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St. Louis China Hub Called Infeasible; Won't Deliver Jobs or Flights

Pie-in-the-Sky.jpg
Look! Is that a Chinese cargo jet about to land in St. Louis, or just pie in the sky?
Update: Michael Webber responds to criticism of his criticism.

Air cargo consultant Michael Webber does not mince words when it comes to questioning the promises tied to the proposed Midwest China Hub at Lambert St. Louis International Airport.

Webber argues that the cargo hub won't ever result in the number of flights and jobs being touted by state and regional officials and -- in calling for $360 million in public financing -- will only further bankrupt the state. 

For starters, Webber notes that the China Hub ignores the fact that the air-cargo market is dominated by just a few companies, all of which have no need to add St. Louis to their list of hub airports.

"St. Louis' big idea is a $400-million speculative venture that from inception excludes participation from global integrated carriers DHL, FedEx and UPS that account for about 90 percent of the current St. Louis market, but already have established hubs in the region," writes Webber in a June 14 article in the online trade pub Air Cargo News. "With hubs in Louisville and Memphis and regional hubs in Rockford, Illinois, and Indianapolis, Indiana, neither UPS nor FedEx (respectively) have any foreseeable need for a significantly expanded role at Lambert."

Moreover, St. Louis is too close to the biggest air-cargo hub in the Midwest: Chicago's O'Hare Airport. To think that Chinese companies would choose to ship their products to St. Louis over Chicago is ludicrous, according to Webber, who notes that once goods arrive by air from China, shipping them by ground to other U.S. cities isn't that big of deal.

With no evidence, "big idea" champions believe shippers need an alternative to O'Hare, suggesting that international air cargo shippers are disadvantaged by having to truck freight a few hours past St. Louis to Chicago, but many international shippers already truck shipments from the Midwest much further to gateways like Los Angeles and Miami," writes Webber. "Trucking company Sterling Transportation Inc. does nothing but truck freight between Miami and Los Angeles to leverage the superior Latin American access of the former and the Asian superiority of the latter. So when trucking economics sustain competitive advantages on segments as distant as Miami and Los Angeles, the distance from St. Louis to Chicago hardly seems excessive.
Webber also disputes the notion that St. Louis would need to build up to 27 million square feet of warehouse space to process and organize all the inventory arriving here from China. Based on the eight or so weekly flights St. Louis could expect to land from China, the region would need a fraction of that warehouse space -- just about 100,000 to 200,000 square feet, he says.

Finally, Webber suggests that if Missouri really wants a cargo hub with China, the Kansas City airport would make more sense. Money has already been spent there to make it an air hub for livestock (a project that's never really taken off), and KC is farther from Chicago and other Midwest cargo hubs. Concludes Webber:

"Rather than merely revise the scale of this project, Missouri should recognize that it has been hoodwinked so badly that not only should the State abandon consideration of future funding, it should seek to recover what has already been wasted. Legislators and state bureaucrats, as well as members of the media who lazily parroted talking points, should repent for having so carelessly treated a potential obligation of hundreds of millions of taxpayer dollars, even as so many much more worthy priorities confront Missouri."
Daily RFT has a call out to Webber to get more of his thoughts. Perhaps not surprisingly, the woman who answered the phone at his business this morning said he's currently on a flight and could not speak until later today. It should be noted that Webber bases his consultancy, Webber Air-Cargo Inc., out of Kansas City and his clients include Chicago and its O'Hare Airport.

Still, he's not the first air-industry insider who has looked at the plans and projections for the St. Louis China Hub and thought them to be "misleading as hell."

H/T to one of Daily RFT's favorite gadflies, Tom Sullivan, for bringing Webber's article to our attention.

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16 comments
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IvoryMetal
IvoryMetal

There have been no Chinese officials addressing the ST Louis press on the China Hub. all we have are the proponents' say so. After the Chinese president came to Washington he went to Chicago signing an agreement to increase trade 20% through Chicago. During that visit the proponents announced possession of a "letter" indicating a strengthened commitment from the Chinese airline which turns out to be no more than a letter of interests.  The cited articles by Adam came from a contractor/developer news letter. This is significant because the architects of the plan are contractors and developers who stand to gain the most. But first, no international entities have shown interests in locating to St Louis to occupy 10% of the spaces proposed. Under that portion of the bill passed the developers’ guarantees include 100% of funds to purchase and clear land; and all construction costs, including infrastructure. Because the bill extends 50 miles surrounding the airport, any developer with land in that area can price and purchase that land under the bill. That is, Willie McGee Company sells his land to WMG Company who will participate in the tax credits -- both companies are owned by the same individual. The proposed bill contains no language guaranteeing what will be built will or shall have an occupant at any time. Finally the primary proponent of the HUB, Paul McKee and his companies are being sued by three different banks for failure to repay different loans in both federal and state court for much smaller developments in this area.  Good Luck!  IvoryMetal

Cluemarket
Cluemarket

Once more St. Louis ... the "lastest with the leastest"   DUH!

