

a popular fruit or vegetable before prices are driven down once cheaper modes of 

transport are able to deliver much larger volumes of that same commodity. In other 

cases, where the produce has a particularly brief shelf-life or cannot tolerate an 

ocean voyage, there are no practical alternatives to air freight.154 California shippers 

of fresh cherries, for example, have become heavily dependent on air freight to 

move their shipments to overseas markets. Likewise, organic produce, whose prized 

status would be vitiated by the chemicals often used to retard deterioration during a 

lengthy sojourn at sea, are also prime candidates for air shipment. 

 

153 Boeing Aircraft’s 2004/2005 World Air Cargo Forecast (p. 9) notes: “Previous research of 

trade patterns suggested that commodities with value greater than US$16 per kilogram would 

potentially be transported by air. Following this result, a potential airborne cargo market can 

be determined from the tonnage of traded goods (regardless of mode) with value that exceeds 

US $16.” Boeing Air Cargo Forecast 2004-2005. 

154 Seafood is often flown to markets thousands of miles from fishing grounds. For an 

informative description of how UPS transports thousands of Atlantic lobsters each week via its 

hub in Louisville, Kentucky, see John McPhee, “Out in the Sort: Lobsters, bats, and Betleys in 

the UPS hub,” The New Yorker, April 18, 2005.
94

Shipping Rates 

There are shipping rates (also commonly known as tariffs), and then there are rates. 

Officially, international air cargo shipping rates are negotiated under the auspices of 

the International Air Transport Association (IATA), an organization that brings 

together approximately 270 airlines whose flights comprise more than 95 percent of 

all international scheduled air traffic. In practice, however, “control of cargo tariffs is 

largely non-existent or ineffectual.”155 Even though IATA Tariff Coordination 

Conferences still fix cargo tariffs on flight routes, those tariffs bear little resemblance 

to actual market rates. Their main function is to help define the rates airlines assess 

each other for transshipments involving more than one carrier. 

Airlines do not always honor rate agreements. Press reports in March 2004 indicated 

that an unexpected capacity shortage pushed airfreight rates up 30 to 40 percent.156

In many cases, forwarders and shippers were told they had to pay premium rates to 

ensure their cargo would move on the flight on which it had been booked. Shippers 

whose traffic increased often had to pay top dollar for additional space. More 

recently, carriers have imposed fuel surcharges to help recoup the run-up in fuel 

prices during 2004. 

Several considerations go into setting air cargo rates. For example, freight density is 

critical to the economics of the industry. Cargo payload on any aircraft is ultimately 

limited by weight but also by volumetric capacity. Since tariffs are based on weight, 

an airline can maximize freight revenue by carrying low volume cargos. By contrast, 

low density shipments may fill the available cargo space without fully utilizing weight 

limits. Ideally, an airline seeks to achieve a cargo balance that makes maximum 

utilization of both volume and weight constraints. However, surcharges are often 

levied on low density cargos to compensate for under-utilization of weight 

capacity.157 

 

155 Doganis (2002), p. 304. 

156 Journal of Commerce, July 19, 2004. 

157 To determine how typical air cargo shipping rates might be monitored, we queried a 

leading authority in the air freight industry. Here is his reply: “Ag exports do represent a 

growing volume in air cargo, however the rate structures are not regulated and are 

confidential. Not to say that USDA could not obtain those rates but it is a different 

environment than ocean. I can't imagine too many (read any) Indirect or Direct Air Carriers 

that would volunteer their customer rate structures to an inquiring party, government or not 

given the competitive nature of the industry. And the rate structures are varied by shipper 
95

Another important factor influencing air cargo rates is the direction of the flight. 

Unlike passenger travel, there are very seldom any roundtrip freight shipments. One 

consequence of this is that imbalances can occur on certain routes, with the volume 

of goods moving in one direction exceeding – sometimes by very substantial margins 

– the volume of goods moving in the opposite direction. This has been typical in 

recent years of airborne trade between the Far East and the U.S. even though air 

carriers have sought to attract cargos on westbound routes by offering lower cargo 

rates.158 The problem of imbalances or the lack is more onerous for all-cargo 

operations than for passenger airlines because the former’s only source of revenue is 

from cargo. Carriers are accordingly reluctant to schedule air-freighter service to 

destinations where there is little prospect of sufficient “back-haul.”159 The air carrier’s 

obvious preference is to earn as much revenue as possible on each flight. 

The Economic Significance of Air Cargo

Most members of the general public and even many public policymakers -- no doubt 

impressed by the sprawling size of maritime facilities like the neighboring Ports of 

Los Angeles and Long Beach or the Port of Oakland America’s seaports with their 

towering cranes hovering over ships carrying thousands of steel containers -- 

instinctively assume that the bulk of the nation’s international trade passes through 

 based on a number of criteria. Their source of data may be within the government strangely 

enough. The Direct and Indirect Air Carriers are required to provide select information to 

Census as well as Customs and Border Protection for the purpose of targeting shipments for 

security reasons. I understand that Census is the owner of much of the data and may well be 

averse to sharing, but you asked for an efficient and economical manner to secure the 

information and that may be the avenue to secure it.” 

 

158 “Aircraft flying into LAX from Asia and the South Pacific are crammed with cargo but carry 

precious little on the backhaul. Transportation rates reflect this imbalance. Shipping lines keep 

raising their eastbound trans-Pacific rates. Westbound, they charge less per container for the 

10,000-mile voyage to Asia than for a 1,000-mile trip from Miami to Puerto Rico. Airlines are 

grabbing every extra dollar they can squeeze from inbound customers. They not only are 

raising steeply their regular cargo rates but are telling forwarders that unless they pay express 

or premium rates – three times the already high tariffs - they cannot guarantee cargo will 

move on designated flights. Outbound U.S. freight tariffs are far lower, yet many aircraft still 

fly out half empty. ” Julian Keeling, a Los Angeles-based air cargo wholesaler wrote in a 

commentary in the Journal of Commerce on June 14, 2004. 

159 Some cargo carriers maneuver around this problem by elaborate routing patterns. For 

example, a carrier might fly freight from A to B, where it picks up goods to be flown to C, 

where it picks up goods to be flown back to A. See John D. Kasarda and Jonathan Green, “Air 

Cargo: Engine For Economic Development,” a paper delivered at the International Air Cargo 

Association Air Cargo Forum in Bilbao, Spain on September 15, 2004. They observe that: 

“Many carriers operate less than profitable backhauls or scramble to find routes allowing a 

second or third stop to make routes profitable.” (p. 7) 

 
96

our seaports. And that is literally true. When measured by weight, over threequarters of America’s foreign merchandise trade is waterborne.160 By contrast, as 

Table 3-1 reveals, a mere 0.4 percent of that trade moved by air in 2003. 

Table 3-1 

Modal Shares of U.S. Merchandise Trade Handled by Land, Water, and Air 

Gateways by Value and Weight1: 2003 

1 BTS estimated the export weight for truck, rail, pipeline, and other and unknown based on value-to-weight ratios from the 

import data. This estimation procedure was used because U.S. exporters are not required to report the export weight for land 

modes. Weight for water and air exports and imports are from U.S. Department of Commerce, U.S. Census Bureau.

2

 Includes truck, rail, pipeline, and miscellaneous surface modes. 

3 Includes purchased vehicles such as aircraft or boats moving from manufacturer to customer where the vehicle itself is 

the shipment, pedestrians carrying freight, and miscellaneous. 

SOURCE: U.S. Department of Transportation, Bureau of Transportation Statistics, based on: Value data -- total trade, 

from U.S. International Trade Commission, USITC Interactive Tariff and Trade Dataweb, available at http://dataweb.usitc.gov/, 

as of September 15, 2004; weight data -- Foreign Trade Division, U.S. Exports of Merchandise, CD-ROM and U.S. 

Imports of Merchandise, CD-ROM, December 2003. Truck, rail, pipeline, other and unknown data—USDOT, BTS, 

Transborder Surface Freight Data 2004; and special calculation, October 2004. 

 

 

160 Bureau of Transportation Statistics, U.S. Department of Transportation, “Pocket Guide to 

Transportation 2004,” p. 37. For 2002, the precise percentage of waterborne trade was 77.8 

percent. 
97

Yet when measured by the dollar value of the goods being transported, the story is quite 

different. In that case, a bit more than forty percent of the nation’s two-way 

merchandise trade was waterborne in 2003, while more than one-quarter moved by air. 

Further, as the data in Table 3-2 indicate, U.S. airborne trade has been increasing at a 

faster pace since 1990 than waterborne trade. On a worldwide basis, air cargo now 

accounts for fully 40 percent of the value of cross-border merchandise trade.161

Table 3-2. 

Value of U.S. Merchandise Trade by Land, Water, and Air Gateways: 1990-2003162

(Current $, billions) 

Year Total U.S. international 

merchandise trade 

U.S. total 

land trade 

U.S. total 

water trade 

U.S. total 

air trade 

Other and 

unknown 

1990 889 204 434 201 50

1991 910 210 435 209 56

1992 981 232 463 226 60

1993 1,046 258 477 255 56

1994 1,176 312 517 293 54

1995 1,328 338 573 355 62

1996 1,420 377 591 382 70

1997 1,560 426 626 433 76

1998 1,594 452 614 442 86

1999 1,720 501 632 496 92

2000 2,000 576 740 593 91

2001 1,870 547 718 519 86

2002 1,857 541 729 498 89

2003 1,983 563 811 523 86

Percent change, 

1990-2003 123.1 176.2 86.8 159.9 73.4

Average annual growth 

rate, 1990-2003 6.4 8.1 4.9 7.6 4.3

 

161 John Kasarda and Jonathan Green “Air Cargo: Engine for Economic Development,” a 

paper prepared for the International Air Cargo Association Air Cargo Forum in Bilbao. Spain on 

September 15, 2004. The authors are with the Center for Air Commerce of the Kenan-Flagler 

Business School at the University of North Carolina at Chapel Hill. 

162 Source: U.S. Department of Transportation, Bureau of Transportation Statistics, from U.S. 

Department of Commerce, U.S. Census Bureau, Foreign Trade Division, U.S. Exports of 

Merchandise CD and U.S. Imports of Merchandise CD, various annual December CDs. Other 

and Unknown includes purchased vehicles such as aircraft or boats moving from manufacturer 
98

Even more striking is that, when measured by value, more of the nation’s 

merchandise export trade is carried by aircraft than on the ships. As Table 3-3 

indicates, airborne exports accounted for 32.6 percent of the nation’s merchandise 

export trade in 2003, with waterborne trade (28.5 percent) and overland trade 

(26.9) with somewhat more modest shares. (As noted elsewhere, aircraft have 

carried more than half of California’s merchandise export trade since at least 1987 -- 

when state-of-origin export data first became available.163) 

A glance at Table 3-4 (Page 100) reveals not merely the importance of the nation’s 

airports as international trade gateways but also the extent to which the nation’s 

seaports are conduits for imported goods. Still, it is not uncommon to see such 

statistical testaments to air cargo’s critical importance to the nation’s export trade 

overlooked by policymakers who are apt to measure foreign trade not by dollar value 

but by the volume of Twenty-Foot Equivalent (TEU) shipping containers handled by 

the nation’s seaports, railroads and trucking lines. 

 to customer where the vehicle itself is the shipment, pedestrians carrying freight, and 

miscellaneous. 

163 In response to questions from state governors and legislatures, the U.S. Census Bureau 

began in 1987 to publish state-level export figures based on information provided on Shippers 

Export Declarations. A 1988 California State World Trade Commission study (“California’s 

Export Statistics”) compared various sources of data purporting to describe the Golden State’s 

foreign trade. That study was the first to observe that most of California’s merchandise export 

trade – when measured by dollar value – was airborne.
99

Table 3-3. 

Value of U.S. International Merchandise Trade by Mode of 

Transportation: 2003164

(Millions of current U.S. dollars) 

 Exports Modal 

% Imports Modal % 

Total 

trade 

Total 

modal % 

Water 206,205 28.5 604,881 48.0 811,086 40.9 

Air 235,602 32.6 284,741 22.6 523,343 26.4 

Truck 194,786 26.9 209,249 16.6 404,035 20.4 

Rail 26,041 3.6 69,683 5.5 95,724 4.8 

Pipeline 915 0.1 31,451 2.5 32,366 1.6 

Other, unknown, 

and miscellaneous 60,194 8.3 56,390 4.5 116,584 5.9 

Total 723,743 100.0 1,259,396 100.0 1,983,139 100.0 

 

164 Numbers may not add to totals due to rounding. Water—Excludes intransit data 

(merchandise shipped from one foreign country to another via a U.S. water port). Imports—

Excludes imports valued at less than $1,250. Import value is based on U.S. general imports, 

customs value basis. Exports—Excludes exports valued at less than $2,500. Export value is 

FAS (free alongside ship) and represents the value of exports at the port of export, including 

the transaction price and inland freight, insurance, and other charges. Sources: Compiled by 

U.S. Department of Transportation (USDOT), Bureau of Transportation Statistics (BTS), May 

2004. Water and air data—U.S. Department of Commerce, U.S. Census Bureau, Foreign Trade 

Division, U.S. Exports of Merchandise, CD-ROM and U.S. Imports of Merchandise, CD-ROM, 

December 2003. Total, truck, rail, pipeline, other and unknown data—USDOT, BTS, 

Transborder Surface Freight Data 2004. 
100

Table 3-4. 

Top 20 U.S. Foreign Trade Freight Gateways by Value 

of Shipments: 2003165

(Billions of current dollars) 

Rank Gateway Exports Imports Total 

1 Los Angeles, CA (w) 16.9 105.2 122.1 

2 JFK International, NY (a) 46.6 65.3 111.9 

3 Detroit, MI (l) 54.5 47.3 101.9 

4 New York, NY and NJ (w) 24.3 76.9 101.2 

5 Long Beach, CA (w) 17.2 78.7 95.9 

6 Laredo, TX (l) 32.4 46.4 78.8 

7 Los Angeles Internatl. Airport, CA (a) 32.6 31.2 63.8 

8 Port Huron, MI (l) 22.7 39.6 62.3 

9 Buffalo-Niagara Falls, NY (l) 27.4 32.0 59.4 

10 Chicago, IL (a) 20.6 33.7 54.3 

11 Houston, TX (w) 21.4 28.5 49.9 

12 San Francisco Internatl. Airport, CA (a) 20.6 26.1 46.6 

13 Charleston, SC (w) 13.4 26.0 39.4 

14 El Paso, TX (l) 16.7 22.5 39.2 

15 Norfolk, VA (w) 11.0 18.5 29.5 

16 New Orleans, LA (a) 13.7 13.7 27.4 

17 Tacoma, WA (w) 5.2 21.1 26.3 

18 Baltimore, MD (w) 5.7 20.3 26.0 

19 Oakland, CA (w) 7.8 17.4 25.1 

20 Dallas-Fort Worth, TX (a) 11.4 12.2 23.6 

Key: a = air; l = land port/border crossing; w = water port. 

 

165 Sources: U.S. Department of Transportation (USDOT), Bureau of Transportation Statistics 

(BTS). Air-U.S. Department of Commerce, U.S. Census Bureau, Foreign Trade Division, special 

tabulation, August 2004. Water-USDOT, Maritime Administration, Office of Statistical and 

Economic Analysis, personal communication, August 2004. Land-USDOT, BTS, Transborder 

Surface Freight Data, August 2004. Notes: Trade excludes imports of less than $1,250 and 

exports of less than $2,500. Air: Includes a low level (generally less than 2%-3% of the total 

value) of small user-fee airports located in the same region. Air gateways not identified by 

airport name (e.g., Chicago, IL) include major airport(s) in that area and small regional 

airports. Due to Census Bureau confidentiality regulations, courier operations are included in 

airport totals for only JFK, Los Angeles, Chicago, and New Orleans. Numbers may not add to 

totals due to rounding. 
101

Air cargo has also become an increasingly important source of revenue for the air 

transport industry. In 2001, British Airways estimated that close to 60 percent of its 

freight revenue on passenger flights went to cover freight-related costs. The other 40 

percent could be used to cover the other costs of operating a passenger flight which 

would have flown regardless of whether there was any cargo aboard.166 

Between 1980 and 2001, freight revenues for U.S. international air cargo carried on 

both air-freighters and aboard passenger aircraft swelled from $1 billion to over $6 

billion (in current dollars). For U.S. carriers, international freight revenues rose at a 

faster clip (9.5 percent per year on average) than did their domestic freight 

revenues, which grew at an average of 8.4 percent per year. After struggling the 

aftermath of 9/11, the air cargo industry has been recovering. The International Air 

Transport Association reported a 10.8 percent year-on-year increase in scheduled 

international traffic for October 2004 that took year-to-date traffic growth to 16.9 

percent compared to first 10 months of 2003. International cargo traffic posted 

similar gains of 12.4 percent for October 2004 compared to October 2003 and 14.0 

percent for the first 10 months of 2004 compared to the same period for 2003.167 

Air freight’s economic impact is amply felt on the ground as well, especially in those 

metropolitan areas and states served by major air cargo terminals. Just as cities 

once prospered by virtue of their location on important waterways or overland trade 

routes, no modern metropolis can flourish without efficient air links to transport 

people and goods around the globe. The significance of air transport to the 

technology sector and to the maintenance of agile manufacturing processes and 

supply chains is further reflected in research findings at the Institute of Public Policy 

at George Mason University that, on average, metropolitan regions with hub air 

 

166 Rigas Doganis, p. 319. Doganis questions the accounting practice of regarding freight 

revenues as a by-product of passenger service. He notes that the International Air Transport 

Association’s Cost Committee has recommended that the profitability of air cargo on 

passenger and combi aircraft can be truly assessed only after all operating costs have been 

allocated between cargo and passengers. If this were done, he concludes, “the carriage of 

belly-hold freight becomes marginal or unprofitable.” (p. 320) 

 

167 The IATA report came with caveats, however. "Despite a negative economic environment 

and continued uncertainty in the price of oil, international traffic is growing at breakneck 

speed. Unfortunately traffic growth and profitability do not always walk hand in hand and we 

still expect industry losses in excess of US$4 billion for this year," Giovanni Bisignani, IATA's 

Director General and CEO, said in the November 30, 2004 IATA press release announcing the 

traffic figures. 
102

cargo operations generate significantly more high-tech jobs than regions without 

hubs. In their assessment of over 300 American cities, Kenneth Button and Roger 

Stough concluded that the presence of a hub airport accounted for almost two-thirds 

of the variation in high-tech employment levels.168 As the University of California at 

San Diego’s Steven P. Erie writes, “Growing evidence indicates that what local 

governments do provide trade infrastructure fundamentally matters to their global 

competitiveness.”169

At the Airport: An Often Frantic Dance

Most air freight today moves in a variety of unit load devices (ULDs), which range 

from half-pallets to intermodal containers which can only be accommodated on widebody freighters. (See Appendix for diagrams and specification of the more widely 

used ULDs.) 

The shipment of goods by air, especially if the goods are perishable commodities like 

cherries, involves an intricate and often frantic dance that is usually orchestrated by 

the freight-forwarder or integrator. The fundamental objective is to ensure that the 

merchandise is delivered to the overseas customer on schedule, in good condition, 

and at an acceptable cost. In the calculus of air cargo, meeting delivery schedules170

and preserving the freshness and appearance of fresh produce normally takes 

precedence over cost considerations – up to a point, of course. 

Freight-forwarders weigh several factors when arranging airborne shipments of fresh 

produce. In the case of fresh cherries, for example, the process of getting the fruit to 

distant markets in top-quality condition is, for obvious reasons, a fast-paced one. 

Cold chains must be maintained throughout transit, especially while sufficient cargo 

space is being found on flights departing for distant markets. To a large extent, this 

effort requires very close coordination with air carriers, if for no other reason than 

the inherent precariousness of flight. 

 

168 See their The Benefits of Being a Hub Airport City: Convenient Travel and High Tech Job 

Growth (Fairfax, Virginia: George Mason University Institute of Public Policy, 1998). 

169 Steven P. Erie, Globalizing L.A.: Trade, Infrastructure, and Regional Development

(Stanford University Press, 2004), p. 12. 

170 The air-freighting of California cherries to Japan is scheduled to ensure that particularly 

large shipments arrive in Japan on Thursday and Fridays for weekend shoppers. 
103

Every aircraft has a certified carrying capacity that is a function of its design. Yet, for 

each of its flights, the maximum takeoff weight may vary enormously. Temperature, 

humidity, wind speed, runway conditions, airport altitude, weather condition en route 

to destination, and a host of other factors determine the allowable takeoff weight. 

For example, at a high-altitude airport even a small rise in temperature can reduce 

the aircraft’s takeoff weight limit by thousands of pounds, sometimes necessitating 

the bumping of passengers, cargo or both. Similarly, weather conditions en route can 

also dictate the nature of the aircraft’s payload. Strong winds en route or poor 

weather at a flight’s destination city may require an air carrier to allocate more of 

the maximum allowable weight to reserve fuel for a circuitous flight plan — leaving 

less allowable weight for both passengers and cargo. All the while, the plane’s center 

of gravity must also be maintained within certain parameters. 

