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Louisville Airport: domestic passengers static, but UPS' Worldport makes it a parcels giant

Louisville International - Standiford Field Airport to give it its full name (LIA here) – is situated in the east south-central part of the US. It has a number of similarly sized airports and city-regions in the vicinity which act as competition, though that competition is at a low level.

The city is comparatively rich, with a diverse economy and numerous tourist attractions. It is also a gateway to a wider area that is replete with them.

However, there is very little passenger growth and that has been the case for several years. The other side of the coin is the presence of a very large parcel-handling station – UPS’ Worldport – which quite possibly has greater significance as an employer and economic activity generator.        

This report looks at present and future growth trends at the airport, how it matches up to competing airports across a range of metrics, local airport statistics, construction activities and ownership.

Louisville - an economically diverse city, rich in culture and sport

Louisville is the largest city in the Commonwealth of Kentucky and the 30th most populous in the United States.

It is located in the east south-central part of the US, which borders Indiana, Ohio, West Virginia, Virginia, Tennessee, Missouri and Illinois. Known as the Bluegrass State for the colour of its rich grasslands, Kentucky is one of four US states constituted as a commonwealth, the others being  Virginia, Pennsylvania and Massachusetts. While it is the largest city in the state by some margin, being twice as big as second-placed Lexington, it is not the state capital. That is Frankfort.

Louisville was founded in 1778 and its initial growth was spurred on by its location on the Ohio River and its ability to offer portage (the practice of carrying water craft or cargo overland; either around an obstacle in a river, or between two bodies of water).  This fact spurred Louisville's growth from an isolated camp site into a major shipping port. Subsequently it became the founding city of the Louisville and Nashville Railroad, which grew into a 6,000-mile (9,700 km) system across 13 states. Hence transport has always been an important part of its economic raison d’être.

Today it is best known as the home of the Kentucky Derby and Kentucky Fried Chicken but equally it houses three of Kentucky’s Fortune 500 companies. Its main claim to fame in an aviation sense is that LIA is the main worldwide hub of United Parcels Service (UPS).

The population of Louisville (2014 census) is 760,000. Since 2003 Louisville's borders have been the same as those of Jefferson County, owing to a city-county merger into what is known as the Louisville/Jefferson County Metro Government – commonly abbreviated to Louisville Metro.  The population of this metropolitan area (sometimes also referred to as Kentuckiana) was 1,269,702 in 2014, ranking it 43rd nationally.

It is a rich city, being listed at #23 on the list in the Five Year American Community Survey of Dec-2014. The survey is based on the percentage of residents with income above USD150,000 per annum in cities with a population of over 500,000, and secondly takes into account the percentage of the adult population holding a Bachelor’s degree. In the case of Louisville those figures are 6.4% and 26.9% respectively. (The richest city is San Francisco [22.6% and 37.4% respectively]).

The city-region’s economy is diverse, embracing:

  • Shipping and cargo industries: Louisville ranks as the seventh largest inland port in the United States. Its strategic location at the Falls of the Ohio River, and its unique position in the central United States (at the crossroads of three major interstate highways and within one day's road travel to 60% of the cities in the continental US) make it a practical location for the transfer of cargo along the route to other destinations. Louisville's continuing importance to the shipping industry is evident with the presence of the aforementioned Worldport global air-freight hub for UPS at LIA.
  • Healthcare and Medical Science industries: with an established downtown medical research campus and the presence of one of the US’ largest health insurance companies, Humana.
  • Hardware manufacturers and distributors.
  • Motor vehicle manufacture: (two Ford plants).
  • Whiskey industry: one third of all bourbon is made in the city.
  • Motion picture industry: films made in and around Louisville include The Insider, Goldfinger (Fort Knox, the site of the US Bullion Depository, which is used to house a large portion of the official gold reserves and which featured in that film, is to the south of Louisville), Stripes, Lawn Dogs, Elizabethtown and Secretariat.

Where tourism is concerned – apart from the annual event spectaculars such as the Kentucky Derby horse race and the two-week festival that goes with it, bourbon festivals, and many arts-related events, Louisville has become a regional centre for independent art and music.

It has gone so far as to adopt the slogan “Keep Louisville Weird” – a similar philosophy to that of Portland Oregon:

(See: http://centreforaviation.com/insights/analysis/portland-international-airport-supporting-air-services-in-a-hotbed-of-environmental-awareness-268398).