Jay Somerville
Jay Somerville

Nobody in China has expressed interest in flying to St Louis.  In fact, one business blog was almost laughing when reporting on this boondoggle.

STL Activist Hub
STL Activist Hub

My understanding is similar to what Colegood expressed.  I thought the whole point of China wanting to go to St. Louis instead of Chicago is that they wanted to use their own carriers rather than relying on companies like FedEx and UPS.  If so, then this guy's argument is unsound.

KittyLitterKing
KittyLitterKing

Still a cheaper white elephant than the W-1W runway expansion.

Fred
Fred

This should be noted at the top, silly, because it says it all: "It should be noted that Webber bases his consultancy, Webber Air-Cargo Inc., out of Kansas City and his clients include Chicago and its O'Hare Airport."

Adam
Adam

no, sir. only ONE of the articles i cited came from a "contractor/developer newsletter". the other two came from the post dispatch and the brownsville herald (newspapers), respectively.

Adam
Adam

that's a solid argument, clue. plenty of ad hominem. no actual information.

Adam
Adam

oh, jay. unfortunately for you, saying things doesn't make them true.

"In January, the Chinese government designated China Cargo Airlines to negotiate with St. Louis.

China Cargo Airlines is a subsidiary of China's largest air cargo carrier, China Eastern Airlines. Last year, China Eastern Airlines sold minority stakes in China Cargo Airlines to Singapore International Airlines and Taiwan-based EVA airlines to raise cash for its expansion."

http://www.stlouiscnr.com/depa...

"Fleming said he was encouraged by the recent decision by thefreight affiliate of China Eastern to send several cargo flights toLambert each week..."http://www.stltoday.com/news/l...

"Bob Hedrick and his Brownsville-based companies World-Wide Consolidated Logistics Inc./Pan American Airways Inc. have won a rare Texas Enterprise Zone project designation from the governor’s office.The designation was awarded on the strength of Hedrick’s plan to establish Brownsville as the air cargo "gateway" to Latin America, connecting it with Lambert-St. Louis International Airport — itself on the verge of becoming the U.S. hub for Chinese air cargo."

http://www.brownsvilleherald.c...

but i suppose if "one business blog" says so then there's just no arguing!

Oh
Oh

And I'm pretty sure the point is that St. Louis is NOT Chicago. Cheaper fees, less traffic and delays. The proximity to Chicago is more of a plus than a minus.

Chad Garrison
Chad Garrison

 Well, you can argue about where to place that information, but the fact is that he's not the only air-industry expert to call the China Hub a joke. I left it at the bottom because I've not yet had the opportunity to ask Webber about possible conflicts of interests.

Colegood
Colegood

I think it’s clear that he may have a serious conflict of interest.  The Chinese are interested in St. Louis because, unlike his client in Chicago, we can actually handle a substantial increase in activity.  This ‘expert’ basis his argument on the fact that FedEx and UPS control 90% of the air cargo flown between the US and China and that these carriers are already based in other cities.  Building off this irrelevant premise, he goes on to assert that St. Louis’ attempt to lure Chinese air carriers will necessarily fail.  However, FedEx and UPS are irrelevant to the potential success of because the Chinese are attempting to directly challenge the supremacy of these two companies.  His ignorance of these basic facts seriously undermines his credibility.His argument that Lambert does not need updated and additional warehouse facilities also lacks merit.  Although there are warehouses around Lambert, many of them lack the capacity to meet the demands of the proposed aerotropolis initiative.  Most notably, it would be necessary to renovate existing buildings to accommodate so-called cold-chain facilities.  Moreover, the current vacancy rate is at 9%, which is 2% below the national average.  If the China hub fulfills its potential, such facilities would prove woefully inadequate.  Importantly, the aerotropolis tax credit package would disburse credits to companies only to the extent that they contribute to the hub initiative.  As such, no hub, no tax credits.  If credits are disbursed, the return on investment would exceed the amount spent on luring freight-forwarding companies to the area.  In light of this reality, the only thing bankrupt in this debate are the arguments advanced by opponents.Further, his assertion that this has less than a 1% chance of succeeding is laughable. I mean, the Chinese would not engage in 3 years of protracted, fairly extensive negotiations if this had virtually no chance of working. Moreover, considering that the Chinese are intent on establishing a hub in the US and we are apparently their first choice, it’s deeply insulting, as well as absurd, to suggest that their efforts here would have less than a 1% chance of succeeding. I have a feeling that Chinese leaders who have guided perhaps the most remarkable economic transformation in recent history are probably a bit more sophisticated than this ‘expert.’I'm beginning to think that calling yourself an expert and then criticizing "Aerotropolis" is the easiest way to get noticed by the stl media. Short of robbing a group of marines, I can't think of a more effective way of getting attention.  I’m sure he’s happy that you have enhanced his Internet profile, which was non-existent before he started criticizing Aerotropolis

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