Managing all of this is a complex chore, the final details of which are often worked 

out only in the minutes before scheduled departure of a passenger flight. At 

American Airlines, for example, the work is performed by load planners who begin 

detailed work on each flight about 90 minutes prior to its scheduled departure.171 

“Flight dispatchers — using a program that factors in information on weather, 

passengers, and cargo — determine the flight’s fuel requirements. The 

planners then assign luggage, mail, and freight to specific cargo holds and 

fuel to fuel tanks in order to keep the aircraft’s center of gravity in the 

optimal position and enhance performance....When the flight plan is done, 

fuelers and baggage handlers are told how to load the airplane. Everything 

gets finalized during the 10 minutes prior to departure. As the flight is taxiing 

to the runway, the pilots receive the final center-of-gravity information — 

based on the exact passenger count and the cargo and fuel on the aircraft — 

from the load planners. This information enables the pilots to set proper trim 

settings for the aircraft’s stabilizer and wing flaps for takeoff.” 

Decisions affecting the aircraft’s maximum take-off weight and load distribution on a 

passenger flight have a direct impact on cargo shipments because the weight and 

volume allowable for cargo can sometimes change abruptly. Since airlines are 

 

171 This description of aircraft load management is taken from “Vantage Point: Weight and 

Balance,” an article in the September 15, 2004, issue of American Way magazine by Gerard J. 

Arpey, the Chairman & CEO of American Airlines. 
104

generally less inclined to disappoint travelers, it is the cargo that is more likely 

bumped. For perishables, this could prove disastrous. According to Robert V. Dahl, 

project director of Air Cargo Management Group, a Seattle-based aviation consulting 

firm: “Airlines can afford to sell excess belly space at low prices, but the quality of 

such freight service is mixed. Freight gets bumped if passenger loads are high or if 

weather conditions mandate higher fuel loads. Also, passenger airlines prefer to fly 

during the day, while freight wants to move overnight. Thus, shippers and freight 

forwarders prefer to move their goods on freighters when they are available.”172 Still, 

because of the frequency of flights to a multiplicity of destinations, passenger flights 

remain highly attractive for shipments of perishables. 

Air Cargo Shipping Containers

Cargos shipped aboard aircraft may be palletized or enclosed in a variety of different 

sizes and types of containers or Unit Load Devices (UDLs). Some of the more 

common ULDs are depicted below. 

 

172 “Freighters – Choices, Choices, Choices,” Air Cargo World, November 2000. 
105
106

There are even ULDs designed specifically to accommodate livestock. 
107

The types of containers carried on a 747-400 freighter include: 

 

Source: These illustrations are from the Boeing Freighter Reference Guide 2003. 

Cargo Airports in the United States

In the FAA’s National Plan of Integrated Airport Systems (NPIAS) there are a number 

of classifications for airports with scheduled passenger service. Commercial Service 

Airports are defined as those airports receiving scheduled passenger service and 

having 2,500 or more annual enplanements. In 2001, there were 546 commercial 

service airports. Primary airports are defined as those commercial service airports 

having 10,001 or more enplanements. In 2001, the FAA classified 31 airports as 

large hubs, 35 were classified as medium hubs, 71 were small hubs and 282 were 

non-hubs.173 

Of the nation’s 100 largest airports in terms of air freight handled, ten are located in 

California. Of those, three are in the San Francisco Bay Area – San Francisco 

International (SFO), Oakland International (OAK) and Mineta San Jose International 

(SJC). Four are in Southern California – Los Angeles International (LAX), Ontario 

International (ONT), San Diego’s Lindbergh Field (SAN), Long Beach Airport (LGB), 

 

173 Airports Council International, “The Economic Impact of U.S. Airports” (2002), p,5.
108

and Burbank’s Bob Hope (BUR). And two are in the San Joaquin Valley Sacramento 

International (SMF) and Sacramento’s Mather Field (MHR). 

The 30 largest freight airports in the United States, measured by total metric 

tonnage, are shown in Table 3-5. The largest airport (Memphis) and the sixth 

largest airport (Louisville), owe their size to hub operations of FedEx and UPS. 

Neither airport is located in a highly populated region. Nor are they international 

gateways. They were selected by UPS and FedEx as hubs because of their central 

location relative to U.S. population, minimal snowfall, and attractive labor 

environments. 

Table 3-5. 

The third largest freight airport (LAX), the fourth (Miami) and the fifth (JFK) are all 

major international gateways, principally serving Asia, Europe and South America, 
109

respectively. Their size is not so much due to FedEx and UPS traffic as it is due to 

international airlines – especially passenger airlines that also carry freight. The third 

largest airport – Anchorage – owes its prominence largely to its ability to serve as a 

refueling and transshipment stop for Asian/North American traffic. 

Because about half of all air freight has moved in the bellies of passenger airliners, 

air cargo operations and especially the activities of freight-forwarders and other 

consolidators have been concentrated at the largest passenger hubs. Only with the 

emergence and subsequent rapid growth of the integrators did the link between air 

cargo and passenger airports start to grow more attenuated. Indeed, FedEx and UPS 

deliberately established their hubs away from the nation’s primary passenger 

airports in order to avoid the congestion and delays from which those airports 

famously suffered. 

Strategies by some regional economic development planning agencies to divert air 

cargo operations from passenger terminals like LAX or Chicago’s O’Hare are usually 

portrayed as efforts to entice airlines to shift more all-cargo flights to less impacted 

airports. Unfortunately, this tends to oversimplify the challenge. Offers of cheaper 

landing fees or modern air cargo handling terminals may be seductive as far as 

airlines are concerned, but findings ways of convincing freight-forwarders to invest in 

new facilities some distance from a region’s busiest airport may be an even more 

onerous challenge. 

Impact of New Aircraft Technology 

Over the past three decades, U.S. airlines have persistently extended their reach. 

New technology made it possible to economically serve additional airports with 

smaller planes, which could fly longer and more frequently to more distant locations. 

Over the past three decades, airlines have shifted from using a few large airplanes 

for international flights to using numerous smaller planes. Boeing, in its Current 

Market Outlook, notes the importance of the change in aircraft type: "Twenty years 

ago, the performance, capacities, and economics of airplanes then available dictated 

the business strategies of transatlantic carriers. They could either operate singleaisle Boeing 707s and DC-8s with fewer than 200 seats or fly widebody 747s and 

DC-10s with more than 300 seats. With lower seat-mile costs and newer technology, 
110

the widebodies predominated, forcing airlines to a business strategy of fewer, highcapacity flights linking only a few transatlantic gateways.”174 

Today, an ongoing shift to smaller, highly fuel-efficient and long-range airplanes is 

fundamentally transforming transoceanic air travel. Introduced in the 1980s, the 

B767 and A310 have permitted airlines to adopt more flexible business strategies 

and to offer consumers greater choice. One result is that airlines are now able to fly 

passengers and cargo to more international destinations. They save time and money 

because their travel is more direct, and they have a greater choice of convenient 

departure times because today's traffic is divided among a greater number of smaller 

capacity jets.175

The increase in aircraft range has likewise popularized non-stop flights between 

Europe and the Pacific basin. Boeing predicts that the Pacific market will continue to 

grow as political restrictions are eased and more use is made of smaller capacity 

A340 and B777 jetliners that can fly as far as, or significantly farther than, the B747-

400.176

The increased range of today’s jet aircraft have lessened the significance of the 

nation’s historic international air gateways. Not long ago, New York’s JFK dominated 

service to Europe, just as Miami was the only major gateway to Latin America, and 

SFO and LAX to the Far East. As an illustration of how technology has enabled 

carriers to leap-frog the old gateways, Evergreen International Airlines, an all-cargo 

airline that operates ten 747 freighters, will in June 2005 inaugurate a five-day a 

week freighter service between the Columbus, Ohio and Nagoya, Japan.177 Perhaps 

more astonishing is the non-stop service Singapore Airlines provides between 

 

174 Boeing, Current Market Outlook 2004. See Executive Summary. 

175 Air-freighters are often fly-by-night operations – literally. According to journalist Barry 

Lopez, freighter pilots sometimes “wear bat wings instead of eagle wings” and refer to 

themselves as "flying the backside of the clock." “On the Wings of Commerce – Air Freighters,” 

Harper’s, October 1995. 

176 Boeing, World Air Cargo Forecast 2004/2005. 

177 The announcement follows a decision by the U.S. Department of Transportation to award 

Evergreen authority to provide scheduled all-cargo service between the United States and 

Nagoya. Columbus will serve as a gateway to more than 60 destinations in the United States 

and Canada. Source: Corporate press release dated December 16, 2004. 
111

Newark and Singapore. Inaugurated in June 2004, the service uses an Airbus 340-

500 to cover the 16,600 kilometers (c. 10,000 miles) between the two cities in 18.5 

hours. 

The Future 

There may be substantial changes on the horizon, however. Each of the following 

issues either currently affects or has the potential to create significant impact on the 

air cargo industry. 

• Security. Government-mandated security regulations pose the gravest potential 

for adversely affecting the viability of the air cargo industry. Within the air cargo 

industry, there is no question that the status quo ante is no longer viable and that 

tighter inspection regimes are inevitable. “The cargo portion of the airline industry is 

exposed and vulnerable to attack, warned Duane Woerth, president of the Airline 

Pilots Association in a commentary in the March 2004 issue of the organization’s 

magazine. “If it becomes the next target of terrorism, and a cargo airliner is used 

either as a weapon, or to make a statement of some sort, the repercussions will 

affect the entire airline industry."178

At the very least, new regulations could lengthen transit times. At worse, security 

concerns could prompt an out-right ban on the carrying of freight from passenger 

aircraft. (Although such a measure is regarded as highly unlikely, no one in the 

industry doubts that Congress could be driven to adopt drastic measures should a 

passenger plane be brought down by an explosive thought to have been loaded as 

freight.) 

One pressing issue is that of determining how rigorously and thoroughly air cargo 

should be inspected. Some members of Congress have been urging intensive 

inspection of all air cargo shipments whether they are being moved on passenger or 

air-freighters. Industry officials fear the government would almost certainly impose 

draconian pre-flight inspection requirements should there be some terrorist incident 

involving air shipments. 

 

178 Captain Duane Woerth, “It’s Not ‘Just Cargo’ Anymore,” Air Line Pilot, March 2004.
112

A related concern is hijacking. In November 2004, the Department of Homeland 

Security warned state and local authorities that al-Qaeda might be plotting to fly 

cargo planes from overseas into U.S. targets. DHS offices conceded there was no 

specific threat or timetable for attack but still the warning was being taken 

seriously.179 More than 2,000 cargo flights land in the United States every day. Yet, 

while passengers and their luggage are searched before boarding commercial 

airliners, only about one percent of air cargo is subjected to a random physical 

search, according to the Coalition of Airline Pilots Association, which represents 

21,000 air-crew members, including cargo pilots. On November 10, 2004, the 

Transportation Security Administration proposed a new set of inspection 

requirements for air cargo that stopped well short of the 100 percent inspection 

demanded by critics like Massachusetts Congressman Dan Markey. 180 

• Service fragmentation. The “hubbing” versus “point-to-point” dilemma typically 

arises in the context of transporting passengers. From a passenger’s perspective, 

making flight connections through busy hubs like Chicago’s O’Hare or Dallas-Fort 

Worth frequently involves a hassle. On the other hand, flying through a hub is often 

the only way for passengers in smaller cities to reach a wide range of destinations. 

By contrast, most air cargo is indifferent to the number of stops en route to final 

destination so long as delivery schedules are met. Hubbing then becomes a more 

acceptable alternative to cargo customers when significant handling, volume, and 

rate efficiencies can be realized. However, when the goods being transported are 

perishable food products, non-stop or at least direct flights are clearly preferable to 

routings through hubs. 

• Low-cost carriers. The demands of passenger focus and operational efficiency 

(e.g., quick airplane turnarounds) reduce the priority of cargo. However, some lowcost carriers realize significant revenues by emphasizing express shipments. In 

general, though, the increasing popularity (and economic viability) of low-fare 

passenger carriers such as Southwest and Jet Blue has been putting extraordinary 

 

179 “U.S. Plans to Toughen Rules For Cargo Shipping Industry,” The New York Times, 

November 19, 2004.

 

180 The TSA proposal was published in the Federal Register on November 10, 2004. Rep. 

Markey has repeatedly pointed out that explosives contained in a parcel weighing no more 

than 16 ounces have the capacity of bringing down an airliner. 
113

pressure on the legacy carriers. (In January 2005, Delta effectively broke ranks with 

the other legacy carriers when it announced a new fare structure to permit it 

compete more directly with the low-cost carriers.) It is an industry axiom that a 

plane sitting on the ground is not earning the airline any revenue. And that insight 

has inspired the success of the low-fare carriers, whose operations emphasize 

minimal turn-around times between flights. But it is a business model that also 

leaves little time for the loading and unloading of cargo unrelated to passenger 

needs. The rise of the low-fare carriers has thus engendered speculation within the 

industry that more and more cargo will be shifted from the bellies of passenger 

aircraft into the holds of air-freighters as the legacy carriers are obliged to emulate 

the fast turnaround practices of the low-fare carriers. 

Such a development would have profound implications for the air cargo industry. At 

present, about half of all air cargo is carried in the bellies of passenger aircraft. Air 

cargo operations thus tend to be concentrated at a handful of major international 

airports precisely because those airports offer the largest number of non-stop or 

direct passenger flights to the widest range of destinations overseas. Should the link 

between cargo and passenger flights grow more attenuated, there are substantial 

incentives for air cargo operations to shift to other airports that may offer more 

space at lower costs. 

To illustrate the point, we used passenger and cargo data from LAX in 2002 to devise 

an index based on a ratio between the numbers of passengers enplaned by a specific 

carrier to the freight tonnage handled by that same carrier. The most prominent of 

the budget airlines, Southwest, carried 3.4 million passengers but just 19,544 tons 

of freight through LAX in 2002, thus scoring 175 on our index. Of the six legacy 

carriers, USAir scored 73; American Airlines, 49; Continental, 48; United, 42; Delta, 

33; and Northwest, 17. 

Other forces reshaping the air cargo industry include: higher fuel costs, technological 

changes, trade liberalization, and the advent of integrated carriers like FedEx, UPS, 

and DHL. Unlike the airport-to-airport cargo services traditionally offered by 

passenger airlines and all-cargo carriers, the integrators offer a more complete doorto-door service to shippers. The attractiveness of the integrator’s service is that all of 

the functions involved in getting a shipment from the shipper to its destination are 
114

handled by a single party. Not surprisingly, industry analysts expect that the 

passenger airlines and the all-cargo airlines will survive only by offering the more 

complete service package now being offered by the integrators. According to a 

recent commentary in Logistics Today: “The airline industry shares the perception 

that it is not competing at the same level as the integrators to deliver reliable, time 

definite service with superior information integration and visibility.”181 Whether 

airlines will respond to the challenge by expanding the scope of their delivery 

services or by forging tighter links with freight-forwarders and other 3PLs remains to 

be seen. 

On the technology front, the introduction of latest generation of commercial aircraft 

poses some interesting opportunities as well as risks for the air freight industry. The 

European consortium Airbus is building the world’s largest passenger aircraft, the 

A380, which is due to enter service with Singapore Airlines in the first quarter of 

2006. It is an immense plane with a seating capacity of 555 in three classes. 

Passengers will be seated on two decks. (In its all-cargo configuration the A380 will 

carry a 150 ton payload, accommodating 71 large cargo pallets or containers on its 

three decks. That is over 30 percent more than its nearest competitor. With a full 

cargo load, the A380 air-freighter will have sufficient range up to 5,620 nautical 

miles.) 

The A380 reflects the belief at Airbus that larger aircraft represent the answer to 

increasing congested major airports. It tacitly assumes that airlines will remain 

closely tethered to hub-and-spoke operations. 

Boeing’s Air Cargo Forecast. Boeing disagrees. The U.S. aircraft builder is banking 

on the belief that airlines will want to fly more passengers directly between more 

city-pairs and are therefore in the market for medium-sized aircraft with exceptional 

range. Boeing’s next generation aircraft is the two-engine 787, nicknamed ‘The 

Dreamliner.’ Two versions of the plane, the 787-8 and the 787-9, will carry 217-257 

passengers in three-class configurations on routes of 8,500 and 8,300 nautical miles 

 

181 “Putting Air Freight on Solid Ground,” Logistics Today (November 2004). 
115

(15,700 and 15,400 kilometers), respectively.182 In addition to bringing big-jet 

ranges to mid-size airplanes, the 787-8 and 787-9 will provide airlines with planes 

that will use 20 percent less fuel for comparable missions than any other wide-body 

airplane. It will also travel at speeds similar to today's fastest wide bodies, Mach 

0.85. Airlines will enjoy 40- to 60-percent more cargo revenue capacity. Indeed, the 

787-9 is designed to accommodate 6 full-sized pallets plus 6 LD3 containers.183 

The 787-8 and 787-9 appear to be eminently suitable for non-stop flights between 

several California metropolitan areas and overseas destinations. Major destinations 

in Europe, the Far East and Latin America lie well within the range of both planes. 

(The further implications of this class of aircraft for California’s agricultural exporters 

will be explored in the next chapter.) 

Boeing Aircraft’s 2004-2005 cargo forecast anticipates strong, long-term growth in 

the air cargo industry. After the dramatic 5.8 percent drop in 2001, induced by a 

simultaneous slowing of the world’s largest economic groupings, collapse of the 

“technology bubble,” and terrorist attacks, traffic increased more than 7 percent in 

2002. In spite of the challenges of a major Middle East conflict as well as the severe 

acute respiratory syndrome (SARS) crisis, the market showed surprising strength in 

2003 with annual growth of nearly 4 percent. Also encouraging is the unusual market 

strength indicated by a further 10.7 percent increase in worldwide traffic for the first 

five months of 2004, compared with the same period in 2003. 

World air cargo traffic will expand at an average annual rate of 6.2 percent for the 

next two decades, tripling over current traffic levels. Asian air cargo markets will 

continue to lead the world air cargo industry in average annual growth rates, with 

the domestic Chinese and intra-Asian markets expanding 10.6 percent and 8.5 

 

182 A third 787 family member, the 787-3 will accommodate nearly 289 passengers in a twoclass configuration and is designed for shorter routes of 3,500 nautical miles (6,500 km). 

183 In December 2004, Airbus hedged its bet when its two principal shareholders, EADS and 

BAE Systems, gave the go-ahead for the company to begin making "firm commercial offers" to 

potential launch customers for a new plane, the A350. The new model is actually based on the 

existing A330. It is not scheduled to enter service until the first half of 2010, two years after 

Boeing’s 787, with which it will compete. The A350 is to be offered in two versions. One will 

seat 245 passengers in a three-class configuration and will have a range in excess of 8,600 

nm (15,900 km). The other model will seat 285 passengers in three classes and will have a 

range of more than 7,500 nm. 
116

percent per year, respectively. As in the past, more mature North American and 

European markets reflect slower and thus lower than average traffic growth rates, 

with the exception of those linked to Asia and Southwest Asia. 

This trend will continue over the next 20 years as well, with capacity increasing 

parallel to the tripling traffic levels, but with fleet size not quite doubling from 1,766 

in 2003 to 3,456 in 2023. Medium-widebody and large cargo aircraft will lead fleet 

additions, growing from an overall share of 44 percent to 60 percent as traffic 

continues to build on long-haul, international trade lanes. 

The distinction between express and general air cargo continues to blur as traditional 

providers expand their time-definite offerings, as air cargo firms consolidate, and as 

postal authorities make inroads as full-fledged logistics providers. Ultimately, the air 

cargo customer benefits from improvements, increased service options, and lower 

prices as market pressure brings competing products into the market. 

International express has grown at more than twice the rate of total worldwide air 

cargo traffic, averaging 16.4 percent annually over the last decade (as measured in 

revenue ton-kilometers [RTK]). Since 1998, however, while still impressive, annual 

growth has been somewhat lower at 9.1 percent. This parallels the express industry’s 

strong double-digit U.S. domestic growth during the 1970s and 1980s, followed later 

by slower growth. 

As a proportion of total international air cargo traffic, international express expanded 

from 4.1 percent in 1992 to nearly 11 percent in 2003, a reflection of higher than 

average annual growth. Average international express shipment size grew from 

2.7kg (6.0 lb) in 1992 to 4.0kg (10.7 lb) in 2003, further bolstering the overall 

express component of international air freight traffic. 

The international market will outpace domestic growth, exceeding 83.7 percent of 

total RTKs by year-end 2023. U.S. carrier share of the world market, currently 

assessed at 29.8 percent, will decline to 23.4 percent by 2023. 

The greatest air freight market growth is expected in those markets linked to Asia. 
117

Boeing expects the size of the worldwide freighter fleet to nearly double over the 

next 20 years, from 1,766 to 3,456 airplanes. Freighters as a share of the total 

airplane fleet will fall from 11 percent to 10 percent, owing to an increase in the size 

of the average freighter. Taking 1,260 retirements into account, 2,950 airplanes will 

be added to the freighter fleet by 2023. Widebody freighters, currently 44 percent of 

the fleet, will supply over half of these additions and will conclude the period with a 

majority 60 percent share of the fleet. The number of widebody airplanes will nearly 

triple. The shift toward widebody freighters will result in a fleet-wide increase in 

average freighter airplane payload. Operators often prefer medium wide-bodies as a 

replacement for retiring medium standard-body freighters. Thus, the share of 

standard-body freighters will decrease from 56 percent to 40 percent over the next 

two decades. By 2023, freighters of all sizes will provide more than half of the 

world’s total air cargo capacity, a slight increase from today. 

World air cargo comprises freight (scheduled, charter, and express) and mail, with 

scheduled freight and express being the largest components. More than 70 percent 

of total traffic is carried by non-U.S. airlines, which have a historic growth rate of 

scheduled freight that outpaces U.S. carrier growth. Overall U.S. carrier traffic has 

seen continuing marginal share decline in recent years, as a result of the maturing of 

their domestic express market. 