So from both a commercial and touristic viewpoint there are many reasons why people might wish to travel to, and from, the city by air. Moreover as the map below suggests, Louisville acts as one of the gateways to the picturesque south-central part of the US and is within striking distance by road (I-65/I-40) of other important tourism cities such as Nashville and Memphis.

For the purposes of this report Louisville International Airport (LIA) is compared with neighbouring airports at Cincinnati and Indianapolis, to the northeast and north respectively, St Louis Lambert to the west, and Nashville to the south. There are no comparable airports to the east, into West Virginia and beyond.  

Location of Louisville International Airport in relation to rivals

A relatively small player in the overall scheme  

The table below compares LIA with the peer and neighbouring airports cited above, using a variety of metrics that include aviation and population statistics.

These are mainly O&D airports and secondary hubs.  The O&D airports are Indianapolis (though it is a freight hub for FedEx) and Nashville. The hubs are: St Louis Lambert – which has lost most of its prior cache as a hub following the downgrading of American Airlines (previously TWA) hub activities there; and Cincinnati/Northern Kentucky – which is now the smallest domestic hub for Delta Air Lines.  The two major primary hubs at Chicago and Atlanta are outside the catchment area and are omitted from the comparison.  

Rankings by assorted metrics (1) (at 22-Aug-2016) 

Airport/metric

ASKs

Seats

Frequencies

Cargo payload

Pax 2015 

(million)

 

City metro population (million)

Louisville Int

475

408

320

539

3.4

1.27

Cincinnati/Nth Kentucky Int

275

265

166

95

6.3

2.1

Indianapolis Int

261

231

179

285

8.0

2.4

St Louis Lambert Int

177

152

110

210

12.8

2.9

Nashville Int

200

163

127

230

11.6

1.9

In terms of passenger traffic and rankings the dominant airport for this loosely defined region is St Louis Lambert, although Nashville is not far behind. Passenger traffic throughput overall is broadly proportionate to metropolitan area population, with the exception of Nashville.

The tables below show how LIA compares alongside a selection of neighbouring US airports, i.e. the ones compared in the previous table, in terms of airline activity and route development.

LIA Network Summary (at 22-Aug-2016): airlines, passenger and freight destinations 

Total Airlines

5

   Domestic only

5

   International

0

Total nonstop passenger destinations

21

   Domestic

21

   Africa

0

   Asia Pacific

0

   Europe

0

   Latin America

0

   Middle East

0

   North America

0

Total nonstop freight destinations

0

   Domestic

0

   Africa

0

   Asia Pacific

0

   Europe

0

   Latin America

0

   Middle East

0

   North America

0

Rankings by assorted metrics (2): Comparison of airports by total airlines and nonstop destinations (at 22-Aug-2016)  

Airport

Total airlines

Pax traffic 2015

(millions)

Pax to airline ratio

International airlines

Nonstop passenger destinations

Nonstop freight destinations

Louisville

5

3.4

0.68

0

21

0

Cincinnati/Nth Kentucky Int'l

12

6.3

0.52

6

49

22

Indianapolis Int'l

9

8.0

0.88

3

40

3

St Louis Lambert Int'l

10

12.8

1.28

2

63

0

Nashville Int'l

12

11.6

0.96

2

48

6

Cumulatively these tables show that LIA is a relatively small regional player, being the lowest ranked in all the categories of the table ‘assorted metrics (1),’ having the smallest number of airlines and passenger destinations, no international airlines and no nonstop freight destinations.

However, LIA is shown to be the airport that ranks second for airline competition for passengers after Cincinnati according to the passenger-to-airline ratio, which measures annual passenger numbers vs. the number of airlines. A low reading equals greater competition/choice.

Connectivity – all flights are domestic

The route map below shows destinations that can be reached by direct (red) or connecting (blue) flights. There are no direct international flights from LIA. Domestic routes are concentrated on the Midwest and east coast areas, with a smaller number of destinations in the Mountain Time zone and on the west coast.  

Direct and indirect (connecting) routes from LIA (at 22-Aug-2016)

Accordingly, in order to take an international flight a passenger must make a connection through a hub. The table below, which details the leading routes in the period Jun-2016 to May-2016, suggests that the three preferred hubs may be Atlanta, Chicago O’Hare and Charlotte-Douglas airports, in that order, although passenger traffic between LIA and those airports will also include O&D journeys. (Chicago’s Midway airport is also popular, for example).