Conceptually, the demand for air freight depends on the economic activity in the 

importing region or country, conditioned by transportation costs, exchange rates, 

and relative prices. 

As emerging economies develop, the non-U.S. airline market share of air cargo 

traffic will continue to expand. As we approach 2023, non-U.S. airline market share 

will reach 77 percent of total air cargo RTKs, up from slightly more than 70 percent 

recorded in 2003. Non-U.S. airlines will continue to dominate long-haul international 

routes, representing nearly 70 percent of the world’s traffic by 2023 from slightly 

over 65 percent in 2003. Traffic carried by U.S. airlines will also grow during the 

forecast period as U.S.-domiciled express carriers increase international service. The 

dominance of U.S. carrier domestic traffic as a share of the world’s total will fall from 

13.4 percent to 8.9 percent by 2023, reflecting slower growth rates and the 

emergence of domestic markets like China. 
118

Air cargo markets linked to Asia, especially the Pac 12, will lead all other 

international geographic markets in average annual growth during the period of 2003 

through 2023. Intra-Asia will grow the fastest of Asian markets, averaging 8.5 

percent growth per year, while the Asia–North America and Europe–Asia markets will 

expand at average annual rates of 7.2 percent and 6.7 percent, respectively. 

Domestic China will be the fastest growing contiguous market in the world, 

averaging 10.6 percent growth per year for the forecast period. 

The mature markets of North America and intra-Europe will grow below the world 

average rate, with 20-year annual growth rates of 4.1 percent for North America and 

5.3 percent for Europe. The North America–Latin America market is forecast to grow 

5.9 percent per year. Also projected to lag behind the world average growth rate are 

trade lanes linking Europe to Latin America (at 6.0 percent growth), North America 

(at 5.6 percent growth), Africa (at 5.2 percent growth), and the Middle East (at 4.7 

percent growth). Europe–Southwest Asia (at 6.4 percent growth) will slightly exceed 

the world average. 

Market shares will continue to change as a result of varying regional growth rates. 

While growing 10.6 percent per year over the next 20 years, domestic China will still 

possess a relatively small market share, given its current size and the market’s 

relatively short average trip distance. Overall, the share of world air trade connected 

to Asian markets, including the domestic markets of China and Japan and all 

international markets, will increase from 47.6 percent in 2003 to 59.4 percent in 

2023. 

Airbus Global Market Forecast 2003. Global summary. Air cargo has been less 

affected by the current crisis than passenger traffic. However, reductions of 

passenger schedules have led to significant changes in the composition of the active 

freighter fleet and in the utilization of aircraft, with an increased usage of larger 

aircraft, higher load factors and intensive utilization of the feeder fleet. 

Airbus forecasters believe that the increased efficiency achieved by operators of 

dedicated freighters will be maintained in the future, leading to an ever higher 

contribution by dedicated freighters to air cargo transport. Recovery of airfreight 
119

traffic is well under way and its long-term prospects are strong, with an average 

yearly growth of 5.75 percent leading to a tripling of freight tons-kilometers (FTKs) 

by 2022. This traffic will be carried by a fleet of 3,283 dedicated freighters, from a 

base of 1,499 active units in 2002. 

The ongoing recovery from the recent crisis demonstrates that the underlying factors 

for strong growth are still at work, among them the development of trade between 

Asia and Europe or North America and the need to carry quickly and safely more and 

more high-value goods. The fastest growing airfreight markets are those linking the 

Asia-Pacific region to Europe and North America. 

Seven of the Top Ten flows serve this region, six of which will enjoy traffic growth 

higher than the world average. These Asia-Pacific markets are expected to represent 

nearly 31 percent of global airfreight in twenty years’ time, compared with less than 

27 percent in 2002. 

Belly traffic will not keep pace with overall demand. Transport of goods in the 

remaining volume of passenger aircraft is attractive in terms of costs, but is 

dependent on the availability of passenger flights and on passenger load factors. 

Airbus forecasters believe that this will persist in the future, with the advantages of 

dedicated flights (time-definite supply, safety and security of cargo, controlled flight 

conditions), continuing to offset the lower marginal cost of belly transport. 

Thus, in 2002, the forecasters estimated that the 64 billion FTKs carried as 

passenger aircraft belly freight represented only 41 percent of the total FTKs 

generated. As passenger traffic, and thus available belly volume, are expected to 

grow more slowly than freight traffic, the share of belly traffic will reduce further, 

decreasing to a third of total FTKs by 2022. 

In contrast, airfreight carried on dedicated freighters is expected to grow at an 

average annual rate of 6.3 percent per year. 

Unlike passenger airlines under pressure to improve service levels by increasing 

frequencies, freight operators generally have little incentive to increase frequencies 
120

beyond once-daily service and are more likely to respond to growing traffic by 

increasing aircraft size and thereby achieving lower unit operating costs. Overall, the 

capacity of the average freighter will increase from 50.4 tons in 2002 to 60.0 tons in 

2022. 

Recent years have seen a significant increase in the number of large freighters used, 

from 286 in 2000 to 339 in 2002. Airbus forecasters believe that this trend will 

continue and that the number of large freighters in service will increase at an 

average 5 percent per year. Indeed, the bulk of new airfreight capacity will come 

from the large freighter segment, where 372 newly-built aircraft as well as 326 

conversions will be needed by 2022. 

This demand will be driven mostly by growth in long-range services, but also by the 

need to replace a number of early 747Fs due to be retired during the second half of 

the forecast period. The base fleet in operation during 2002 excluded some 51 large 

freighters which were parked or almost not utilized; most of them were 747-100s, -

200s or 747 combis which are not expected to rejoin the active fleet. This segment is 

expected to see the highest capacity growth, with a yearly average increase of 5.4 

percent over the forecast period. 

MERGEGLOBAL Forecast. MergeGlobal is an Arlington, Virginia-based consulting 

firm that focuses on developing competitive strategy for firms in the freight 

transportation and logistics industries.184 Its latest forecast states that 

intercontinental belly capacity will grow an average of only 2.7 percent per year 

between 2003 and 2008, reflecting continuing concerns about terrorism and sluggish 

business travel. Consequently, freighter capacity will grow by 6.3 percent per year, 

while fleet size will grow at a slower rate as operators up-gauge aircraft in order to 

reduce unit costs. Generally, the larger the aircraft, the more units will be added. 

The largest number of additional freighters will be required in the greater than 80-

ton category - exclusive domain of the Boeing 747-400 until the first Airbus A380 

freighter arrives in 2008. One interesting exception is the expected growth in the 25-

40 ton category, where converted A300-600s will operate in shorter intercontinental 

markets such as Europe-Middle East. Worldwide, regional freighter capacity will grow 

 

184 The MergeGlobal forecast appeared in the April 2004 issue of Air Cargo World. 
121

at 3 percent per year, due largely to competition from time-definite trucking within 

North America and Europe. 

One of the most interesting issues facing the industry is how freighter operators will 

manage the collision between two long-term trends: falling yields and rising costs. 

Yields are falling because shippers continue to squeeze spending on logistics and 

thus transportation. Customers really are demanding "more for less" every year. Yet 

costs are rising inexorably, even though competitive pressures are forcing airlines 

around the world to become steadily more efficient. The problem is that full 

freighters are an inherently more expensive form of capacity than the belly 

compartments of passenger aircraft, which generate around half of the world's 

intercontinental cargo airlift. To meet forecast demand growth, freighter aircraft 

must generate a rising share of total airlift capacity - and thus the industry's cost 

structure must rise inexorably. 

Air freight demand is geographically concentrated, as is the underlying economic 

activity. In 2003, more than 96 percent of world freight ton kilometers moved to, 

from, or within the three pillars of the world economy: Asia-Pacific, Europe and North 

America. Even more significant, 59 percent of world FTKs moved to, from, or within 

the United States alone. 

Rolls-Royce Forecast. Rolls-Royce, along with General Electric, is one of the 

principal manufacturers of modern jet engines. The company expects that the air 

cargo market will continue to expand more rapidly than the passenger market. As a 

result, the proportion of capacity offered by passenger aircraft belly holds will 

gradually shrink. To fill the capacity gap, Rolls Royce forecasters believe the 

dedicated freighter fleet will double over the next 20 years. This fleet growth, which 

is conservative compared with growth over the last decade, takes account of 

significant freighter productivity improvements in terms of ATKs/aircraft. This 

improvement includes both the increased utilization available from newer aircraft 

fleets, plus an increase in average aircraft capacity. The large (i.e., over 65 ton) 

segment is expected to triple in size, with the largest aircraft types seeing significant 

demand for new production freighter versions. 

As evidenced by the ongoing restructuring of airlines’ freighter networks around key 
122

hubs, historical trends in aircraft size increases are likely to continue, perhaps in 

contrast to developments in some passenger markets, but in line with events in the 

shipping industry. The unit cost advantages of larger aircraft have also played an 

important part in generating growth by diverting surface freight onto airlines. Feeder 

services into cargo hubs are often ‘flown’ by trucks, although the integrators do 

make great use of smaller types, including conversions of corporate jets. The air 

cargo market has already seen great liberalization and could be truly liberalized well 

ahead of passenger services. This will reinforce the large cargo hubs set up by 

leading carriers. However, although many new routes have been offered as a result 

of liberalization, and frequencies increased, many long-haul markets offer less-thandaily service. The longer door-to-door elapsed times of most air cargo mean that at 

least a twice weekly service is necessary to offer a competitive advantage. For most 

time-dependent cargo, a five per week schedule (i.e. weekdays) is sufficient. The 

world fleet of all-cargo Boeing 747s is approaching 300 airframes, up 10 percent just 

in the last two years. 

Other assessments of the future of air cargo. Paul Page, editor of Air Cargo 

World, recently admonished air cargo operators to take heed of developments in the 

passenger airline industry.185 Worldwide, he observed, air forwarders still get most of 

their space from combination carriers. But if current trends persist, the gap between 

belly cargoes and all-cargo services is apt to increase. The shift from accommodating 

cargos in the bellies of passenger aircraft to more dedicated air-freighters has 

profound implications for the air cargo industry, agricultural shippers, and state 

transportation planners. So long as the bulk of cargos were shipped aboard 

passenger planes, air cargo activities were obliged to focus on major passenger hubs 

like LAX and SFO. With cargos increasingly moving to air-freighters, airlines are free 

to consider developing air cargo facilities at airports that are less congested and 

where rents, landing fees and other costs are most likely much lower. 

Such prospects further open the door for a growth in direct all-cargo air service 

between overseas airports and California airports that are nearer the state’s principal 

agricultural regions. That subject is explored in detail in the next chapter of this 

report. 

 

185 Paul Page, “Editor’s Note: Networks,” Air Cargo World, July 2004.
123

On the downside – most decidedly – most major forecasts of the air cargo industry’s 

future have not fully reckoned with the considerable run-up in fuel costs in recent 

months and the likelihood that much higher fuel costs will be a permanent factor in 

airline operations. Rising costs together with an intense competition for passengers 

that has resulted in lower ticket prices and therefore lower revenues have placed 

combination carriers like United, Delta and American in a precarious position. These 

legacy carriers have been looking to increase their more profitable international 

services, which should normally be good news for shippers. Yet, as an April 2004 

report in the Journal of Commerce observed, airlines now “are more concerned with 

survival than about expanding cargo services” and are consequently “reluctant to 

invest in cargo projects that don’t offer a quick return.”186 

Until the U.S. air transport sector sorts itself out by eliminating one or more of the 

less competitive major carriers, it is not likely that U.S. airlines will be in a position 

to expand their share of the international air cargo market. It is therefore likely that 

foreign carriers will come to play an even more dominant role in providing the lift for 

air cargos moving into and out of an increasing number of U.S. gateways. Indeed, 

there is even some speculation that foreign carriers, with balance sheets that are 

generally healthier than their U.S. peers, could be permitted to, in effect, rescue 

certain U.S. carriers by acquiring an equity stake larger than currently permitted 

under U.S. law.187 

 

186 Ian Putzger, “Cargo may be jettisoned,” The Journal of Commerce, April 11, 2005. 

187 In a March 4, 2005 article (“EU transport chief to offer US 'open skies' olive branch”), the 

Financial Times reported that Jacques Barrot, the European Union Commissioner for Transport,

would seek to persuade U.S. officials to give European airlines the right to buy their struggling 

American counterparts. 
124

Chapter 4 

The Air Cargo System in California 

This chapter describes the air cargo system in California and how it relates to the 

needs of the state’s agricultural exporters. Of particular interest here will be how the 

current system for air-freighting goods is changing in response to shifting patterns of 

trade, technological advancements in aircraft capabilities, rising fuel costs, economic 

competition, public opposition to expanded flight operations at most of the state’s 

major airports, heightened security concerns, and changing business practices within 

the airline industry. The chapter will then conclude with an appraisal of how these 

changes are likely to specifically affect the interests of California’s agricultural 

exporters. 

Air Transport and California’s Economy: An Overview

As recently as 1998, a report published by the Institute of Transportation Studies at 

UC Berkeley observed that: “Little is known about the role of air cargo in California’s 

goods movement.”188 In the ensuing years, fortunately, a good deal more research 

effort has gone into the topic as more local economic development organizations and 

regional transportation planning agencies have come to appreciate more acutely than 

ever the economic significance of air cargo services. 

Nevertheless, air cargo’s role in California agricultural economy remains a subject 

whose surface has been barely scratched. Indeed, in an otherwise comprehensive 

2003 assessment of the state’s aviation assets, the California Department of 

Transportation devoted more attention to crop-dusting services and the use of 

 

188 H.-S. Jacob Tsao, “The Role of Air Cargo in California’s Goods Movement,” (U.C. Berkeley: 

Institute of Transportation Studies, September 1998), p. 11. Almost on the heels of the Tsao 

report, UC Berkeley’s Institute of Transportation Studies published another report on the 

challenges facing California’s air transport infrastructure. See Mark M. Hansen, Geoffrey D. 

Gosling. And Colin Rice. “The California Aviation System: Current Status and Recent Trends,” 

December 1998. 
125

private aircraft to ferry agribusiness executives around the state than to air cargo’s 

role in transporting food products to market.189 

Such an oversight is not entirely surprising. Few Californians are aware of the vital 

role air cargo services play in the Golden State’s overall export trade. Even among 

the state’s policymakers, discussions of California’s international trade infrastructure 

almost invariably revolve around the condition of our major seaports or our bordercrossings with Mexico. Yet, as the data in Table 4-1 attest, when measured by dollar 

value, more of California’s merchandise exports are transported by air than by sea 

and land combined. 

Table 4-1. 

California Merchandise Exports by Mode of Transportation 

1997-2004 

(In Millions of Dollars) 

 Total Exports By Air % By Sea % By Land %

1997 $99,161 $61,266 61.8% $17,899 18.1% $19,996 20.2%

1998 $95,768 $57,533 60.1% $16,032 16.7% $22,203 23.2%

1999 $97,920 $61,522 62.8% $14,217 14.5% $22,181 22.7%

2000 $119,640 $77,859 65.1% $16,810 14.1% $24,971 20.9%

2001 $106,777 $64,879 60.8% $19,350 18.1% $22,548 21.1%

2002 $92,214 $52,726 57.2% $17,234 18.7% $22,254 24.1%

2003 $93,955 $50,375 53.6% $19,878 21.1% $23,742 25.3%

2004 $109,968 $60,171 54.7% $21,319 19.4% $28,477 25.9%

Source: WISER 

In 2004, for example, 54.7 percent of California’s total export trade traveled by air, 

while 25.9 percent was shipped overland to Mexico and Canada. By contrast, 

seaborne shipments accounted for just 19.4 percent of the total value of California’s 

2004 export trade. Even those figures represent retreats from previous higher levels 

of airborne commerce. As recently as 2000 (the heyday of the telecom boom), 65.1 

percent of the state’s merchandise exports were shipped by air. 

 

189 Aviation in California: Benefits to Our Economy and Way of Life, California Department of 

Transportation, Department of Aeronautics (June 2003). 
126

Air cargo typically consists predominantly of high-value or time-sensitive goods, 

most notably telecommunications hardware, electronic equipment, perishable 

commodities, emergency shipments, overnight packages and documents. By one 

University of California estimate, air cargo is, on average, at least 37 times as 

valuable as goods transported by truck.190 The timely delivery of such cargos has 

become an increasingly critical requirement for many of California’s most competitive 

industries. Indeed, according to a study by the Institute of Transportation Studies at 

UC Berkeley, the ability to move goods via air cargo is more important to California 

than to the nation as a whole.191 

Air transport has become absolutely essential to the management of far-flung global 

supply chains as well as just-in-time delivery and inventory control strategies. The 

high value-added products associated with California’s advanced technology 

industries are routinely exported by air. Remarkably, upwards of eighty percent of 

the value of all merchandise exports from the San Francisco Customs District,192

which includes Silicon Valley, departed by air in the years preceding prior to the 

sharp downturn in the electronics sector during the winter of 2000-2001. 

 

190 Jacob Tsao, “The Role of Air Cargo in California's Goods Movement.” University of 

California at Berkeley Institute of Transportation Studies Research Report UCB-ITS-RR-98-7, 

September 1998, p. 43. 

191 Mark M. Hansen, Geoffrey D. Gosling and Colin Rice, “The California Aviation System: 

Current Status and Recent Trends.” University of California at Berkeley Institute of 

Transportation Studies Research Report UCB-ITS-RR-98-12, December 1998, pp. 43-45. 

192 The San Francisco Customs District encompasses all of Northern California as well as 

adjacent portions of Nevada. In 2000, before the 9/11 crisis and when the California economy 

was still thriving, air cargo’s share of the district’s $53.8 billion merchandise export trade was 

an astonishing 79.2 percent. 

 
127

Owing to a worldwide economic slowdown, the bursting of the telecom bubble, and 

the after-effects of the terrorist attacks of September 11, 2001, air freight’s share of 

the dollar value of merchandise exports leaving via California plunged to a low of 

52.1 percent in 2002 before beginning to recover. Even so, 72.3 percent of the dollar 

value of all merchandise exports leaving the San Francisco Customs District still went 

by air in 2003. Airborne exports accounted for about 48.2 percent of the total value 

of merchandise exports out of the Los Angeles Customs District that same year.

193

California’s major international airports also serve the nation as a whole, handling 

nearly one-fourth of America’s total airborne trade.194 Los Angeles International 

Airport (LAX) and San Francisco International Airport (SFO) rank second and third, 

respectively, after New York’s John F. Kennedy International Airport (JFK) as the 

nation’s principal international gateways for airborne merchandise trade. In 2002, 

Los Angeles International and San Francisco International combined to handle 22.1 

percent of the nation’s airborne international trade.195 Interestingly, California’s 

airports appear to handle cargos with a significantly higher value per kilogram than 

other airports. Cargo moving through SFO, in particular, has reportedly had a valueto-weight ratio more than twice that of most other major airports.196 

 

A June 2003 report from the California Department of Transportation’s Division of 

Aeronautics enumerated the manifold benefits of aviation and air cargo services to 

California’s.197 The report calculated that aviation accounted for nearly 9 percent of 

the state’s job rolls and its economic output. For example, in 2001 aviation was 

 

193 U.S. Census Bureau, “U.S. Exports of Merchandise: Statistical Month – December 2003,” 

(DVD Format). 

 

194 For a detailed discussion of the entrepôt role of California’s airports, see John D. Haveman 

and David Hummels, “California’s Global Gateways: Trends and Issues,” Public Policy Institute 

of California, 2004, especially pp. 19-34. 

195 “U.S. International Trade and Freight Transportation Trends 2003,” Bureau of 

Transportation Statistics, U.S. Department of Transportation, p. 41. These levels represent 

declines from previous years, as the Asian economic crisis of the late 1990s, along with the 

general economic slowdown and the effects of September 11, adversely affected air cargo 

operations across the nation. 

196 Jon D. Haveman and David Hummels, California’s Global Gateways: Trends and Issues

(San Francisco: Public Policy Institute of California, April 2004) p. 5. 

197 The report was prepared with the aid of Economics Research Associates (ERA) and JD 

Franz Research, Incorporated. 
128

responsible for an estimated $111 billion of California’s $1.3 trillion Gross State 

Product as well as approximately 1.7 million of the state’s 19.5 million jobs. 

The Caltrans report further noted that almost half of all domestic visitors from 

outside California travel by air in 2001, generating some $14.5 billion in tourist 

spending. Aviation also generates revenue for the state through a variety of taxes, 

including personal property taxes, taxable aviation gasoline revenues, taxable 

aircraft jet fuel, excise tax revenues, possessory interest tax, and sales tax on 

general aviation aircraft. Caltrans reported that total tax revenue generated as a 

result of aviation in FY 2002 was slightly over $250.2 million. 

California’s Commercial Airports

Caltrans’ Division of Aeronautics currently identifies some 254 public use airports 

throughout the state.198 These range from major international gateways like Los 

Angles International and San Francisco International to limited-use landing strips. Of 

the state’s public use airports, 29 are defined as Commercial Service airports 

providing scheduled passenger service.199 

The Federal Aviation Administration defines a Large Hub airport as one that enplanes 

one percent or more of total U.S. passengers. The state’s three Large Hub airports – 

LAX, SFO and San Diego’s Lindbergh Field (SAN) – fit into that category. Collectively, 

they provided scheduled passenger service for over eight percent of the national 

total passenger enplanements in 2001. 

. 

Medium Hub airports enplane between 0.25 percent and one percent of total U.S. 

passenger enplanements. California boasts of six Medium Hub airports: Norman Y. 

Mineta San Jose International (SJC), Oakland International (OAK), Sacramento 

International (SMF), John Wayne (SNA) in Orange County, Ontario International 

(ONT), and Bob Hope (BUR), formerly Burbank Airport. In 2001, these six airports 

accounted for more than 3.7 percent of the nation’s total passenger enplanements. 

 

198 Caltrans, Division of Aeronautics, “Aviation in California: Fact Sheet,” October 2004. 

199 The Federal Aviation Administration regards an airport to be a Commercial Service airport 

when it receives scheduled air carrier passenger service and has 2,500 or more enplaned 

passengers annually. Primary Commercial Service airports handle at least 10,000 

enplanements per year. 
129

 

Small Hub airports enplane 0.05 percent to 0.25 percent of the total U.S. passenger 

enplanements. The state features four Small Hubs: Fresno Yosemite International 

(FAT), Long Beach Municipal (LGB), Palm Springs International (PSP, and Santa 

Barbara Municipal (SBA). To be sure, scheduled passenger service represents a small 

portion of operations at these Small Hubs. Up to 90 percent of their activity involves 

general aviation. Still, in 2001, the four airports accounted for 1.7 million annual 

enplanements or two percent of the state’s total of 80.7 million annual 

enplanements. 

Non-Hub airports enplane less than 0.05 percent of all commercial passenger 

enplanements but more than 10,000 annually. In addition to commercial travel, NonHub airports contribute significantly to the state’s air transport system by providing 

facilities to accommodate fast growing corporate and business aviation segments. 

The 15 Non-Hub airports in California are: Arcata, Chico Municipal, Imperial County, 

Inyokern (Indian Wells), Jack McNamara (Crescent City), McClellan–Palomar 

(Carlsbad), Meadows Field (Bakersfield) Modesto City–County, Monterey Peninsula, 

Oxnard, Redding Municipal, San Luis Obispo, Santa Maria, Stockton Metropolitan, 

and Visalia Municipal.200

Primary Commercial Service airports provide the essential transportation 

infrastructure not only for scheduled passenger service but for all-cargo operations. 

At the same time, the state has been seeing the transition of several military airfields 

to civilian use, primarily as dedicated air cargo airports. These include: Mather Field 

(Sacramento County), March Global Port (Riverside County), and the Southern 

California Logistics Airport (San Bernardino County). Mather serves DHL and UPS. In 

December 2004, DHL announced it would establish its western regional hub at 

March. 

 

As for air cargo, fifteen California airports reported handling at least 1000 metric 

tons of freight in 2003. (See Table 4-2, Page 130.) Six of these airports ranked 

among the nation’s 50 largest conduits for air cargo. 

 

200 Because of the ongoing financial problems of many air carriers and due to the resulting 

turbulence in the aviation industry, smaller airports may occasionally see a marked shift in the 

service provided by air carriers. In some instances, such as Stockton Metropolitan, there may 

be periods in which no scheduled passenger service is available even though the airport is 

eminently equipped to accommodate carriers. 
130

Table 4-2 – California’s Primary Airports for Air Cargo 

Ranked by Metric Tons of Cargo Handled in 2003 

Airport National Rank Tons Handled 

 Change from 2002 

LAX 3 1,833,300 +2.8% 

OAK 12 597,383 -5.9% 

SFO 13 573,523 -3.8% 

ONT 15 518,710 +4.5% 

SAN 38 135,547 -6.6% 

SJC 47 108,622 -22.5% 

SMF 60 71,230 +.08% 

MHR 64 54,533 -2.7% 

LGB 66 50,873 -4.7% 

BUR 73 44,654 +12.3% 

SCK 81 33,607 +74.0% 

SNA 110 12,050 -12.2% 

FAT 124 5,176 -64.5% 

SBA 127 2,825 -0.2% 

SBP 134 1,265 +12.2% 

MHR=Mather Field; LGB=Long Beach; BUR=Bob Hope Airport (Burbank); SCK=Stockton; 

SNA=Santa Ana; FAT=Fresno Yosemite; SBA=Santa Barbara; SBP=San Luis Obispo. 

Source: Airports Council International 

During the 1990s, the volume of air cargo handled by airports throughout California 

swelled. According to a 1998 study funded by Caltrans, even out of the ten surveyed 

airports experienced a growth rate higher than 50 percent in the five years between 

1991 and 1996.201 Four out of the seven saw total air cargo tonnage more than 

double during the period. The ten airports had a combined growth rate of higher than 

50 percent in those 5 years. 

The Worldwide Airport Traffic Report published by the Airports Council International 

provides air cargo data for 12 California airports. Table 4-3 presents the total weight 

of air cargo enplaned or deplaned at these airports in 1990, 1996 and 2000 as well 

as the percentage changes seen during the two periods. Growth of air cargo at the 

airports in operation in 1996 has been very fast. Eight of these airports experienced 

growth higher than 50 percent over the six-year period from 1990 to 1996. Four of 

 

201 Jacob Tsao, Mark Hansen, Geoffrey Gosling, “The Role of Air Cargo in California’s Goods 

Movement” (University of California at Berkeley, Center for Transportation Studies, 1998.
131

these eight experienced more than a doubling of their total air cargo tonnage, with 

growth at John Wayne, Oakland, Sacramento and Fresno airports of 952 percent, 

189 percent, 122 and 116 percent, respectively. The average annual growth rate for 

Orange County Airport during the six years was almost 50 percent, albeit from a very 

low initial level. 
132

During the four-year period from 1996 to 2000, however, the growth rate in air 

cargo slowed. Those airports that had seen the strongest growth during the early 

1990s typically saw their growth slacken or their air cargo activity even decline in the 

decade’s concluding years, while growth rates at Los Angeles International, San 

Francisco International, and San Diego remained fairly stable. Table 4-4 shows the 

same data aggregated at the regional level. Air cargo growth in all four regions 

exceeded 50 percent during the first six years, while air cargo in the two smaller 

regions grew faster than in the two larger regions. During the period from 1996 to 

2000, the average annual growth rates in Southern California and the Bay Area 

dropped significantly compared to their previous levels. The San Diego area 

continued its fairly strong growth, while cargo activity in the Sacramento area grew 

at an average annual rate of 37 percent. 

By early 2001, the state and national economies had begun to slow as the “dot com” 

sector deflated. So demand for air cargo services was already waning before the 

terrorist attacks in September 2001. The industry suffered not merely from a closure 

of the nation’s airspace for several days after the attacks but from a more prolonged 

downturn in passenger air travel which resulted in a substantial drop in overall air 

cargo capacities. Still, air cargo was not as dramatically affected as passenger travel 

by the events of September 11. According to a study by the Southern California 

Association of Governments (SCAG), passenger air travel in Southern California 

dropped 47 percent following September 11th compared to a 10 percent decline in 

air cargo volume.202

 

202 Southern California Association of Governments, Regional Aviation Economic Analysis. 

(2004). 
133

California Air Cargo Tonnage (Domestic and International) 1996-2003 

According to Caltrans (See Charts 4-1 and 4-2), Los Angeles International and 

Oakland International were responsible for 56 percent of the state’s air cargo 

(domestic as well as international) in 2001. 

Chart 4-1 

Source: Caltrans Division of Aeronatutics 

Chart 4-2 

Source: Caltrans 
134

California’s Principal International Gateways

California’s two premier international gateways for both passengers and cargo are 

Los Angeles International and San Francisco International. Both have a rich history in 

providing transoceanic air service to the Orient as well as to destinations in Europe. 

However, in recent years, their once paramount role as entrepôts in the nation’s 

transpacific trade has been eroded by the liberalization of international air transport 

agreements that have opened more routes to more carriers and by the advent of 

long-range aircraft able to ferry passengers and freight between the Far East and a 

growing number of cities throughout the United States. Still, primarily because they 

are the principal airports serving California’s two largest metropolitan areas, LAX and 

SFO will continue to play a very substantial role in California’s international trade. 

In 2004, LAX and SFO handled 93.2 percent of all airborne merchandise exports 

from California. The only other California airport with significant export traffic was 

Oakland International, which handled 6.5 percent of the state’s airborne export trade 

in 2004. All of the other airports in the state collectively handled less than 0.3 

percent of the state’s airborne export trade that year. 

There has been some change in the percentage of exports moving through these 

three airports, however. In 2000, SFO’s share of the state’s airborne merchandise 

export trade was slight larger than LAX’s share – 47.5 percent and 47.3 percent, 

respectively. Oakland’s share that year was 4.6 percent. 

As the accompanying table indicates, SFO’s share of the trade has diminished 

considerably in recent years. 

 

Los Angeles International Airport was the nation’s second busiest international 

air-freight gateway when ranked by the dollar value of shipments handled in 2003, 

trailing only New York’s JFK International Airport.203 LAX also ranked seventh among 

all of the nation’s land, sea, and air freight gateways. In 2003, approximately 12 

percent of the value of all U.S. international air freight moved through LAX (See 

 

203 It should be noted that LAX trailed JFK by some distance. In 2002, JFK handled $112 

billion in air freight shipments as opposed to $64 billion at LAX. See Bureau of Transportation 

Statistics, America's Freight Transportation Gateways Connecting Our Nation to Places and 

Markets Abroad, 2004. In particular, see Table 2. Top 50 U.S. Freight Gateways, Ranked by 

Value of Shipments, 2003. 
135

Table 4-5). By weight, LAX ranked fourth among all air gateways, with seven percent 

of U.S. international air freight moving through it. (Only JFK, Memphis, and 

Anchorage handled more cargo by weight in 2003. Memphis, of course, is the 

primary Federal Express hub, while Anchorage’s Ted Stevens International Airport 

has emerged as an increasingly important transshipment point for freight moving 

between the Far East and the Central and Eastern portions of the United States.) 

LAX is owned and operated by Los Angeles World Airports (LAWA). Cargo facilities 

operated by airlines and cargo shippers and integrators occupy two million square 

feet of building space on about 200 acres of land. (The total land area of LAX is 

3,500 acres.) A significant number of off-airport freight-forwarding facilities are also 

located close to the airport. LAX is popular with shippers and freight-forwarders 

primarily because of the large number of passenger air carriers providing spot or 

contracted cargo transport. Approximately 46 percent of LAX cargo is carried in the 

bellies of passenger aircraft.204

Like SFO, LAX is a major U.S. hub for trade with Pacific Rim countries. The most 

important destination and origin markets for goods moving through LAX are Mexico, 

United Kingdom and Taiwan, and South Korea, Taiwan, and Japan, respectively (see 

Table 4-7, Page 138). Together, they account for nearly 50 percent of the total 

tonnage transported.205 In terms of merchandise transported on nonstop international 

flight segments, Seoul, South Korea was the leading origin point for imports, while 

London emerged as the top destination for exports (See Table 4-8, Page 138). 

Between 1999 and 2003, the tonnage of international air freight passing through LAX 

rose six percent (See Table 4-6, Page 137). Imports grew by seven percent, while 

exports rose by three percent (See Chart 4-3, Page 136). By value, air cargo 

shipments through LAX declined five percent, with exports falling by nine percent 

and imports by slightly less than one percent. According to the U.S. Bureau of 

Transportation Statistics, some of the major commodities exported through LAX are 

 

204 Southern California Association of Governments, “Goods Movement Program Whitepaper: 

A Survey of Regional Initiatives and a Discussion of Program Objectives” (January 2002), p. 9. 

205 This calculation is derived Form 41 International Market Data from Office of Airline 

Information, Bureau of Transportation Statistics. According to the Bureau of Transportation 

Statistics, origin-destination airport-pair data by value are not available from the merchandise 

trade data. 
136

vegetables, fruits and nuts; clothing; computer equipment; and medical instruments, 

while the leading imports are apparel, computer equipment, audio and video media, 

and office machinery. 

Chart 4-3 

Air Freight Imports and Exports via LAX, CA: 1994 - 2003 

SOURCE: U.S. Department of Transportation, Bureau of Transportation Statistics, Form 41 

Traffic - Segment Data, various years, as of Sept. 16, 2004. 
137

Table 4-5 

Value and Weight of U.S. International Merchandise Freight, 

Role of LAX, 2003 

Overall and Air Mode ($ millions) Total Exports Imports 

Total U.S. trade by all modes (land, sea, air) 1,983,139 723,743 1,259,396

Total U.S. trade by air 523,343 235,602 287,741

Value of International Air Freight by Los 

Angeles International (LAX), CA 

Total air trade through LAX, CA ($ millions) 63,838 32,590 31,248

Percent of total U.S. air freight value 12.2 13.8 10.9

Weight of International Air Freight 

Total international air freight through U.S. 

gateways (short tons) 8,391,870 3,370,539 5,021,331

Total U.S. air freight via LAX, CA (short tons) 618,812 249,342 369,470

Percent of total U.S. air freight weight 7.4 7.4 7.4

SOURCE: U.S. Department of Transportation (USDOT), Bureau of Transportation Statistics 

(BTS), based on data from multiple sources, September 2004. Merchandise Trade – U.S. 

Department of Commerce, U.S. Census Bureau, Foreign Trade Division, U.S. Exports and 

Imports of Merchandise, CD-ROM. Air Freight Tonnage – U.S. Department of Transportation, 

Bureau of Transportation Statistics, Form 41 Traffic - Segment Data, various years, as of Sept. 

16, 2004. 

Table 4-6 

Total Air Freight Exports and Imports via LAX, CA: 1999 – 2003 

(Short tons, thousands) 

 1999 2000 2001 2002 2003 

Imports 345 369 340 340 369 

Exports 242 274 253 243 249 

Total 587 643 593 583 619 

SOURCE: U.S. Department of Transportation, Bureau of Transportation Statistics, Form 41 

Traffic - Segment Data, various years, as of Sept. 16, 2004. 
138

Table 4-7 

Top 3 Destination and Origin Countries for International Air 

Freight via LAX, CA: 2003 

Rank Export destination Tons 

1 Mexico 39 

2 United Kingdom 32 

3 Taiwan 27 

 

Rank Import origin Tons 

1 South Korea 91 

2 Taiwan 50 

3 Japan 40 

SOURCE: U.S. Department of Transportation, Bureau of Transportation Statistics, Form 41 

Traffic - Segment Data, various years, as of Sept. 16, 2004. 

Table 4-8 

Top 3 Destination and Origin Cities for International Air Freight 

via LAX, CA: 2003 

Rank Export destination Tons 

1 London, United Kingdom 32 

2 Taipei, Taiwan 27 

3 Seoul, South Korea 26 

 

Rank Import origin city Tons 

1 Seoul, South Korea 91 

2 Taipei, Taiwan 50 

3 Tokyo, Japan 34 

SOURCE: U.S. Department of Transportation, Bureau of Transportation Statistics, Form 41 

Traffic - Segment Data, various years, as of Sept. 16, 2004. 

A large number of domestic and international carriers operate out of LAX. The top 

three air carriers moved 25 percent of the weight of air imports and 18 percent of 

the weight of air exports handled at LAX in 2003. Korean Air Lines carried most of 
139

the imports, while the Mexican cargo carrier, Aerotransportes Mas De Carga, 

transported most of the exports out of LAX (Table 4-9). 

Table 4-9 

Top 3 Air Carriers for Exports and Imports via LAX, CA: 2003 

(Short tons, thousands) 

Rank Export carrier Tons 

1 Aerotransportes Mas De Carga 16 

2 Lufthansa German Airlines 16 

3 Eva Airways Corporation 13 

 

Rank Import carrier Tons 

1 Korean Air Lines Co., Ltd. 45 

2 Eva Airways Corporation 27 

3 Atlas Air, Inc. 21 

SOURCE: U.S. Department of Transportation, Bureau of Transportation Statistics, Form 41 Traffic - Segment Data, various 

years, as of Sept. 16, 2004. 

FedEx has its largest Southern California hub operation at LAX, where it accounts for 

somewhat over 20 percent of the freight handled at LAX. UPS operates its west 

coast hub at Ontario, where it accounts for nearly 80 percent of the airport’s freight 

traffic. Despite this high percentage, traffic volumes for the UPS Ontario hub and the 

FedEx hub at LAX are similar. Both carriers provide limited service out of the other 

four major airports. 

Table 4-10 (page 140) displays the top 10 cargo carriers at LAX by tonnage in 2002, 

the latest year for which the airport has made figures available. 
140

 Table 4-10 

The list is dominated by passenger carriers, with just three all-freight carriers 

(FedEx, Eva, and Gemini) appearing in the top 10. Major domestic passenger 

airlines – United, American, Northwest and Delta – rank second, fourth, fifth and 

seventh. Three major foreign passenger carriers also rank high: Korea Air (3), 

Asiana (8) and Singapore (10). Collectively, the top 10 all-freight carriers only 

account for 33% of the total freight volume at the airport (the remainder being 

predominantly passenger airlines). 

The Southern California Association of Government’s Regional Transportation Plan 

(2002) forecasts that cargo volume at LAX will increase to 2.98 million tons by 2025, 

up from 2.06 million tons in 1997.206

San Francisco International Airport was the fourth busiest international air cargo 

gateway in the United States in 2003, when ranked by the dollar value of shipments 

 

206 Southern California Association of Governments, “Goods Movement Program Whitepaper: 

A Survey of Regional Initiatives and a Discussion of Program Objectives” (January 2002), p. 9. 
141

handled there. It also ranked twelfth among all the nation’s air, land, and sea freight 

gateways. In 2003, nearly 9 percent of all U.S. international merchandise air freight 

by value moved through SFO (See Table 4-11). By weight, SFO stood sixth among 

air gateways, with over 3 percent of U.S. international air merchandise tonnage 

moving through it. 

As with LAX, SFO is a major hub for trade with Pacific Rim countries. The major 

origin and destination countries on non-stop international flight segments to and 

from SFO are Japan, South Korea, and Taiwan, while the major origin and 

destination cities were Taipei, Seoul, and Tokyo (See Tables 4-12 and 4-13). The 

major categories of exports from SFO include, not surprisingly, high technology 

products like computers, semiconductors and semiconductor equipment, electronic 

equipment and parts, medical equipment, telecommunication equipment, and 

pharmaceuticals. Comparable information about the composition of imports is not 

available. SFO is also a key departure point for California agricultural exports, 

although it has been losing more and more of that market to LAX in recent years. 

In 2003, SFO handled over $47 billion worth of international air freight. A sharp 

downturn in the technology sector affected air trade passing through SFO. Between 

1999 and 2003, the value of international freight handled at SFO declined 35.4 

percent (See Table 4-14, Page 144). Exports fell by 36 percent, and imports dropped 

by 34 percent (Chart 4-4). Among the country’s top 25 international freight 

gateways, SFO had the worst decline in the value of its trade.207 Although much of 

this can be attributed to the economic travails of Silicon Valley, some critics cite the 

airport’s failure to aggressively address the requirements of air cargo carriers as a 

contributing cause of SFO’s diminished role in the international air cargo trade. 

 

207 During the same period the tonnage of freight moving through SFO declined by 12 

percent. 
142

Chart 4-4 

Air Freight Exports and Imports via SFO, CA: 1994-2003 

SOURCE: U.S. Department of Transportation, Bureau of Transportation Statistics, 

Form 41 Traffic - Segment Data, various years, as of Sept. 16, 2004. 

Table 4-11 

Value and Weight of U.S. International Merchandise Freight, 2003 

Overall and Air Mode ($ millions) Total Exports Imports 

Total U.S. trade by all modes (land, sea, air) 1,983,139 723,743 1,259,396

Total U.S. trade by air 523,343 235,602 287,741

Value of International Air Freight by San 

Francisco International Airport (SFO), CA 

Total air trade through SFO, CA ($ millions) 46,625 20,570 26,055

Percent of total U.S. air freight value 8.9 8.7 9.1

Weight of International Air Freight 

Total international air freight through U.S. 

gateways (short tons) 8,391,870 3,370,539 5,021,331

Total U.S. air freight via SFO, CA (short tons) 286,095 131,300 154,795

Percent of total U.S. air freight weight 3.4 3.9 3.1

SOURCE: U.S. Department of Transportation (USDOT), Bureau of Transportation Statistics (BTS), 

based on data from multiple sources, September 2004. Merchandise Trade – U.S. Department of 

Commerce, U.S. Census Bureau, Foreign Trade Division, U.S. Exports and Imports of Merchandise, 

CD-ROM. Air Freight Tonnage – U.S. Department of Transportation, Bureau of Transportation 

Statistics, Form 41 Traffic - Segment Data, various years, as of Sept. 16, 2004. 
143

Table 4-12 

Top 3 Destination and Origin Countries for International Air 

Freight via SFO, CA: 2003 

(Short tons, thousands) 

Rank Export destination Tons 

1 Taiwan 36 

2 South Korea 25 

3 Japan 20 

 

Rank Import origin Tons 

1 Japan 58 

2 South Korea 22 

3 Taiwan 21 

SOURCE: U.S. Department of Transportation, Bureau of Transportation Statistics, Form 41 

Traffic - Segment Data, various years, as of Sept. 16, 2004. 

Table 4-13 

Top 3 Destination and Origin Cities for International 

Air Freight via SFO, CA: 2003 

(Short tons, thousands) 

Rank Export destination Tons 

1 Taipei, Taiwan 35 

2 Seoul, South Korea 25 

3 Tokyo, Japan 18 

 

Rank Import origin Tons 

1 Tokyo, Japan 56 

2 Seoul, South Korea 22 

3 Taipei, Taiwan 21 

SOURCE: U.S. Department of Transportation, Bureau of Transportation Statistics, Form 41 

Traffic - Segment Data, various years, as of Sept. 16, 2004. 
144

Table 4-14 

Total Air Freight Exports and Imports via SFO, CA: 1999 - 2003 

(Short tons, thousands) 

 1999 2000 2001 2002 2003 

Imports 190 214 166 174 155 

Exports 134 154 128 126 131 

Total 324 368 293 300 286 

SOURCE: U.S. Department of Transportation, Bureau of Transportation Statistics, Form 41 Traffic - Segment Data, various 

years, as of Sept. 16, 2004. 