The busiest domestic routes from LIA (Jun-2015 to May-2016) 

City

Passengers

Airlines

Atlanta

333,000

Delta

Chicago O’Hare

156,000

American, United

Charlotte-Douglas

145,000

American/US Airways

Chicago Midway

131,000

Southwest

Baltimore-Washington

121,000

Southwest

Dallas-Fort Worth

118,000

American

Detroit

75,000

Delta

Denver

71,000

Southwest, United

Minneapolis-St Paul

61,000

Delta

Orlando

51,000

Delta, Southwest

Nonstop connectivity – LIA the smallest of the pack

The chart below adds more detail to the examination of nonstop connectivity, this time embracing all destinations rather than just domestic ones and comparing LIA again with the same clutch of airports.

Nonstop connectivity values (passenger destinations). Comparison of LIA, Cincinnati, Indianapolis, St Louis Lambert and Nashville airports, 22-Aug-2016 to 28-Aug-2016

Evident again here is the lack of international flights, which all three of Cincinnati, Indianapolis and St Louis can offer, although in very small numbers – a total of just four routes between them.

Previous profiles for US airports have highlighted this lack of international service from many sizeable US conurbations and their airports. Otherwise, LIA is again shown to be the smallest of these regional airports by this measure.

The airport has three runways – two parallel and one crosswind, including one of 3623m x 46m – and it has existing Customs and Border Protection facilities on account of the international cargo flights operating there. Accordingly, the provision of international passenger flights could not be excluded on those grounds.

Landing charges are attractive

One of the advantages LIA that offers over its rivals is that its landing charges are not appreciably higher than those of rival airports, and in some comparisons are lower. They are considerably lower than those at St Louis Lambert, across the spectrum of aircraft types. Of course, landing charges are only one measure of airport charges to airlines.

The CAPA Airport Charges & Benchmark Database, from which the data below is extracted, has seven different measures.  

Landing Charges (USD) for Louisville International Airport [SDF], Cincinnati/Northern Kentucky International Airport [CVG], Indianapolis International Airport [IND], St Louis Lambert International Airport [STL], Nashville International Airport [BNA] for 2015

Louisville is mainly a full service airport

Only 30.9% of seats at LIA are on low cost carriers, with 69% on full service airlines and 0.1% attributed to a virtual airline – OneJet – which specialises in scheduled public charter flights on business jets owned by Corporate Flight Management. OneJet’s operations encompass other airports in the peer group.

LIA capacity, seat share by airline type, 22-Aug-2016 to 28-Aug-2016

The chart below compares this traffic split with the airport’s peers.  

Comparison of selected airports by specific airline type – seat availability, 22-Aug-2016 to 28-Aug-2016  

Airport

% of seats on FSCs

% of seats on LCCs

% of seats on other modes (e.g. regional, charter airlines)

Clarification of previous column (other modes)

Louisville Int

69.0

30.9

0.1

Virtual airline

Cincinnati/Nth Kentucky Int

79.2

20.7

0.1

Regional/commuter

Indianapolis Int

62.8

37.1

0.1

Virtual airline

St Louis Lambert Int

39.9

59.6

0.6

Regional/commuter

Nashville Int

40.4

59.4

0.2

Charter

Average

58.3

41.5

0.22

-

This data shows that LIA’s percentage of seats on FSCs is above the peer group average by over 10 percentage points (ppts) while the percentage of seats on LCCs is over 10 ppts below the group average.

(An intriguing observation is that of the two fairly major hubs that are now minor ones – St Louis Lambert and Cincinnati – the former appears to have embraced the LCCs to a significantly greater degree than the latter.)

Seat capacity is shared across the big four airlines

The main airlines operating at LIA are shown in the seat capacity distribution chart below. Apart from Southwest, which is responsible for all the LCC capacity (there are no LCCs such as Allegiant and Spirit operating there despite the fairly low charges), the split of capacity between American, Delta and United is quite equal.  

LIA capacity (seats per week), by all airlines, total system, 22-Aug-2016 to 28-Aug-2016

Cabin class ratio suggests the affluent nature of the local economy  

The difference in the ratio of first, business, premium economy and economy seat capacity at LIA compared with the peer group is small. There are slightly more first class seats than at the other peer group airports, apart from Cincinnati. While the number of business class seats is limited, overall there are fewer economy class seats than within the peer group. This may reflect the nature of the economy and business climate in Louisville, as described earlier.   