Several major domestic and international air carriers operate through SFO. United 

Airlines is the largest carrier of international merchandise exports as well as imports 

through SFO (Table 4-15). The top three air carriers (United Air Lines, Nippon Cargo 

Airlines, and Korean Air Lines) together, accounted for 45 percent of the imports and 

39 percent of the exports in 2003. San Francisco airport has recently added new 

cargo facilities, which will play an important role if the technology sector recovers 

and the merchandise trade through SFO rebounds. 

Table 4-15 

Top 3 Air Carriers for Exports and Imports via SFO, CA: 2003 

(Short tons, thousands) 

Rank Export carrier Tons 

1 United Air Lines, Inc. 19 

2 Asiana Airlines, Inc. 16 

3 China Airlines, Ltd. 16 

 

Rank Import carrier Tons 

1 United Air Lines, Inc. 28 

2 Nippon Cargo Airlines 25 

3 Korean Air Lines Co., Ltd. 17 

SOURCE: U.S. Department of Transportation, Bureau of Transportation Statistics, Form 41 Traffic - 

Segment Data, various years, as of Sept. 16, 2004. 
145

Other Key Airports

In addition to SFO and LAX, seven other airports in California reported handling 

international cargo in 2002. However, their combined tonnages amount to less than 

one percent of California’s airborne foreign trade. These airports were: Oakland 

International, Mineta San Jose International, Ontario International, Sacramento 

International, San Bernardino International, San Diego International, and Southern 

California Logistics Airport. The role of some of these facilities in transporting freight 

internationally will, however, likely change markedly in coming years. 

 

Two airports, Ontario and Oakland, have exceptionally strong potential to emerge as 

major international trade gateways. Both have a long way to go, however, before 

even approaching the status of LAX or SFO. In 2004, for example, Ontario processed 

some 108,881 international passengers, while the international passenger count at 

LAX was 16,468,590.208

Oakland’s advantage is that it serves the state’s second largest metropolitan area 

and that it has more expansion capacity and fewer weather-related delays than SFO. 

In 2002, Oakland International handled $2.9 billion in U.S. exports but only $121 

million in imports passed through Oakland International Airport.209 As with LAX and 

SFO, exports through Oakland are dominated by electronic integrated circuits, which 

account for more than one-half of the total. The remainder consists of small amounts 

of computer and office equipment, measuring and controlling devices, medical 

instruments and supplies, and aircraft and parts. Trade through OAK is primarily with 

Japan, Hong Kong, and Taiwan. Oakland will ineluctably gain a greater share of the 

international air cargo market as airlines, especially Asian-based all-cargo operations 

find SFO’s cargo handling facilities less and less satisfactory. 

Ontario International Airport (ONT) currently handles only a small fraction of the 

international air cargo tonnage that passes through LAX. 210 In 2003, ONT handled 

10,281 tons of international cargo as opposed to the 963,469 tons handled at LAX. 

Still, ONT will see a growing role in international goods movement, if only because 

 

208 Los Angeles World Airports websites. 

209 Haveman and Hummels, p. 6. 

210 Integrated carriers account for nearly 98 percent of the freight tonnage at Ontario. 
146

UPS has begun offering direct service to China each weekday from ONT.211 It is 

currently the originating point for four of the six direct weekly UPS flights flown to 

China. UPS opened its West Coast Air Hub in Ontario in 1992 with 2,100 employees. 

As of September 2004, it employs about 4,500 people at the Ontario hub and 

handles about 70 percent of the airport’s air cargo.212 Like Oakland International, 

ONT is well-situated to serve a huge population center. Given its proximity to major 

surface facilities — the I-10 Freeway to the north, the I-15 to the east, and the 

Pomona Freeway to the south — as well as ample space available for the expansion 

of facilities, the Southern California Association of Government’s Regional 

Transportation Plan forecasts an increase of nearly 380 percent in Ontario’s cargo 

traffic by 2025.213 

The competition to attract air cargo services will scarcely end there. As in other parts 

of the world, California will see intense competition among so-called secondary 

airports to capture more and more air cargo traffic. This phenomenon has already 

been evident in other parts of the U.S. For example, there has been fierce 

competition among East Coast airports seeking to become regional air cargo hubs. 

Philadelphia International Airport is now regarded as a leading contender to grow as 

a cargo gateway in the northeastern quarter of the country.214 By some accounts, 

this trend toward regional gateway development began when the international 

 

211 Los Angeles County Economic Development Corporation, “International Trade Trends & 

Impacts: The Southern California Region 2003 Results and 2004 Outlook,” May 2004, p. 6. 

212 Phil Pitchford, “Stakes Run High As Airports Compete,” Riverside Press Democrat, 

September 20, 2004. Pitchford quotes Oscar Sepulveda, a UPS spokesman in Ontario, on the employment 

figures.

213 The forecast specifically calls for an increase in the volume of cargo traffic at ONT to 2.25 

million tons by 2025, a 379 percent increase over the Tegional Transportation Plan’s baseline 

planning year of 1997. 

214 Another example that whets the aspirations of the proprietors of decommissioned military 

airfields throughout the country is DHL’s new Wilmington, Ohio hub. In the fall of 2004, 

ground was broken on a $300 million project at Wilmington, Ohio, for DHL's expanded air and 

ground hub. The DHL expansion at the Wilmington Air Park is divided into 42 construction 

projects, including a new Network Operations Control center and a new computer facility. DHL 

strengthened its foothold in the North American market in 2003 when it acquired Airborne 

Express as well as Airborne's Wilmington facility. DHL will continue to operate a separate, 

backup operation at its former North American hub at the Cincinnati/Northern Kentucky 

International Airport, where its new $230-million sorting center opened last year. 

 Approximately 1.2 million sq. ft. of additional space for sorting packages and 36 acres of 

aircraft ramp pavement are planned at Wilmington. By late 2005, the Wilmington airport, a 

former USAF Strategic Air Command base, is expected to increase capacity to handling 1.7 

million shipments a day. 
147

freight forwarder Panalpina established a gateway at Huntsville International Airport 

in Alabama. The inland Port of Huntsville now combines the airport, an international 

inter-modal center and an industrial park serving the Tennessee Valley region and, 

by truck, the entire southeast U.S. region. Panalpina continued the trend toward 

regional gateways by opening facilities at Bradley International Airport near Hartford, 

Connecticut in 2002. Atlanta’s Hartsfield International and even New Orleans’ Louis 

Armstrong International are also trying to make inroads into Miami International’s 

long stronghold as America’s dominant air cargo gateway to Latin America. 

It is worth noting, though, that even some of those leading the development of 

regional air gateways expect that growth in air cargo traffic will continue primarily at 

those airports served by both passenger airlines and air cargo carriers. All-cargo 

airports can be profitable under certain circumstances, but it is often more attractive 

financially and logistically for cargo carriers and passenger carriers to share the same 

airport.215

The history of Kinston, North Carolina’s Global TransPark offers one important 

cautionary tale. Opened in 1999, the facility was originally intended to become an air 

cargo hub that would include manufacturers and other industrial users. Perhaps 

because the facility’s development was championed by John Kasarda, the highly 

regarded director of the Kenan Institute of Private Enterprise at the University of 

North Carolina, the project attracted considerable grant money from the state. 

Today, though, the facility is foundering, having lost more than $7.6 million in the 

past two years. Worse, it has almost no prospect of paying off a state loan of 

approximately $30 million by a July 1, 2005 deadline. State lawmakers, already 

disenchanted with the project, may then pull the plug. According to one analysis, 

critics of the project have pointed to the lack of any real concentration of industry in 

the primarily agricultural region of eastern North Carolina where the airport is 

located.216 

 

215 James Ott, “Future Cargo Hubs: Primary airports are expanding; secondary ones are 

looking like gateways,” Aviation Week & Space Technology, November 15, 2004. 

216 Ed McKenna, “Global TransPark Crowded with Debt,” Traffic World, January 24, 2005. 
148

Here in California, Palmdale, March Global Port, San Bernardino International, 

Stockton Metropolitan, Mather Field, and Victorville217 have all been proposed as 

major freight airports. Yet with nearly half of all air freight traffic through LAX carried 

aboard passenger airlines – many of them foreign-flagged – it would be exceedingly 

difficult to convince freight-forwarders and other logistics providers to relocate their 

operations to more remote airfields. Palmdale enjoys the advantage of being 

operated by Los Angeles World Airways, which also runs LAX. March Global Port has 

recently been designated as a regional hub by DHL.218 San Bernardino International 

had hoped to become the regional hub for DHL, but lost that contest to March. 

Victorville, which bills itself as the Southern California Logistics Airport, touts its 

proximity to Union Pacific Railroad (UPRR) and the Burlington Northern Santa Fe 

Railway (BNSF) trunk lines. Indeed, its promotional literature devotes considerable 

attention to its potential as to become “the eastern arm of the Alameda Corridor, 

which links the ports of Los Angeles and Long Beach with several inland intermodal 

container transfer facilities.” 219 

Air Cargo in Southern California

The Southern California Association of Government’s Regional Transportation Plan 

(RTP) forecasts that 9.5 million tons of air cargo will be handled by the region’s 

airports in the year 2025.220 That would represent a 265 percent increase in volume 

over the 2.6 million tons of cargo handled by the region’s airports in 1997. To meet 

this anticipated future demand, the RTP calls for both an expansion of existing 

commercial service airports and the development of several new facilities at former 

military air base sites, including Norton Air Force Base (now San Bernardino 

International Airport), George Air Force Base (now Southern California Logistics 

Airport), March Air Reserves Base (now March Global Port), and Palmdale Regional 

 

217 “Southern California Logistics Airport Development OK’d; Ground for the new intermodal 

rail facility will be broken within two years,” California Trade Report, November 22, 2004. 

218 In April 2005, the Federal Aviation Administration threatened to disqualify March Global 

Port from receiving millions of dollars in future funding. At issue was a rule blocking private 

airplanes from using military-owned airfields. Until it is resolved, the FAA said it will no longer 

consider grant applications from the civilian reuse authority at March. See Kimberly Trone, 

“March Airport Funding at Risk,” The [Riverside, CA] Press-Enterprise, April 27, 2005. 

219 The literature does not address why anyone would pay premium prices to ship cargo 

thousands of miles by air only to see it complete its journey on a slow-moving train. 

220 Southern California Association of Governments, “Goods Movement Program Whitepaper: 

A Survey of Regional Initiatives and a Discussion of Program Objectives” (January 2002), p. 9. 
149

Airport. SCAG’s regional aviation strategy aims to disperse passenger and cargo 

capacities throughout the region. Not only would this relieve operational pressures at 

LAX, it would ensure the development of air services nearer to some of the 

Southland’s fastest-growing areas. 

To diversify the air cargo load, SCAG has long promoted the development of a 

regional airport system. That system would include a new global cargo port at March 

could handle 1.1 million pounds annually, making it third in the region after Los 

Angeles and Ontario airports. Development of March as an international air cargo 

facility would be beneficial to agricultural exporters throughout much of Southern 

California who must now truck produce across the L.A. Basin to reach LAX. 

Under the RTP, LAX would stay largely stable with 2.34 million tons of cargo 

anticipated by 2030, up from slightly more than 2 million tons this year. Airports at 

Ontario, Palmdale and the former Norton and George military bases in San 

Bernardino and Victorville respectively would handle a combined 6 million tons 

annually of a projected 8.2 million total tons. 

There are some evident flaws, however. After examining the detailed master plan 

guiding the $11 billion renovation of LAX that would permit millions of additional 

airline passengers a year, one Los Angeles newspaper observed that the plan “fails 

to provide more freeway lanes or significant mass-transit projects to handle the 

expected crush.”221 Yet, as the California Business, Transportation and Housing 

Agency’s January 2002 report, “Golden Gateways Development Program,” observed 

“For the international airports, truck access is a critical problem, especially at Los 

Angeles, Oakland, and Ontario airports. San Diego also has operating constraints, 

and runway and land-use limitations. Expansion of California’s largest airports is 

hindered by urbanization, ground access limitations, air quality restrictions and local 

opposition. Sufficient air transport capacity needs must be addressed, which 

balances mobility needs, security concerns, and community impacts in providing an 

integrated system of airports in California.” 

 

221 Los Angeles Daily News, November 20, 2004. 
150

One of the larger challenges of transportation planners lies in convincing airlines, 

freight-forwarders, trucking lines and other crucial elements of the infrastructure 

needed to support air cargo operations to assume the considerable costs and risks 

associated with shifting all or even part of their operations to an airport other than 

LAX (or SFO in the north.) 

From the carrier perspective, LAX offers several advantages simply because it is the 

principal international passenger airport in the region as well as Southern California’s 

primary domestic airport for several major airlines. As a transshipment hub, it would 

be very difficult and expensive to duplicate the breadth of air transport and logistical 

services available at LAX anywhere else. Moreover, despite population sprawl, LAX 

remains the most centrally located major airport in relation to the region’s population 

and industrial base.222 

From the perspective of shippers, truckers, and freight-forwarders, LAX offers similar 

advantages, most importantly an ability to accommodate larger aircraft (including 

the superjumbo Airbus 380), a central location relative to customers, and flight 

connections to a large number of destinations. The biggest disadvantages of LAX are 

reportedly the costs of leases223, crowding, and traffic congestion. 

In one recent study, interviewees indicated they were very concerned about traffic in 

the vicinity of LAX. However, the interviewees did not view Palmdale to be a viable 

alternative. The reduction in congestion, crowding and cost of operation evidently do 

not adequately compensate for its remoteness. And although the Palmdale airport is 

located in a less congested area, trucks would still need to negotiate considerable 

congestion in the LA region in order to reach Palmdale.224

 

222 Of course, one important reason for the continuing dominance of LAX is that, in failing to 

develop local airports to meet rising local demand for air transport services, residents and 

businesses in both Orange County and San Diego County have no alternative to LAX for their 

international travel or shipping needs. 

 

223 The University of Southern California’s Randolph Hall reports that LAX currently has the 

second highest commercial lease rates in the country, behind only New York’s JFK. See his 

report entitled “Alternative Access and Locations for Air Cargo” published in June 2002 by 

METRANS, a transportation research collaborative of the University of Southern California and 

California State University, Long Beach. 

224 Ibid. 
151

The great majority of freight-forwarders operate in very close proximity to LAX as 

well as to SFO. In strong contrast to integrated carriers, forwarders do not spread 

their facilities throughout the region. This can be attributed to the relatively large 

size of their shipments (making it less important to consolidate loads close to the 

shipper/receiver), and due to forwarders’ reliance on trucking companies for 

providing ground transportation service (which operate their own distinct terminals). 

The forwarders themselves are not positioned to serve airports other than LAX. 

By contrast, San Diego’s Lindbergh Field is simply not a significant player on the 

international air cargo scene. For 2004, for example, the airport’s on-line monthly 

traffic reports indicate that international freight tonnage represented less than onehalf of one percent of its total air cargo tonnage.225 In fact, two-way international air 

cargo traffic through SAN had plummeted by nearly 90 percent from 2003. Airborne 

exports dropped to a mere 583.4 tons in 2004. In this case, the plunge in 

international air cargo was almost entirely attributable to the cessation of British 

Airways’ non-stop service between San Diego and London in July 2003, leaving San 

Diego with international service only to Canada and Mexico. 226 

San Diego area officials and voters have long wrestled with how best to meet the 

area’s current and future air transport needs. Over the past several years, various 

parties have proposed various schemes – including a cross-border airport venture 

with Tijuana, Mexico. Seeking to bring the civic dithering to an end, the California 

Legislature in 2001 established the San Diego County Regional Airport Authority. The 

new agency’s objective is to present voters with a preferred site for a new regional 

airport by 2006, while keeping Lindbergh functioning as efficiently as possible 

through the decade or two that it would take to construct any new airport. The 

authority's search for a potential airport has centered on nine possibilities ---- eight 

new sites and a plan to aggressively expand Lindbergh Field itself. 227 The San Diego 

 

225 San Diego’s international air cargo traffic went from 6,499.8 tons in 2002 to $5,504.5 

tons in 2003 to $583.4 tons in 2004. Through the first quarter of 2005, 160.5 tons of 

international cargo passed through the airport. Source: San Diego Airport Air Traffic Reports. 

226 See Michael Kinsman, “Flights to London to end soon,” San Diego Union-Tribune, July 11, 

2003. 

227 The San Diego Regional Airport Authority has named nine potential sites for an 

international airport: the Marines' Miramar Air Station, East Miramar and Camp Pendleton; 

North Island Naval Air Station; March Air Reserve Base near Riverside; Boulevard in East 

County; the Borrego Springs area; the Imperial Valley desert; and an expansion of Lindbergh 
152

County Regional Airport Authority expects to decide in 2005 which short-term course 

should be taken in shoring up the area’s air transport system, while seeking to 

identify a site for a new regional airport. 

In the meantime, San Diego will likely remain a relatively inconsequential player in 

the international air cargo industry. And that comes with a price. As UC San Diego 

professor Steven P. Erie concludes: “Lindbergh Field’s international passenger and air 

cargo deficiencies cost the region’s economy an estimated $4-5 billion annually in 

high value-added activity and hinder San Diego’s aspirations to become a leading 

export-based high-tech center. That opportunity cost will only grow in the future.”228

Even worse, failure to develop an air transport facility commensurate with the needs 

of local industry only ensures that the San Diego region’s economic destiny will 

continue to be influenced disproportionately by transportation infrastructure 

decisions taken by officials in other counties. 

Air Cargo in the San Francisco Bay Area 

Air cargo’s role in the San Francisco Bay Area has been the subject of several recent 

reports, prominently including those undertaken by the Bay Area Economic Forum. 

In 2000, the Forum published a two-part assessment of the importance of air 

transport to the region’s economy.229 The organization also released a report on air 

transport in the Bay Area in the aftermath of the 9/11 tragedy.230 Most recently, it 

issued a report in November 2004 on the economic effects of competitive air service 

at San Francisco International Airport.231 

 Field. Because of their distance from metropolitan San Diego, the Borrego Springs and 

Imperial Valley options appear to be non-starters. Consideration of military bases in the area 

inevitably funds afoul of the debate over military base-closings. For an analysis of the politics 

of regional airport selection, see Gig Conaughton, “Airport officials: Speed up Lindbergh 

improvements,” North County Times, December 14, 2004. 

228 Steven P. Erie, Globalizing L.A.: Trade, Infrastructure, and Regional Development

(Stanford University Press, 2004), pp. 217-218. 

229 “Air Transport and the Bay Area Economy: Phase One” was published in January 2000. 

Phase Two came out in November of that same year. 

230 “Air Transport and the Bay Area Economy – Crisis in Air Travel: Weathering the 

Downturn,” (January 2002). 

231 “Economic Impacts of Competitive Air Service at San Francisco International Airport,” 

(November 2004). 
153

Unlike Southern California, there has been no concerted effort in the Bay Area to 

devise a comprehensive strategy for dealing with the region’s air transport needs. 

Indeed, officials at SFO have strenuously resisted efforts to coordinate operations at 

the Bay Area’s three principal airports. (In 2001, SFO officials argued that 

coordination of Bay Area airports would result in: (a) more than 9 million passengers 

per year being unable to use the airport of their choice; (b) almost immediate 

capacity issues at both Oakland and San Jose International airports if enough flights 

are shifted to reduce SFO’s delays, and (c) virtual elimination of freighter cargo at 

SFO.)232

Those needs are likely to be considerable in the years to come. The Bay Area 

Economic Forum anticipates that cargo tonnage through the Bay Area’s three major 

international airports – SFO, Oakland International and Mineta San Jose International 

– is expected to double from 1.75 million tons currently to 3.2 million tons by 2005 

and triple to 5.5 million tons by 2020 – reflecting an average annual growth rate of 

6.2 percent. Despite the daunting challenge of accommodating that much growth in 

the volume of air cargo, regional transportation planners and public officials appear 

content to leave the problem’s resolution to competition among Bay Area airports 

and those in adjacent areas of Northern California. 

A November 2000 report by the Bay Area Economic Forum stated that 58 percent of 

the air freight shipped through SFO traveled in the bellies of passenger aircraft.233 

By its own admission, SFO is one of the most weather-delayed airports in the nation, 

primarily because of its outdated runway configuration. The airport’s parallel 

runways, built in the 1940s, are separated by 750 feet, whereas the Federal Aviation 

Administration now requires runways to be separated by 4,300 feet for use in all 

weather conditions. SFO can normally handle 60 landings an hour in clear weather. 

In poor visibility, however, federal regulations oblige airport authorities to close one 

of the runways, effectively cutting in half the number of permissible arrivals. In the 

 

232 SFO press release dated April 21, 2001 and titled. “SFO Officials React To Independent 

Report On Alternatives To Reduce Delays Without Runway Separation.” The press release 

alludes to the findings of a Charles River Associates study of the impact of alternatives to 

building a new runway at SFO. 

233 “Air Transport and the Bay Area Economy: Phase Two,” Bay Area Economic Forum 

(November 2000), p. 10. 
154

fall of 2004, SFO installed a new instrument landing system that airport authorities 

expect will allow up to 38 landings per hour in adverse weather.234

Some aviation industry critics have argued that the situation at SFO has led some 

airlines to be reticent about inaugurating new service there. 235 While it is certainly 

true that SFO has dropped from being the nation’s fifth busiest passenger airport in 

2000 to 13th in 2003, it is a difficult allegation to prove. Indeed, the recent 

inauguration of new or expanded international service at SFO by carriers such as 

Cathay Pacific, Independence Air, Air New Zealand, Iceland Air, Vietnam Air and ATA 

suggests that SFO still has considerable drawing power. 

Still, there remain questions about SFO’s future role in serving Northern California’s 

air cargo. Rather than consider proposals for a strategy of coordinating operations of 

the Bay Area’s three primary airports, SFO management in the early 2000s banked 

heavily on securing clearance to build a new runway that would have extended out 

into the bay. When the new runway option was finally defeated in 2003, the Bay 

Area was left with a growing need for air transport services but no coherent plan to 

cope with it. The contrast with Southern California’s efforts to alleviate the burden on 

LAX by shifting more of that region’s international flights to other facilities could not 

be more stark. 

Across the Bay, Oakland International (OAK) has lately replaced Mineta San Jose 

International as the Bay Area’s second largest passenger airport. Its growth has been 

spurred by the advent of low-fare carriers, especially Southwest Airlines, and more 

recently JetBlue Airways. Officials at the Port of Oakland, which operates OAK, have 

indicated that they plan to continue to focus on low-fare flights to domestic airports as 

well as to vacation destinations in Mexico and the Caribbean. They insist they have 

plans to challenge San Francisco International for lucrative international fliers.236 

 

234 Alan Gathright, “Technology to boost SFO’s foggy landings,” San Francisco Chronicle, 

October 27, 2004. 

235 Stanford Horn, “A small, fast way to end SFO delays,” San Francisco Chronicle Open 

Forum, October 21, 2004. Horn, a Bay Area transportation writer, suggests diverting general 

aviation and smaller commuter aircraft to some of the region’s secondary airfields, especially 

when visibility at SFO is poor.

236 David Armstrong, “Port of Oakland in expansive mood; New chief's ambitious agenda,” 

San Francisco Chronicle, August 15, 2004. 
155

Oakland International Airport currently accounts for the largest share of air cargo 

operations of the three major Bay Area airports, carrying 70 percent of domestic air 

freight (Chart 4-5). Nearly 70 percent of its cargo business comes from FedEx, which 

uses Oakland as its West Coast hub. UPS accounts for another 20 percent of 

Oakland’s air cargo. 

 Chart 4-5 

Source: Oakland International Airport Website 

International cargo traffic at Mineta San Jose International has fallen dramatically in 

the past three years, even though American Airlines has continued to offer a daily 

non-stop connection to Tokyo’s Narita Airport. During the fiscal year ending June 30, 

2002, SJC handled 771.4 short tons of international air freight. By the end of the 

next fiscal year, though, international cargo had fallen over 63 percent to 285.9 tons 
156

and then dipped even more abruptly to just 7.9 tons in the fiscal year ending June 

30, 2004.237 

Airfield and facilities congestion currently constrain domestic air cargo development 

at SFO. As a result, future growth in domestic air cargo, as well as in domestic 

passenger volume, is expected to occur primarily at Oakland and San Jose 

International Airports. SFO, however, is expected to retain the lion’s share of 

international air cargo arriving or departing the Bay Area. 

While SFO may be the most preferred international gateway in Northern California, 

the region’s shippers and freight-forwarders often send cargos by truck to Los 

Angeles International Airport. One reason for this is that LAX offers an even wider 

choice of air carriers flying to an even larger number of destinations worldwide. In 

addition, because of the more competitive air cargo market, shippers are usually 

able to find lower shipping rates for cargos moved through LAX.238 Another reason is 

suggested by Sarah L. Bachman in a 2003 study for the Pacific Council on 

International Policy: “Inefficient Oakland and San Francisco airports and marine ports 

are losing business to their rivals, particularly those in Southern California. Some 

freight forwarders truck shipments to Los Angeles to avoid congestion and delays in 

the Bay Area. 239

SFO, has lately come in for sharp criticism for an allegedly lax attitude toward air 

cargo. In a September 2004 commentary in Air Cargo World, David E. Wirsing, the 

executive director of the Airforwarders Association, a national organization 

representing air freight-forwarders, took SFO’s management to task. Wrote Wirsing: 

“[T]he management of SFO has fallen short in ensuring that the airport's cargo 

infrastructure is as accessible for users as its passenger facilities....As a result of this 

inattention, it is an open question whether SFO will be able to provide the global 

links for air cargo that businesses in the Bay Area will require in the years ahead. It 

 

237 Officials at SJC were unable to offer an explanation for the drop in international cargo 

except to say they were merely reporting figures provided by air carriers. Given the relatively 

low tonnage involved, it is possible that American Airlines decided to consolidate its freight 

handling at SFO. 

238 “Air Transport and the Bay Area Economy: Phase Two,” Bay Area Economic Forum, 

November 2000, page 31. 

239 S. L. Bachman, “Globalization in the San Francisco Bay Area: Trying to Stay at the Head of 

the Class” (Los Angeles: Pacific Council on International Policy, January 2003), p. 1. 
157

is well known in the air cargo industry that SFO has not taken seriously its 

responsibility to provide its tenants the facilities necessary to accommodate the 

demands of Northern California exporters.”240 

Wirsing was also critical of SFO’s plan to construct over a period of several years a 

new air cargo terminal designed primarily to serve the needs of U.S. carriers such as 

United which do not operate air-freighters but carry cargos in the bellies of 

passenger aircraft. “The proposed terminal also is not intended to house the 

international carriers who use freighters to accommodate Northern California 

exporters. They would remain in warehouse facilities off-airport in congested areas 

never intended for those purposes.” 

Catering to the more automated requirements of all-cargo carriers is becoming a 

major point as more and more Asian carriers have – in contrast to their American 

counterparts -- been aggressively adding to their freighter fleets. At SFO, though, 

United Airlines is far and away the largest tenant, accounting for approximately 48 

percent of the passenger traffic at the airport. Other airports in the region, notably 

Oakland and Sacramento’s Mather Field, have been deliberately targeting Asian 

cargo carriers now using SFO by promising better facilities.241

Wirsing’s laments about SFO echo a March 2001 commentary in the Journal of 

Commerce.242 In describing the opening of SFO’s massive new international 

passenger terminal, the newspaper’s Chris Barnet remarked: “Not everyone, though, 

is thrilled with SFO's soaring new monument to foreign travel. Some shippers, 

forwarders, customs brokers and airlines see the passenger terminal and a new car 

rental complex as proof that air cargo is a second-class citizen at the nation's fifthbusiest airport.” 

 

240 David E. Wirsing, “San Francisco is a too-familiar example of airports that neglect the 

needs of air cargo,” Air Cargo World, September 2004. 

241 See Mark Larson, “Study sees China as huge boost to Mather,” Sacramento Business 

Journal, April 15, 2005.

242 Chris Barnett, “What about air cargo? Air cargo carriers complain that San Francisco 

International Airport is a difficult place to do business,” JoC, March 12, 2001. 
158

“Their frustration is growing,” Barnet went on. “SFO's international cargo terminals 

are located three miles north of the airport. With Silicon Valley workers clogging the 

Bayshore Freeway and the main cargo access road torn up by four years of 

construction, carriers must impose early cutoff times that truckers, trapped in traffic, 

sometimes miss. Importers complain that while international travelers are promised 

swift U.S. Customs clearance, there is a shortage of agents to clear inbound freight.” 

Writing in the San Francisco Chronicle in November 2004, William F. Shea, a former 

associate administrator for airports with the Federal Aviation Administration and a 

former chief of Caltrans Aeronautics Division, warned that the “region's unmet 

aviation needs are in danger of spiraling out of control unless county and state 

policy-makers become more pro-active now and make plans to provide a new 

airport.”243

Air Cargo in the Central Valley

California’s Central Valley is the heartland of the state’s agricultural economy. It is 

also a region undergoing a fast-paced metamorphosis as a result of extensive 

population growth and economic diversification. Although non-stop international 

service from its airports is currently limited to flights to Mexico, the situation is 

expected to change considerably within the next decade.244 

Mexicana Airlines has been serving Sacramento International Airport (SMF) since 

2002 with non-stop and direct flights to Mexico. And despite growers’ concerns about 

airborne pests, the Mexican carrier has been building popular support for air serve 

from Fresno Yosemite Airport.245

The inauguration of direct or even non-stop air service to international destinations 

will offer grower/shippers more latitude in exploiting export opportunities. As 

 

243 Shea supports construction of an entirely new international airport to serve the Bay Area. 

As an interim measure to take the burden off of SFO, he has proposed that Travis Air Force 

Base in Solano County be opened to civilian flights. See his “Without new airport, unfriendly 

skies for Bay Area,” San Francisco Chronicle Open Forum, November 28, 2004. 

244 As a next step in the direction of expanded international service, Sacramento 

International expects to add service to Vancouver, British Columbia in 2005. 

245 Dennis Pollock, “Fresno Growers bend on Mexican airline in Fresno,” Fresno Bee, May 15, 

2004. 
159

discussed elsewhere, only a small portion of California’s agricultural export currently 

trade now moves by air. Still, the prospects are high for a marked increase in 

airborne farm exports over the next decade as California agriculture becomes more 

fully enmeshed in a global agricultural economy. 

Commodities with long shelf-lives and/or a low value-to-weight ratio typically 

journey to overseas markets by ship for the simple reason that the cost of oceanshipping is normally far less than by air. Only very meager amounts of California’s 

two leading farm exports in recent years – almonds and cotton – are ever shipped 

overseas by air (and usually then only because of glitches in regular delivery 

channels.) For that matter, most of the agricultural goods produced in California can 

be (and customarily are) shipped by sea.246 No one seriously expects to see 

appreciable air shipments of such California farm products as rice or almonds. 

Nevertheless, several of this state’s high value-added specialty crops have grown 

uniquely dependent on air cargo. Most notably, virtually all of the state’s shipments 

of fresh cherries to markets outside the North American Free Trade Area reach their 

destinations by air, as do significant volumes of other valuable crops including 

strawberries, peaches and nectarines, asparagus, table grapes, and lettuce. Fresh 

organically-certified commodities almost always require air-shipment if they are to 

reach distant markets.247 

In 1998, UC Berkeley’s Tsao took note of the importance of air cargo for shipping 

California’s agricultural products to domestic or international destinations. But he 

also noted some major disadvantages in the way agricultural goods were being 

shipped to distant markets through LAX and SFO. “For example, trucking the 

products to those airports is often delayed by the congested bridges, highways and 

surface streets. It is well known that air cargo receives lower priority than 

passengers on passenger airlines. In addition, when air cargo is “bumped” for 

 

246 Or overland in the case of Canada and Mexico. 

247 There is an interesting, if somewhat insidious campaign by some organic food 

organizations --- notably in the United Kingdom -- to oppose air shipment of organic farm 

products on the grounds that the fuel consumed to achieve such shipments is contrary to the 

ethic of organic farming. One suspects that the more straight-forward economic desire to keep 

distant producers out of local markets may also factor into this campaign. 
160

accommodating passengers and their luggage, fruits and vegetables tend to get 

lower priority than commodities like computers and machinery.”248

One ambitious yet ultimately unsuccessful effort to provide more direct air service to 

San Joaquin Valley exporters of fresh produce was made in the late 1980s by 

Farmington Fresh Inc. in conjunction with Stockton Metropolitan Airport. Spurred by 

the opening of Japan to fresh cherry and other horticultural imports from the U.S., 

the farmer co-op established a cold-storage packing operation just off Highway 99 

and adjacent to an airport runway. The original intent was to use the facility as the 

principal consolidation point for different types of fruits and vegetables produced in 

the region. Fresh produce, including cherries, would be air-shipped to Japan and 

other destinations. Reportedly, there were also plans to truck fresh-cut beef to the 

facility from as far away as Kansas for air-shipping to foreign countries. The airport 

was also anticipating that it would receive imported shipments of fresh-cut lamb 

from Australia. For a variety of economic and logistical reasons, the venture never 

really took flight. While Farmington Fresh does operate as a packing operation for 

airborne export shipments, those shipments are then trucked to SFO and LAX. 

That bad experience, however, has not deterred airport officials and government 

leaders in Stockton from continuing to promote the airport to agricultural exporters. 

Source: Excerpt from an Internet presentation by Stockton Metropolitan Airport dated 

December 2004 

 

248 Tsao, pp. 47-48. 
161

As the preceding excerpt indicates, Stockton airport officials have been trying to 

promote the airport as a superior choice for shipping San Joaquin Valley produce by 

air. 

Stockton Metropolitan has had an unhappy experience maintaining scheduled 

passenger service. In September 2003, the only passenger airline servicing the 

airport, America West Airlines, ceased flights from the airport, even though area 

leaders had spent a reported $800,000 in incentives to lure it. 249 That same year, 

though, Menlo Worldwide moved its headquarters from the Bay Area to Stockton's 

airport and started daily weekday cargo flights between Stockton and the company’s 

national hub in Dayton, Ohio. Overall, Stockton reports having handled 15,348 

metric tons of cargo in 2004, up 11.1 percent over the preceding year.250

Fresno likewise has keen ambitions for its airport. Indeed, Fred Burkhardt, Fresno’s 

economic development director, has opined that “Fresno is positioned to capitalize on 

trade with Mexico, China, the Pacific Rim, and Central and South America.251 

Planning is under way for an Air Cargo Park to be located on approximately 87 acres 

on the north side of the airport. The cargo park will feature two aircraft ramps and 

over 500,000 sq. ft. of air cargo building space. Fresno’s prospects for becoming a 

significant international air cargo are limited. In our estimation, the San Joaquin 

Valley will be able to support only one globally-focused air cargo hub, and Fresno’s 

chances must be weighed against competing bids to play this same role from 

Stockton and Sacramento. 

In Sacramento, airport planners have sought to establish Mather Field as the region’s 

air cargo hub, while maintaining Sacramento International (SMF) as its chief 

passenger airport. The split has been somewhat imperfect because of the volume of 

air cargo carried in the bellies of passenger planes landing at SMF and because 

Federal Express has thusfar refused to move its facilities from SMF to Mather. 

(FedEx, whose entire operation depends on a tightly meshed scheduling of flights, 

 

249 Michael Fitzgerald, “Stockton airport flying high on air cargo” Stockton Record,net March 

31, 2004. 

250 Data contained in an email from Barry Rondinella, Stockton Metropolitan Airport manager, 

dated January 12, 2005. 

251 Quoted by Sanford Nax, “Flying for the long haul,” Fresno Bee, June 27, 2004. 
162

cites SMF’s superior navigation systems for handling flights during fog and other 

adverse weather conditions as a reason for its reluctance to move to Mather.252) 

The two Sacramento airports sit amidst a network of major highways in the San 

Joaquin Valley’s fastest-growing region. It is the municipal area within the San 

Joaquin Valley that, by virtue of demographic trends alone, is most likely to attract 

more and more international flights. As noted earlier, SMF already serves Mexican 

destinations with non-stop and direct flights and will add flights to Vancouver, British 

Columbia in 2005. However, according to market research conducted for Sacramento 

aviation officials, SMF’s market is already large enough to make daily non-stop 

flights to London economically feasible. The same research also showed that SMF 

could sustain five flights per week to Frankfurt. However, the research did indicate 

that passengers flying to the Far East would continue to use SFO. 

Given its current and projected market size, it is inevitable that Sacramento will offer 

passenger flights to the EU, although probably not to Asia, within the next decade. 

European flights would afford SMF with the opportunity to increase its role as an air 

cargo airport. That prospect should be appealing to San Joaquin Valley growers since 

it would provide an entirely new transportation channel for accessing a highly 

lucrative European market at a time when EU trade barriers against U.S. farm 

products are apt to become less restrictive. 

Mather’s international prospects are more directly linked to the transpacific trade and, more 

specifically, to the competition to lure a share of that traffic away from Bay Area airports. To 

achieve a greater role in transporting air cargo, however, Mather has to overcome or at least 

neutralize complaints about air craft noise. Moreover, to serve the San Joaquin Valley’s 

agricultural exporters, a cold-storage facility would have to be built on or very near the 

airport. 

The key to determining which San Joaquin Valley airport or airports will emerge as the 

region’s international air cargo hub will ultimately be determined not by airport officials 

but by the willingness of airlines, freight-forwarders, trucking lines and other vital 

elements of the air cargo infrastructure to assume the costs and risks of investing in new 

 

252 Mather Field is due to have top-rated instrument landing equipment installed by 2007. 

Once that equipment is in place, Sacramento County airport officials expect UPS to establish a 

regional hub at Mather. They also expect DHL to build a sorting center at Mather and FedEx to 

move its operations to Mather from Sacramento International. 
163

facilities. Given the inevitable emergence of SMF as the San Joaquin Valley’s premier 

international passenger gateway, Mather’s prospects for becoming an important 

international cargo airport would be thereby enhanced. Indeed, since the Sacramento 

area also offers the extensive aircraft maintenance and repair facilities at McClellan Park 

(formerly McClellan Air Force Base),253 the region would seem particularly well-suited to 

support major airline operations involving overseas destinations. 

 

253 McClellan features 1.5 million square feet of aviation-related facilities, offering hangar 

storage, repair, maintenance, and painting capabilities for both commercial and private 

aircraft. 
164

Chapter 5 

Air Cargo Transportation Viewed by 

California Agricultural Exporters 

To assist in the evaluation of air freight exporting of California’s specialty crops a 

number of fruit and vegetable packers-shippers and industry representatives were 

surveyed. This survey was done primarily by personal interview although a few firm 

managers were contacted telephonically or by e-mail. 

The industry representatives interviewed represented firms and industries that use 

air transport to export their products. The crops included cherries, desert grapes, 

asparagus, mixed vegetable, salads, strawberries, and other berries. The firms 

contacted were located throughout California. 

The purpose of the survey was to collect information on (1) the volume of these 

commodities that are air-shipped to export markets; (2) the logistics that are 

employed in making air freight shipments; (3) the costs of air shipment to the major 

export markets; and (4) any difficulties that shippers had encountered in using the 

air cargo mode. 

CHERRIES: 

A survey was conducted of five packer-shippers located in the Stockton-Lodi, 

California areas. These firms are the leading cherry packer-shippers located in the 

state, cherries represented over 84 percent of all 2003 California air exported 

produce items254. 

Although only five firms were surveyed these firms handle 86 percent of the four 

major sweet cherry varieties (Bing, Van, Lambert and Ranier) packed during 2003 

(California Cherry Advisory Board). 

The following observations are a summary of personal interviews with the 

management of these firms. 

 

254 U.S. Department of Agriculture, Market News Service. 
165

1. Type of Firm 

All five firms are combined growers, packers and shippers. 

2. Products Handled 

While all of these firms pack and ship cherries, all of them, also pack and ship other 

products. The California cherry season usually starts at the end of April and 

concludes during the third week of June. This season may explain why cherry 

shippers usually handle other products. Some of the five firms also reported packing 

and shipping asparagus, bell peppers, blueberries, pears, wine grapes and apples. 

3. Volumes Shipped 

The annual volume of cherries shipped by the five firms varied from 500,000 to 1.1 

million 18-pound cartons. The average annual cherry volume per firm was 830,000 

cartons. 

4. Products Exported 

All of the surveyed firms export cherries, and four of the firms also export 

asparagus. Apples and blueberries were also reported to have been exported. 

5. Quantities Exported 

Export shipments range from 16 to 35 percent of all cherry shipments made by the 

surveyed firms. Exports represented an average of 26 percent of the cherry 

shipments made by the five firms. 

6. Air Export Shipments 

The surveyed firms all use air transportation to export cherries. Air export 

shipments of the five firms range from 80 to 100 percent of their cherry export 

shipments. In 2003, 94 percent of the cherry shipments made by these five firms 

were delivered to their foreign destination by airfreight. 

7. Shipment Arrangements 

The surveyed firms made export sales by their in-house sales staff, by brokers and 

by freight forwarders. The freight forwarder plays a dominant role in cherry 

exporting. While the sales staff or broker arranges the terms of sale, the freight 

forwarder handles the logistics of the product movement. Generally the shipper has 

the responsibility of getting the product to the airport. The freight forwarder handles 

the shipment thereafter to its final destination including documentation and shipment 

tracking. 
166

8. Export Destinations 

The survey firms sent cherries to the following countries: 

Countries Number of Shippers 

Reporting 

Japan 5 

Australia 3 

Singapore 3 

Taiwan 3 

U.K. 3 

Hong Kong 1 

Germany 1 

Malaysia 1 

Korea 1 

Mexico 1 

South America 1 

9. Air Freight Charges 

Air freight charges reported by these surveyed shippers varied mostly with the size 

of the shipment and the available aircraft space. Air freight charges for shipping 

cherries from San Francisco to Japan ranged from $.89 to $2.64 per kilogram, with 

shipping rates generally starting higher at the beginning of the season then declining 

after peak production levels are reached. The average shipping charges for the five 

firms varied from $1.15 to $1.77 per kilogram. 

Shipments made on passenger aircraft tend to be less expensive than the all cargo 

flights. Cherry shipments are sometimes given lower priority than other cargo and 

are, thus, “bumped” from a flight. Finding alternative flights increases costs. 

Demand for cargo space varies with the day of the week. 