LIA and peer group combined schedule by class of seat - one way weekly departing seats (total system) 22-Aug-2016 to 28-Aug-2016

The actual figures are available online in the CAPA site, and for LIA they are:  

% of seats

First

Business

Premium economy

Economy

LIA

6

0.8

3.7

89.5

Global alliance penetration is high  

Predictably, with the three majors well represented, airline alliances are fairly strong at LIA, led by SkyTeam with over 28% of seat capacity, of which the contribution of Delta Airlines is a principal component. Slightly less than a third of capacity is on unaligned airlines. 

LIA capacity, seat share by alliance/unaligned, 22-Aug-2016 to 28-Aug-2016

How does this compare with peer airports? The same group is used as previously. LIA has the second highest ratio of seat capacity on aligned airlines, by over 11 ppts from the average. Again the more business-like appeal of the airport may at least partly explain this result, although there are many reasons why alliance airlines may favour one airport over another.

Comparison of LIA with selected airports by alliance penetration – seat capacity, 22-Aug-2016 to 28-Aug-2016  

Airport

% of seats on unaligned airlines

% of seats on aligned airlines

Louisville Int

31.0

69.0

Cincinnati/Nth Kentucky Int

20.8

79.2

Indianapolis Int

37.2

62.8

St Louis Lambert Int

62.2

37.8

Nashville Int

60.3

39.7

Average

42.3

57.7

Seat capacity is rock-steady...  

Seat capacity has not varied since 2012, with the exception of a small dip in 2013. 

Louisville International Airport seat capacity year-on-year

…and passenger traffic growth figures also

This stability is reflected in the unvarying passenger figures during the same period.  

LIA annual passenger numbers

Figures for 1H2016 suggest exactly the same for the full year. Traffic was absolutely static in that period. 

Stage lengths – no flights over four hours in duration

Over four fifths of seats at JIA are on flights of up to two hours in length, and a further fifth on flights of up to four hours, which is representative of the route maps above and the main hubs served. The longest flights are to Phoenix, Las Vegas and four Californian destinations.

LIA seats by length of flight, total system, 22-Aug-2016 to 28-Aug-2016

The chart below also emphasises the heavy concentration of frequencies at LIA in the 0-2 hour flight time band (for example between 400 and 600 frequencies weekly in the one- to two-hour range)

LIA frequencies 22-Aug-2016 to 28-Aug-2016

Another perspective on frequencies is represented below in the form of a bar chart of seat capacity (arriving and departing) by time of day, on a typical day, which is 23-Aug-2016.

Despite the airport being only 10 minutes from ‘downtown’ there is no curfew in place at LIA, but no activity usually occurs between 0100 and 0500. Overall, throughout most of the day after 0900 there is equilibrium between departures and arrivals (which this chart also represents), but not in the early morning or the late evening from 21:00.

LIA, seats per hour, typical day, Tuesday 23-Aug-2016 (all airlines, total system, all terminals, all origins and destinations)

LIA’s cargo is handled on passenger aircraft, but UPS’s Worldport is a major advantage  

Almost all freight at LIA is domestic and is carried on passenger aircraft; there are no dedicated freighters of substance, even though LIA is a major hub for one of the world’s largest parcel carrier.  

Payload has been reducing continually during the last four years, as indicated by the chart below.  

Louisville International Airport cargo payload

Southwest is the biggest cargo payload provider – as it is with passenger seat capacity – but in this instance that capacity is over 10 ppts greater than that of Delta, while United’s cargo capacity is only 3% of the total compared with its 13% for passenger seats.

Louisville International Airport total capacity per week (cargo payload, kg), total system, by airline, 22-Aug-2016 to 28-Aug-2016

None of this takes into account Worldport, the global hub for UPS (United Parcel Service). This has been located at LIA since 1980, though the term Worldport was not used officially by the company until 2002 – following a USD1 billion, five-year expansion project. A further USD1 billion expansion was completed in 2010, which included the addition of extra ramps.  

On account of being the host location of Worldport Louisville IA ranks third in North America – and seventh in the world – in the total amount of cargo handled.