Trucking from the Stockton area to the San Francisco airport (SFO) ranged from $.55 

to $.60 per box. Whole truckload shipments were reported to be $.34 per 18-pound 

boxes of cherries. Trucking from the Stockton area to the Los Angeles airport (LAX) 

was reported to be $1.10 per 18-pound box with the cost of about $.55 per box for a 

full truckload shipment. A truckload is slightly over 1,900 boxes. Cherries are 

packed in 18-pound boxes at the packing shed. The boxes are palletized in pallet 
167

units compatible with aircraft containers. These pallets are trucked to the airport 

and put into aircraft containers. The usual reported airport charge varied from $25 

to $100 per shipment. The higher cost is usually incurred when cargo space is 

limited causing the aircraft personnel to shift cherry shipments to alternative flights. 

The common smaller container (LD-2) holds 156 boxes of cherries. 

In addition to the logistic costs a phytosanitary inspection certificate must 

accompany the shipment. This is issued by the Agricultural Inspector and usually 

costs from $25 to $55 per shipment. For a 156 box container load this would be 

$.26 per 18-pound box of cherries. Utilizing these data from the five surveyed firms, 

the following costs are incurred in shipping an 18-pound box of cherries from the 

Stockton-Lodi, California area to Japan: 

Item Cost/Box 

Air Freight $9.36 - $14.40 

 

Trucking to San Francisco 

(156 box Pallet) $.55 - $.55 

 

Airport Containersizing 

(156 box Contianer) $.40 - $.40 

 

Phyto-Sanitary Certificate $.26 - $.26 

Total Range $10.57 - $15.61 

10. Documents Required 

Generally these air exported cherry shipments require the following documentation: 

• Phytosanitary Certificate 

• Invoice 

• Air Way Bill 

• Certificate of Origin 

11. Obstacles to Airfreighting 

The surveyed shippers indicated the following obstacles to airfreight exporting: 

• Getting the product to the airport on time. 

• Airline cut-off of flights on which shipments are scheduled. 
168

• Congestion at airports. 

• Planes used are getting smaller leaving less space for cargo. 

• Problems are greatest when air cargo space is “tight.” 

12. Reasons for Exporting 

Cherry shippers air freight their product to foreign markets because this fruit is 

highly perishable. Cherries are fairly high value products and transportation costs 

are of less importance than for many other agricultural products. Several shippers 

indicated that market prices decline fairly rapidly once the season begins. These 

shippers like to get their product to buyers before another price drop “hits.” 

A review of cherry prices reported by the U.S.D.A. Market News Service supports the 

shipper’s contentions. Prices reported from 1999 to 2003 for select given day prices 

reveal prices drop from about $55-60 per carton at the season’s beginning to below 

$30 per carton by June 15, season’s end (Table 5-1). 

Table 5-1 

Cherry Prices*, Per 18 Pound Carton, By Data and Year, Stockton, CA 

 

April 

25 

May 

7 

May 

15 

May 

30 

June 

7 

June 

15 

1999 − − − 40-44 30-33 26-28 

 

2000 55 − 55-60 40-45 30-35 25-30 

 

2001 − − 50-55 37 30-32 28-30 

 

2002 − − 44.90 40.90-

42.90

36.90-

38.90 32.90 

 

2003 − − 55 35-40 27.90-

30.90 22-24 

 (Source: USDA, Market News Service) 

*Prices quoted for “mostly” sales. 

13. Export Market Growth 

All of these shippers expressed the belief that the export market will continue to 

increase during the next five to ten years. Although, one shipper said this market 

expansion is not a certainty. Two shippers indicated that California cherry acreage is 

increasing, thus, the industry will need to develop programs for market expansion. 
169

14. Impact of the Food Security Act 

Generally these cherry shippers had no real problems complying with the 

requirements of the Food Security Act. Initially there was some misunderstanding 

about registering as an exporter with the Food and Drug Administration. 

15. Some Observations 

The surveyed shippers and exporters made some additional observations about air 

freight exporting. They were: 

• More cherry shipments are being flown out of Los Angeles because there are 

far more flights to Asia. 

• Improved cold chain technology may make ocean transport a more viable 

transportation alternative. 

• Cold chain management at destination airports should be improved. Airport 

handling personnel leave cherry pallets on the tarmac for extended periods. 

• The Australian market for cherries has been increasing. 

DESERT GRAPES 

A survey was conducted among major shippers of table grapes in the desert region. 

The production area is located in the Coachella Valley centered in the Indio, 

California vicinity (Southeastern California). This production region usually produces 

seven to eight million cartons of grapes (19-pounds/carton) annually. The season 

usually begins about May 15 and ends about July 1. As the Coachella Valley grape 

season ends harvesting begins in the Kern District (Bakersfield area). 

While the desert grape crop is made up of many varieties, the Perlette (early 

season), the Flame Seedless and the Thompson Seedless make up over 85 percent 

of the crop. The data cited in this section were obtained from shippers, exporters 

and freight forwarders that handle desert grapes. 

1. Market Positioning 

The Coachella Valley produces the first California grapes of the new season. 

Historically, these grapes commanded a high initial price as harvesting began. There 

was little competition in the market place for this product. 

Today, improved storage and an extended season cause Chilean grapes to still be 

available as the Coachella Valley season begins harvest. Too, the Mexican table 

grape industry has expanded greatly and much of this fruit is exported to the U.S. 
170

These grapes are also important competitors for the Coachella Valley fruit. Thus, the 

market window for desert grapes has decreased greatly. 

2. Volume Exported 

In 2003, there were 7.8 million cartons of grapes produced in Coachella Valley255 Of 

these about 906,000 cartons were exported256 Exports represented slightly over one 

percent of the crop during the 2003 season. 

3. Air Exported Volumes 

It was estimated by the surveyed industry members that about 20 percent of the 

exports are shipped by air. Most of these shipments leave the Los Angeles airport. 

Generally it was reported these air exports are made during the early part of the 

season. 

4. Destinations of Air Exports 

During the 2003 season, Coachella Valley grapes were exported to nine countries. 

The United Kingdom received over 43 percent of these shipments. Hong Kong was 

the next most important market taking 26 percent of the shipments. 

The 2003 Coachella Valley export shipments were made to: 

United Kingdom 

Hong Kong 

Singapore 

Korea 

Taiwan 

Malaysia 

Japan 

Honduras 

Guatemala 

5. Shipment Arrangements 

The desert grape industry uses in house sales staff and exporters to make sales. 

Generally, large frequent buyers deal directly with the packer shipper. All surveyed 

firms indicated that the transportation logistics are handled by freight forwarders. 

Several shippers and exporters indicated the Japanese system of moving product 

and documentation through the marketing channel is fairly extensive and is 

facilitated by the use of a freight forwarder. 

 

255 U.S. Department of Agriculture, Market News Service. 

256 California Table Grape Commission, personal interview. 
171

6. Air Freight Costs 

Air freight costs varied from $10.84 to $14.08 per 19-pound carton for shipment to 

Singapore. The surveyed firms reported the following costs: 

Transport Activity Per Carton 

Truck Transport 

 Indio to LAX 

 (96 carton pallet) 

.70 to 1.04 

 

Shipment Preparation 

 at LAX airport 

 ($25/pallet depend on 

 insulation and material) 

.26 to 1.00 

 

Freight Forwarder Costs 

 Transport and Documentation 

 (to Singapore) 

9.88 to 12.00 

Total 10.84 to 14.04 

7. Reasons for Air Shipments 

The reasons the surveyed firms shipped their products by air freight were: 

• Grape prices decline rapidly as the season gets under way. Shippers like 

to get their product sold and delivered before the price drop occurs. 

• Rapid transit provides buyer with a more fresh product with higher quality. 

• Buyers requested air shipments. 

8. Price Variability 

Desert grapes have a very limited market window. Having a shipment in transit 

seven days or more via ocean freight reduces retail shelf life and increases 

deterioration. 

Prices reported by the U.S. Department of Agriculture’s Market News Service support 

the industry leader’s contention that grape prices decline rapidly as the harvest 

season gets under way (Table 5-2, Page 172). 
172

Table 5-2 

Coachella Valley Grape Prices on Specified Dates, Flame Seedless Variety, 

19-Pound Cartons (For “Mostly” All Sales) 

 Date 

Year 

May 

15 

May 

21 

May 

30 

June 

15 

June 

30 

July 

15 

1999 − 18.50-

20.50 16.50 14.00 13.50 −

 

2000 16.50 12.50-

13.50 11.50 11.00 13.00 10.50 

 

2001 − 40.85 31.85 15.85-

16.85 

8.85-

9.85 

7.85-

8.85 

 

2002 − 16.85-

17.85 

12.85-

14.85 14.85 14.85 −

 

2003 14.85-

16.85 

12.85-

14.85 13.85 14.85 15.85-16.85 9.85 

 

2004 24.85-

26.85 

22.85-

24.85 14.85 12.85 − −

(Source: USDA, Market News Service) 

Clearly seasonal price declines ---- with the season but weekly price changes can be 

substantial. 

8. Future Concerns 

All of these grape handlers were concerned about the growth of grape production in 

China. This could be serious competition for California desert grapes. The value of 

the U.S. dollar also influences foreign sales. 

Despite these concerns the industry is optimistic about the future of export sales. 

Air freight will probably always be important to this industry because they have a 

very short market window. The desert grape will likely continue to be the first 

available American grape from each new season. 
173

ASPARAGUS: 

Asparagus is grown on about 70,000 acres in California, Michigan, New Jersey, 

Oregon and Washington. However, over 50 percent of this $200 million crop is 

grown in California. The other important production area, Washington, grows about 

25 percent of the U.S. crop257. 

In California, asparagus is grown primarily in San Joaquin, Fresno, Imperial, 

Monterey, and Santa Barbara counties. The California harvest season ranges from 

mid-February through June 30. The state usually produces slightly over 100 million 

cwt. of asparagus annually and it is usually packed in 11 and 28 pound cartons. 

About 20 percent of the crop is exported. 

Seven of the firms interviewed packed and shipped asparagus. These firms reported 

packing from one million to 30 million packages per firm of various products. 

These asparagus packer-shippers exported from 5 to 50 percent of all the asparagus 

they packed. But, commonly the firms reported they exported 10 to 15 percent of 

their annual asparagus volume. 

The use of air freight varies with the shipper. Five of these asparagus shippers use 

air freight exclusively for their export shipments. 

1. Sales Arrangements 

The export sales were made either by the in-house sales staff of by an exporter. 

2. Transport and Logistics 

The interviewed firms sent shipments out of San Francisco and Los Angeles. 

Generally the shipper was responsible for getting the shipment to the airport. A 

freight forwarder handled all the details thereafter. 

3. Shipping Costs 

Air transport costs varied with the destination and ranged from $0.80 to $1.10 per 

kilogram. 

Truck transport from the shipper to the airport varied from $0.75 to $0.85 per 

carton. 

 

257 U.S. Department of Agriculture, NASS 
174

4. Export Destinations 

These exporters reported making shipments to: 

Japan 

Hong Kong 

Taiwan 

Switzerland 

France 

5. Reasons for Air Shipping 

The most often mentioned reason for shipping asparagus by air freight was the 

perishability of the product. One shipper said they made only small volume 

shipments so that shipment by other than air was impractical. 

6. Obstacles 

Several shippers expressed the concern about imports. The Peruvian and Mexican 

asparagus industries have increased greatly. The U.S. is a major outlet for this 

product. The seasons overlap with the California harvest season. Also, it was 

reported that asparagus is grown in Peru on a year round basis. This asparagus 

could be a formidable competition for the California industry. 

SALAD MIXES 

One Salinas shipper reported exporting both pre-packaged and bulk salad mixes. 

The destinations were Japan and Taiwan. Essentially freight forwarders handled all 

of the logistic details of these shipments. 

STRAWBERRIES 

Strawberries are an important U.S. crop. There are about 48,000 acres of this crop 

grown commercially in about 15 states. Of the 48,000 acres, about 30,000, acres or 

62 percent, of the U.S. crop is grown in California. The California Strawberry 

Commission reports that in 2003, California accounted for about 88 percent of the 

nation’s fresh and frozen strawberry output258. The 2003 crop generated about $1.1 

billion for its growers. 

California strawberries are mainly grown in the coastal regions of the state with the 

largest production in the central coastal area. While strawberries are grown somewhere 

in California throughout the year the primary season is April, May, and June. 

 

258 California Strawberry Commission, Internet website. 
175

Exports are an important market for California strawberries. In 2003, some 14 

percent of the fresh production and 5 percent of the frozen production was 

exported259. Canada has been the leading market for fresh strawberries and Japan 

has been the leading market for frozen strawberries. 

Strawberries are usually packed in a 12 pint flat container with a net weight of 12 

pounds. One large shipper was interviewed for this study. This firm exports about 

five percent of its annual volume. An estimated 60 percent of the strawberries this 

firm exports are shipped by air. 

1. Export Destinations 

While 60 percent of this firm’s exports were shipped to the United Kingdom, export 

destinations for this firm were: 

United Kingdom 

Japan 

Taiwan 

Singapore 

Malaysia 

Hong Kong 

These shipments were made about equally from Los Angeles and San Francisco. 

2. Transport Charges 

Truck from packing house to Los Angeles airport $0.55 per flat 

Truck from packing house to San Francisco airport $0.40 per flat 

Air Freight from Los Angeles to Tokyo: $6.75 per flat 

3. Obstacles 

High air freight costs. 

Availability of space. 

Time required to get shipment through security. 

Cold chain control – leaving berries on tarmac for extended periods (over 45 

minutes). 

Fumigation requirements for Japanese shipments. 

4. Future Concerns 

Air export of strawberries will likely increase. Ocean transport is not a viable option 

because of the limited shelf life (7-10 days). 

 

259 California Strawberry Commission, Internet website. 
176

BLUEBERRIES 

Two large blueberry packer-shippers were surveyed in this study. While California 

has historically not been a blueberry production area, new varieties and renewed 

demand has prompted plantings of new acreage. As of 2004 it is estimated that 

about 1500 bearing and non-bearing acres of blueberries are growing in California. 

Blueberries are usually harvested from late April through June. 

1. Destinations 

The two shippers exported blueberries to: 

Japan 

Mexico 

Canada (by truck) 

2. Volume Exported 

Exports represented from one to 35 percent of the surveyed firms’ output. 

3. Shipment Arrangements 

Generally the packer-shippers have the responsibility of getting the shipments to the 

airport. Logistics thereafter were arranged by a freight forwarder. 

4. Air Shipments 

Essentially all of the export shipments were made by air with the exception of the 

Canadian sales which were made by truck. 

5. Air Freight Costs 

The shipments from these firms were shipped from both the Los Angeles and the San 

Francisco airports. Choice of airport depended mostly on availability of flights and 

space available. 

Reported transport costs were: 

Truck from packing house to Los Angeles airport $0.55 per flat 

Truck from packing house to San Francisco airport $0.40 per flat 

Air Freight to Japan: $3.35 per flat (4.7 pounds) 

6. The Future 

These shippers expect the export market to grow. 

In addition to blueberries, one large coastal shipper also exported raspberries and 

blackberries. The data for these berries were essentially the same as those for 

blueberries. 
177

INDUSTRY OBSERVATIONS 

After having interviewed the management of firms’ air exporting California 

agricultural products the following generalizations can be made. 

1. Seasonality 

All of the high value specialty crop packer-shippers interviewed in this study deal 

with seasonal crops. These air freight shipments start about mid-February with 

asparagus. The season for all air freight shipments concluded about June 30. Thus, 

the present air freight produce shipment period is about 4.5 months long. 

2. Destinations 

The surveyed shippers reported marketing shipments to 13 different countries. Most 

of these destinations were Pacific Rim (Japan, Korea, Taiwan, Singapore, Malaysia, 

Hong Kong, and Australia). But several shippers made shipments to the United 

Kingdom, Switzerland, Germany, Mexico, Honduras, and Guatemala. 

3. Air Freight Costs 

Air freight costs vary by destination and other factors. For all of the products 

included in the survey, the air freight costs ranged from $.80 to $2.02 per kilogram. 

The highest freight costs were reported for cherries and the lowest freight costs were 

for asparagus. 

4. Logistics and Pricing 

Generally, the packer-shipper had the responsibility to get a shipment to the airport 

in sufficient time to be put in a cargo container and to clear security checks. Freight 

forwarders played a very important role for all products included in this study. 

Essentially, freight forwarders handled the shipment at the airport to the destination. 

All sales made by these packer-shippers were F.O.B. at the packing house. While 

they are concerned about transportation costs, their real responsibility is to make the 

air freight deadlines. 

In several cases the foreign buyers came to the packing facility to make the 

purchase. And, it was reported some foreign buyers frequently check the packing 

operations. 
178

5. Reasons for Air Shipping 

The survey packers said they made air freight shipments for several reasons. 

• Because the product is very perishable. 

• To get the product to the buyer as quickly as possible to avoid price drops. 

• The buyer requested air freight shipment. 

• Rapid transport minimizes product deterioration and extends shelf life. 

6. Obstacles of Air Freight 

These packer-shipper firms made several observations about obstacles to making air 

freight shipments. 

• Getting the product to the airport on time to meet the airlines requirements. 

• Cut-off of flights on which shipments were scheduled. 

• Traffic congestion at airports. 

• Increasingly smaller sized aircraft are being used reducing freight space 

available. 

• Some specialty agricultural products are being imported during the harvest 

season of some California specialty crops. 

• World competition is increasing for high value specialty crops. 

7. Perceptions of the Future 

Despite high air freight prices and the listed obstacles, the surveyed firms were all 

optimistic about the future of air freight. Rapid transport is a requirement for 

maintaining a high quality in a perishable product. 
179

Chapter 6 

Principal Findings and Conclusions 

Summary of Findings

● California’s airborne agricultural export trade totaled $659.4 million in 2004, a 

22 percent increase over the preceding year and a 42 percent increase over 

2002. 

● Although airborne shipments currently represent just over six percent of 

California’s $10.4 billion agricultural export trade, several highly perishable, 

high value-added specialty crops – most notably fresh cherries, strawberries, 

asparagus and organically raised fruits and vegetables – have become acutely 

dependent on air transport to reach overseas markets. 

● A much wider variety of fresh produce is also exported by air, particularly by 

those seeking to capture the premium prices that are generally prevalent only 

during that relatively brief period before more abundant supplies reach these 

markets via slower modes of transport. 

● California’s agricultural export trade grew by 40 percent between 1996 and 

2004, while its airborne agricultural exports rose by 67 percent. 

● Air transport will likely become an increasingly attractive alternative to oceanshipping for California agricultural exporters, especially with respect to those 

economies with which the U.S. runs substantial merchandise trade deficits. In 

particular, shipping rates for airborne cargoes on westbound transpacific routes 

should become even more competitive as air carriers add cargo capacity to 

serve a burgeoning eastbound trade in U.S. imports from the Far East. 

● Even though their near-monopoly over international air transport in California 

will gradually diminish, Los Angeles International Airport (LAX) and San 

Francisco International Airport (SFO) will continue to be California’s primary 

international gateways for air cargo, including agricultural shipments. 
180

● LAX has moved well ahead of SFO as the primary conduit for California’s 

airborne export trade in recent years. 

● Technological advancements in the aircraft and engine design will enable 

airlines to offer passengers as well as exporters more direct access to a wider 

range of overseas destinations. Within ten years, a new generation of mediumsized, long-range aircraft such as the Boeing 787 and Airbus 350 will permit 

airports in addition to LAX and SFO to provide non-stop service to destinations 

abroad. 

● Oakland International Airport and Ontario International Airport will be the 

California airports most likely to see an expanded role in California airborne 

agricultural export trade, especially if integrated carriers such as FedEx and 

UPS secure a larger share of the international air freight market. 

● Simple demographic factors associated with the spread of population and 

industry beyond the state’s coastal regions will, in time, ensure that additional 

California airports will initiate scheduled passenger as well as all-cargo flights to 

overseas destinations. 

● Because of the Sacramento area’s rapidly growing population and economic 

base, Sacramento International Airport and Mather Field are airports that are 

most likely to emerge as new conduits for the state’s airborne agricultural 

export trade. 

● Establishment of international air cargo service at airports nearer to where high 

value-added specialty crops are grown will provide California growers with 

readier access to lucrative overseas markets in Europe as well as Asia. 

Public Policy Issues 

Capacity constraints at California’s principal gateway airports, LAX and SFO, will 

continue to prompt a migration of air cargo services to other California airports. At 

the same time, the relentless spread of population and industry into inland regions of 

the state will eventually create the demographic conditions that will attract 

international air service. 
181

Although desirable from any number of perspectives, the migration of international 

air service from SFO and LAX to other California airports will not be universally 

welcomed. It is almost axiomatic, for example, that residents of communities 

adjacent to those airports that will see an increasing number of flights – especially 

cargo flights arriving or departing in the evening or early morning – will resist 

increased flight operations at these airports. History indicates that such opponents 

are capable of mounting sustained campaigns involving political action and litigation 

that could severely impede if not thwart airport development plans. Similarly, public 

agencies as well as private groups dedicated to maintaining air quality standards can 

be expected to raise questions or indeed objections to any plans to expand airport 

operations. Moreover, in those cases where expanded flight operations would 

necessitate actual expansion of the airport itself, a whole host of land-use and 

environmental quality issues would come into play. 