Worldport mainly handles express and international packages and letters, serving all major US domestic and many international hubs and having over 90 spokes on its distribution hub.  

Worldport viewed from above

Situated between the two parallel runways, the facility is 5.2 million sq ft (48 hectares) in area and can handle 416,000 packages per hour.

More significant for the economy of the area: there are over 20,000 employees, making UPS one of the largest employers in Kentucky.

Many of those employees are part-time college students working overnight shifts; they can receive up to 100% tuition reimbursement if they are students at local universities and colleges.  

Inevitably the demands of Worldport impact on construction activities at LIA.

Construction – new taxiway will accommodate the largest cargo aircraft  

The airport has a single passenger terminal building (Jerry E Abramson). This terminal is in the process of being aesthetically enhanced at a cost of USD9.5 million, with a financial contribution from concessionaires HMSHost and Paradies Lagardère: those firms are investing more than USD8 million in total for new outlets and retail stores. The enhancements were recommended by community 'vision' groups which met for over a year to find ways to enhance travellers’ experiences and create a stronger community presence. The driving force behind the refurbishment was the American Airlines/US Airways merger.  

Separately, and probably more importantly, work has taken place to make safety improvements to Runway 11-29 and to construct a new taxiway two miles long, which required the relocation of a road – Crittenden Drive – that runs along the airport perimeter. These works were funded by the FAA and the Louisville Redevelopment Authority and the taxiway is a key component of the Beyond 2010 plan for airfield improvements, which will enable the airport to handle the largest and newest long-range commercial cargo aircraft.

Ownership remains wholly in the public sector; no indication of change

The airport is entirely in public ownership by the Louisville Regional Airport Authority (LRAA). The forerunner of the Louisville Regional Airport Authority was established in 1928 by the Commonwealth of Kentucky’s General Assembly and the airport is believed to be the first airport to use the authority-type governance in the United States.

LRAA is an autonomous municipal corporation established by Kentucky state statute that is responsible for owning, operating and developing Louisville International Airport and Bowman Field, which is a reliever airport for LIA. It is corporatised and self-funded, deriving operating revenue from a variety of user fees. The Authority does not receive local or state funding for the routine operations of either airport.

There is no indication of any intention to privatise the facility at this stage. 

Summary and conclusions

  • Louisville is at the centre of a mid-sized conurbation in the east south-central part of the US. It has a diverse economy and while not being an outright tourist centre in its own right, it is a gateway to a wider region that is.
  • In terms of passenger traffic LIA is a relatively minor player in comparison with neighbour airports, despite the decline that took place at its nearest rival (the Cincinnati/Northern Kentucky airport) in recent years.
  • All passenger flights are domestic only and international travel is usually made through hubs such as Atlanta, Chicago O’Hare and Charlotte-Douglas.
  • While there are no international flights at LIA, neighbouring airports themselves only offer a handful. At LIA, with a long runway and customs/border protection facilities that already exist for the parcels service based at the airport, there is at least the opportunity to develop limited international services.
  • Moreover, LIA’s landing charges are quite attractive in comparison with peer airports.
  • LIA is mainly a full service airport. LCC impact is lower than at all but one of the peer group airports.
  • Alliance airline penetration is also higher than the peer group average.
  • Seat capacity and passenger growth levels have both been stable over the past four years. While there is no growth, there is no decline either. This may be because Louisville is not a secondary hub like some of the other airports in its vicinity, and that is where the damage has been done. The city and environs make a substantial city-region in its own right.
  • Most flight lengths are two hours or less, with only 20% being up to four hours.
  • LIA could operate 24/7 but there appears to be no demand for arrivals or departures after midnight. There is equilibrium between arriving and departing flights for much of the day, and few obvious opportunities to promote off-peak pricing offers to fill slot gaps.
  • While LIA’s regular cargo is handled on passenger aircraft, and cargo capacity is actually in decline, the parcels business Worldport operating there makes it one of the largest handlers anywhere within that business segment.
  • The presence of Worldport influences design and build activities. A new taxiway was recently completed, financed by the FAA and the airport rather than the facility’s operator, and as part of the ‘Beyond 2010’ plan to enable the airport to handle the largest and newest long-range commercial cargo aircraft.
  • The airport is wholly within the public sector and there are no known plans to attract any form of privatisation beyond what already exists there (i.e. Worldport).

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