Even the agricultural sector will apt to be of several minds about the prospect of 

international flights taking off or landing at airports near some of the state’s leading 

agricultural areas. While presenting the preliminary findings of this study to 

representatives of California agriculture, it was made clear to us that efforts to 

initiate direct or non-stop air service between airports in California’s inland regions 

and overseas destinations will spark concern – if not outright opposition – from 

agricultural interests fearful that such flights will significantly heighten the risk of 

new alien pest infestations. Even though such flights would be highly beneficial to 

international travelers and businesses in such places as the San Joaquin Valley, 

growers have a legitimate concern that – either by accident or maliciousness – 

overseas flights could carry “passengers” that might prove devastating to growers, 

ranchers and dairy operators. Industry officials and state leaders should begin 

working together on developing the best available prophylactic measures to ensure 

that the needs of airline passengers and non-agricultural industries in all regions of 

the state are served without endangering California’s agricultural economy. 

Defining a constructive role that state government might play in enhancing 

California’s air cargo infrastructure is a difficult task. In his 1998 study of California’s 

air cargo system, Jacob Tsao warned that state government may not be able to play 

a major role in resolving some critical issues faced by the state’s air cargo 
182

industry.260 One reason is jurisdictional in nature. Airports are typically operated by 

local governments or regional airport authorities. Moreover, their flight operations 

are tightly regulated by the federal government, while international flights are 

governed by bilateral accords. The role of state government, by contrast, has been 

fairly minimal. Indeed, state government’s most obvious significant responsibility lies 

in ensuring that ground access to the state’s major international air gateways is 

relatively unencumbered by traffic delays and diversions. 

In a larger sense, though, the relatively marginal role of state government in the 

commercial aviation sector also arises from the fact that the movement of goods by 

air – whether domestically or internationally -- is a subject about which state 

policymakers are well-informed. At the State Capitol, for example, most 

pronouncements about the importance of international trade to the state’s economy 

seem to implicitly assume that trade is an activity confined to the waterfront. Not 

surprisingly, new lawmakers are often surprised to learn that most of California’s 

merchandise export trade (when measured by its dollar value) is airborne. 

That level of awareness is, unfortunately, shared by many exporters, particularly 

those companies which have out-sourced the shipping function to freight-forwarders, 

integrators and other third-party logistics providers. In many instances, exporters 

are not much more familiar with the exact means used to transport their goods to 

distant markets than an individual handing a package to a Federal Express or UPS 

driver. This serves to diminish the effectiveness of those seeking to inform and 

advise state policymakers regarding transportation and other logistical matters and 

especially about the challenges facing the air cargo industry in California. 

Absent a stronger voice from California businesses with a stake in maintaining 

efficient transportation links with foreign customers and suppliers, the goal of 

equipping California with the goods movement infrastructure it needs to compete 

effectively in the global economy of the 21st century will likely prove elusive. 

 

260 Tsao, “The Role of Air Cargo in California’s Goods Movement,” (UC Berkeley, Institute of 

Transportation Studies, 1998). 
183

Appendices
185

Appendix A 

The entire discussion of aviation’s importance to California’s 

agricultural economy according to the California 

Department of Transportation’s 2003 report. 

California is the country’s leading agriculture producer. More than half of the 

nation’s fruits, nuts and vegetables are grown in California. In 2001, the 

state’s gross cash income from agriculture amounted to $27.6 billion, and 

fruits, nuts, livestock, poultry and vegetables accounted for over threefourths of this income. California has 88,000 farming operations, and the 

state’s agriculture industry employs 1.1 million people. The top four counties 

in agriculture production are Tulare, Fresno, Monterey and Kern Counties. 

California is not only the leading, but the only producer of certain specialty 

crops as well. For example, in 2001, California accounted for over 99 percent 

of the nation’s production of the following agricultural products: almonds, 

artichokes, clingstone peaches, dates, figs, kiwifruit, nectarines, olives, 

persimmons, pistachios, plums, dried prunes, raisins, and walnuts. 

Approximately 14 percent of the state’s agricultural production is shipped to 

foreign countries. If California were a nation, it would be the sixth leading 

agricultural exporter in the world. Annually, $6.5 billion in food and 

agricultural commodities are shipped around the world, much by air due to 

the perishable nature of the products. 

Canada and Japan are the top two export destinations. The leading export 

products are almonds, cotton, wine, table grapes, milk/cream, oranges, 

processed tomatoes, rice, beef, and lettuce. 

California’s airports contribute greatly to the success of its agriculture 

industry, providing services for export shipment, corporate travel, crop 

dusting, crop storage facilities, and aerial photography. Some examples 

include: 

• Stockton Metropolitan Airport has a long runway to facilitate the 

transport of highly perishable goods to Asian markets via jumbo jet. 

For example, cherries that sell for $25 per kilo in the basement of the 

high-end department stores in downtown Tokyo can be shipped 

overnight via air from facilities such as the Stockton Metropolitan 

Airport. 

• Nunn Farms, one of the largest agricultural growers and processors of 

tomato products in California, maintains and fuels its aircraft in Tracy 

Municipal Airport. In addition, Morning Star Packing contracts with 

the Tracy Flight Center to conduct aerial monitoring of its crop 

development (primarily tomatoes) on several of its large farms 

between Tracy and Los Angeles. 
186

• Diestal Farms, a major turkey grower, regularly uses the Columbia 

Airport for corporate travel. 

• Salinas Municipal Airport is located in the Salinas Valley, the center 

of Monterey County’s three billion dollar agriculture industry. Dole 

Foods, one of the largest fruit and vegetable producers, uses the 

airport for corporate travel on a daily basis. The airport anticipates 

that most of its future growth will be from agriculture-related travel. 

• Most of the major tenants at Shafter–Minter Field are agriculturerelated businesses, including Acala Seeds, Bender Farms, Crop Care 

Applicators, Inland Crop Dusting, G.K. Lewis Irrigation Services, and 

the California Department of Agriculture. 

• Foster Farms, a dairy and poultry producer, has built new facilities at 

Modesto City–County Airport. 

• Paramount Citrus relocated its operations to Delano Municipal 

Airport largely because of the aviation services available at the 

airport. 

THE WINE INDUSTRY 

Wine is not only California’s number one finished agricultural product in retail 

value, it also has special significance in California culture. California ranks 

fourth in the world in wine production and accounts for 98 percent of the wine 

shipments from the United States. It employs 145,000 people in the state and 

pays $4.3 billion in wages. California wines are famous throughout the world 

and continue to win awards at international wine competitions. 

There are approximately 850 commercial wineries in California. The majority 

of these are in Napa, Sonoma and San Luis Obispo Counties. A concentration 

of wineries is also found in Mendocino, Santa Cruz, Santa Barbara, Monterey 

and Alameda Counties. 

The long-term outlook for the California wine industry is strong. There is 

increasing domestic demand for both moderately priced and luxury wines. 

Rising incomes and sophistication in many countries around the world are also 

driving growing export demand for California wines. 

California’s system of large and small airports plays an important role in the 

success of the wine industry. Key contributions include export shipment, pest 

control, local tourism and industry corporate travel. Some examples include: 

• Napa County Airport is located in the Napa Valley, the best known 

wine-growing region in the United States. Local wineries, hotels, bed 

and breakfast lodges, and restaurants receive many tourists via the 

airport. 

• Many tourists visit the wineries in the Livermore Valley because of the 

presence of the Livermore Airport. 
187

• At the Charles M. Schulz–Sonoma County Airport, wine industry 

aircraft occupy the largest amount of hangar space. Located in the 

heart of Sonoma’s wine country, this airport also receives a substantial 

number of winery visitors. 

• French Valley Airport serves tourists visiting the Temecula wine 

country as this part of Riverside County becomes an increasingly 

popular attraction for wine enthusiasts. 

• Paso Robles Municipal Airport is located in a region becoming a 

major wine growing area of California. Some wineries, such as the 

Treana Vineyards, have recently located in the Paso Robles area in 

part due to the nearby airport, which allows executives based in Napa 

to fly in for the day to inspect the vineyards. Airport officials estimate 

that one-third of the airport’s activities are wine-industry related. 

• Porterville Municipal Airport provides shuttle service for corporate 

travelers to and from Franzia Vineyards. 

Aviation is also critical for pest management. For example, sulfur and copper 

sprays are extremely important for controlling powdery mildew, a problem 

that affects about 10 percent of wine grapes. 

Applying sulfur from aircraft allows for rapid response even in wet weather as 

well as the coverage of a large area in a short period of time. Aviation has 

also been important for the industry’s research and quality control. National 

Aeronautics and Space Administration (NASA) researchers have used remotesensing technology images taken from airplanes and satellites to help 

vintners measure ripening rate, disease incidence, soil drainage, and fruit 

quality. Mondavi Winery of Oakdale has used remote-sensing technology 

extensively for this purpose. This technology was also used to initially site the 

wineries in Temecula. 
188

Appendix B 

California’s Principal Civilian Airports

FRESNO YOSEMITE INTERNATIONAL AIRPORT (FAT) 

Fresno (Fresno County) 

Identifier: FAT. 

www.flyfresno.com. 

Air Service: 

Total Carriers: 7 

All-Cargo: 5. 

Cargo Space: 

Total Ramp/Tarmac Surface for Cargo Handling: 345,663 s.f. 

Warehouse Space: 15,128 s.f. 

Occupied: 86 percent 

FTZ: Yes 

Customs: 6 miles away 

USDA Inspector: 6 miles away 

Traffic: 

Total '03 Tonnage: 5,175.97 m.t., -181.8 percent. 

Total '03 Aircraft Movements: 160,926, +4 percent. 

Distance to Connecting Transport (miles): 

Rail Terminal: 10, 

Ocean Port: 160, 

Interstate Hwy: 2, 

Truck Terminal: 10, 

Comments: New cargo facilities to be completed by November 04, estimated 

345,000 s.f. of ramp space. Fresno Yosemite International Airport will not 

construct any new warehouse facilities. Any new warehouse space will be 

constructed by tenants. FYI’s cargo project is nearly completed. Early last 

spring, bulldozers began the long process of moving ground to prepare the 

north side of the airport for a new parking ramp for our current air cargo 

carriers. The final cargo project will measure 20 acres, with spaces and 

infrastructure for support to accommodate all current air cargo operations 

and future growth; up to and including 747 air-freighters. Total project cost 

of $11 million has been paid by FAA airport improvement funds comprised of 

90% federal aviation dollars and 10% matching airport revenue.J 

JOHN WAYNE AIRPORT (SNA) 

Costa Mesa (Orange County) 

Identifier: SNA. 

www.ocair.com. 

Air Service: 
189

Total Carriers: 12 commercial airlines, 3 commuter airlines 

All-Cargo: 2 

Cargo Space: SNA has no on-site warehouse space 

Customs: In Los Angeles 

Traffic: Total '03-‘04 Tonnage: 14,198 m.t., +4.6 percent. 

Distance to Connecting Transport (miles): 

Rail Terminal: 40, 

Ocean Port: 40, 

Interstate Hwy: 2, 

Truck Terminal: 40. 

ONTARIO INTERNATIONAL AIRPORT (ONT) 

Ontario (San Bernardino County) 

Identifier: ONT. 

www.lawa.org/ont 

Air Service: 

Total Carriers: 42, 

All-Cargo: 16 

Special Services/Facilities: Handling for large animals, equine. Planned 

refrigeration for cut flowers, perishable food, frozen goods. Planned 

quarantine, HazMat, bonded and secure storage. 

Customs: Yes 

USDA Inspector: Yes 

Traffic: 

Total '03 Tonnage: 529,184 m.t., +6.6 percent. 

Distance to Connecting Transport (miles): 

Rail Terminal: 12, 

Ocean Port: 60, 

Interstate Highway: On Site, 

Truck Terminal: On Site, 

Intermodal Center: 12 

LOS ANGELES INTERNATIONAL AIRPORT (LAX) 

Los Angeles (Los Angeles County) 

Identifier: LAX. 

www.lawa.org/lax 

Air Service: 

Total Carriers: 106, 

All-Cargo: 34 

Cargo Space: 

Total Ramp/Tarmac Surface for Cargo Handling: 170 acres. 

Warehouse Space: 2.1 million s.f. 

Occupied: 99 percent 

FTZ: No 

Special Services/Facilities: Handling for large animals,equine; refrigeration 

for cut flowers, perishable food, frozen goods; bonded and secure storage. 

Customs: Yes 

USDA Inspector: Yes 
190

Traffic: 

Total '02 Tonnage: 1,806,164 m.t. +2.7 percent. 

Total '02 Aircraft Movements: 622,378, -3.6 percent. 

Distance to Connecting Transport (miles): 

Rail Terminal: 17, 

Ocean Port: 20, 

Interstate Hwy: less than 1, 

Truck Terminal: 3-5 

MARCH GLOBAL PORT (RIV) 

Moreno Valley (Riverside County) 

Identifier: RIV. 

www.marchglobalport.com. 

Cargo Space: 

Total Ramp/Tarmac Surface for Cargo Handling: 1.1million s.f. 

Warehouse Space: 225,00 s.f. 

Occupied: 95 percent 

Special Services/Facilities: Handling for large animals, equine; refrigeration 

for cut flowers, perishable food, frozen goods; bonded and secure storage. 

Planned quarantine and HazMat. 

USDA Inspector: 19 miles away. 

Distance to Connecting Transport (miles): 

Rail Terminal: 1, 

Ocean Port: 60, 

Interstate Hwy: On Site, 

Truck Terminal: 1, 

Intermodal Center: On Site. 

Comments: Planned new cargo facilities to be completed October 2005; 

estimated an additional 300,000 of warehouse space. 

MINETA SAN JOSE INTERNATIONAL AIRPORT (SJC) 

San Jose (Santa Clara County) 

Identifier: SJC. 

www.sjc.org. 

Air Service: 

Total Carriers: 12, 

All-Cargo: 5, 

Non-Scheduled Charter: 7 

Cargo Space: 

Ramp/Tarmac Surface for Cargo Handling: 43,961 s.f. 

Warehouse Space: 19,200 s.f. 

Occupied: 100 percent. 

FTZ: No 

Customs: Yes 

USDA Inspector: Yes 

Traffic: 

Total '03 Tonnage: 108,317 m.t., -22.7 percent. 
191

Distance to Connecting Transport (miles): 

Interstate Hwy: 0.2 

OAKLAND INTERNATIONAL AIRPORT (OAK) 

Oakland (Alameda County) 

Identifier: OAK. 

www.oaklandairport.com. 

Air Service: 

Total Carriers: 18, 

All-Cargo: 4 

Major Cargo Carriers: Airborne Express, Ameriflight, FedEx, United Parcel 

Service 

Number of Daily Departures (2004): 282 (74 are all-cargo flights) 

Runways: 10,000-foot asphalt runway (can be extended to 11,600 feet) 

6,200-foot asphalt runway 

5,020-foot asphalt runway 

3,300-foot crosswind asphalt runway 

Cargo Space: 

Total Ramp/Tarmac Surface for Cargo Handling: 38 acres 

Warehouse Space: 400,000 s.f. 

Occupied: 100 percent. 

Cargo Sort Facilities: Airborne (5.6 acres) 

FedEx Domestic Sort (46.6 acres) 

FedEx Int'l Import Clearance Center (.65 acres) 

United Parcel Service (21.6 acres) 

U.S. Postal Service (1.1 acres) 

FTZ: 1.5 miles away 

Special Services/Facilities: Handling for large animals, HazMat. 

Customs: Yes Avg. 

Customs Clearance Time: Within 24 hrs. 

USDA Inspector: 4 miles away 

Freight Forwarders: 5 

Traffic: 

Total '03 Tonnage: 620,453 m.t., -4.82 percent. 

Total '03 Aircraft Movements: 342,871. 

Distance to Connecting Transport (miles): 

Rail Terminal: 9, 

Ocean Port: 9, 

Interstate Highway: 1.5, 

Truck Terminal: 1.5, Intermodal Center 1.5 

Comments: Six-lane parkway between the airport and major interstate 

highway opened in 2003, providing quicker access to/from air cargo facilities. 

SACRAMENTO INTERNATIONAL AIRPORT (SMF) 

Sacramento (Sacramento County) 

Identifier: SMF 

www.sacairports.org/int 

Air Service: 
192

Total Carriers: 14, 

All-Cargo: 2. 

Cargo Space: 

Total Ramp/Tarmac Surface for Cargo Handling: 260,000 s.f. 

Warehouse Space: 38,500 s.f. 

Occupied: 100 percent 

Special Services/Facilities: Handled by Individual Carriers. 

Customs: Yes Avg. 

Customs Clearance Time: Varies 

USDA Inspector: 10 miles away 

Traffic: 

Total '03 Tonnage: 78,898 tons, +1.3 percent. 

Total '03 Aircraft Movements: 159,360, +.7 percent. 

SACRAMENTO MATHER AIRPORT (MHR) 

Rancho Cordova (Sacramento County) 

Identifier: MHR 

www.sacairports.org/mather 

Air Service: 

Total Carriers: 2, 

All-Cargo: 2, 

Non-Scheduled Charter: 7 

Cargo Space: Total Ramp/Tarmac Surface for Cargo Handling: 60 acres. 

Warehouse Space: 500,000 s.f. 

Occupied: 80 percent. 

Customs: 20 miles away 

Avg. Customs Clearance Time: 4 hrs. 

USDA Inspector: 20 miles away. 

Traffic: 

Total '03 Tonnage: 60,124 tons, -2.7 percent. 

Total '03 Aircraft Movements: 70,709, -16.8 percent. 

Distance to Connecting Transport (miles): 

Rail Terminal: 12, 

Ocean Port: 80, 

Interstate Hwy: 1, 

Truck Terminal: 12, 

Inland Waterway Port: 15. 

Comments: Extension of short runway planned for next 3-5 years; 

development of west end of cargo apron (also in 3-5 years). 

SAN DIEGO INTERNATIONAL AIRPORT 

San Diego (San Diego County) 

Identifier: SAN. 

www.san.org. 

Air Service: 

Total Carriers: 19, 

All-Cargo: 8 

Cargo Space: 
193

Total Ramp/Tarmac Surface for Cargo Handling: 768,561 s.f. 

Warehouse Space: 103,832 s.f. 

Customs: Yes Avg. 

Customs Clearance Time: 2 hrs 

USDA Inspector: Yes 

Traffic: 

Total '02 Tonnage: 133,081 m.t., -12.2 percent 

Distance to Connecting Transport (miles): 

Rail Terminal: 2, 

Ocean Port: 1, 

Interstate Highway: 1, 

Truck Terminal: 5, 

Inland Waterway Port: 3, 

Intermodal Center: 2 

SAN FRANCISCO INTERNATIONAL AIRPORT (SFO) 

San Bruno (San Mateo County) 

Identifier: SFO. 

www.flysfo.com 

Air Service: 

Total Carriers: 56 

All-Cargo: 10, 

Non-Scheduled Charter: 3 

Cargo Space: 

Total Ramp/Tarmac Surface for Cargo Handling: 53.5 acres 

Warehouse Space: 845,000 s.f. 

Occupied: 96 percent 

Special Services/Facilities: Refrigeration of cut flowers, perishable food; 

quarantine, HazMat, bonded and secure storage. 

Customs: On airport 

USDA Inspector: Yes 

Traffic: 

Total '03 Tonnage: 573,448 m.t., -3.8 percent. 

Distance to Connecting Transport (miles): 

Rail Terminal: 30, 

Ocean Port: 15, 

Interstate Hwy: 1, 

Truck Terminal: 2, 

Inland Waterway Port: 30 

SOUTHERN CALIFORNIA LOGISTICS AIRPORT (IVCV) 

Victorville (San Bernardino County) 

Identifier: IVCV 

www.logisticsairport.com. 

Air Service: 

Scheduled Charter: 6 

Cargo Space: 

Ramp/Tarmac Surface for Cargo Handling: 75 acres. 
194

Warehouse Space: 300,000 s.f. 

Occupied: 50 percent 

FTZ: Yes 

Special Services/Facilities: Planned handling for large animals, equine, 

quarantine; refrigeration for cut flowers, perishable food, frozen goods, 

HazMat, bonded and secure storage, refrigeration on site (in consolidated 

freight station) 

Customs: Yes 

USDA Inspector: Yes 

Distance to Connecting Transport (miles): 

Rail Terminal: On Site, 

Ocean Port: 90, 

Interstate Hwy: 1, 

Truck Terminal: On site, 

Intermodal Center: On Site 

STOCKTON METROPOLITAN AIRPORT (SCK) 

Stockton (San Joaquin County) 

Identifier: SCK. 

www.stocktonmetro.com. 

Air Service: 

Total Carriers: 1, 

All-Cargo: 1, 

Non-Scheduled Charter: 3. 

Cargo Space: 

Total Ramp/Tarmac Surface for Cargo Handling: 11 acres. 

Warehouse Space: 200,000 s.f., 1 million cubic feet refrigerated storage. 

Occupied: 28 percent 

FTZ: Yes 

Special Services/Facilities: Handling for large animals, equine, refrigeration 

for cut flowers, perishable food, frozen goods, secure storage. 

Customs: By appointment 3 miles away 

USDA Inspector: By appointment 2 miles away. 

Freight Forwarders: 1 

Traffic: 

Total '03 Tonnage: 13,809 MT 

Total ’04 Tonnage: 15,348 MT +11.1 percent 

Total '03 Aircraft Movements: 66,489, -16 percent. 

Distance to Connecting Transport (miles): 

Rail Terminal: 2, 

Interstate Hwy: 2, 

Truck Terminal: 2, 

Inland Waterway Port: 5, 

Intermodal Center: 2 

Comments: New cargo facilities to be completed in September 2005 to add 1 

acre of ramp space, essentially doubling the parking apron adjacent to the 

Farmington Fresh cold storage facility to allow parking of two 747’s.