Atlas Air is negotiating with the state of Alaska to build a large, dedicated operations base that would improve fluidity and ensure the airport can accommodate continued growth as the airline increasingly focuses on booming e-commerce trade from Asia to the United States, according to public documents and officials.
The proposed deal would see Atlas Air lease a large piece of mostly undeveloped land on the west side of Ted Stevens Anchorage International Airport for 55 years at an annual rent of nearly $533,000, with space for aircraft parking, fueling, and cargo loading and unloading, according to a public notice published this summer by the Alaska Department of Transportation and Public Facilities.
Plans for a major investment coincide with a significant upsizing of the freighter fleet. Atlas Air, which primarily flies on behalf of other carriers and freight companies, expects to add 11 aircraft this year after announcing last Thursday the signing of long-term leases for three Boeing 747-8 nose-loading jumbo jets.
Anchorage (ANC) mostly serves as a technical stop for airlines to refuel and change crews on long trans-Pacific routes, especially when flying with a full payload from South China or Vietnam. Cargo stays on the planes. Atlas Air is the largest all-cargo operator at ANC, with 7,000 departures per year – about 25 each day. Atlas has about 200 pilots and ground staff who live in Anchorage and an additional 600 fly-in pilots based there.
But Atlas Air’s top executive didn’t rule out using the airport as a cargo hub for consolidating cargo and feeding it to other cities, which would be a major change from how the airline does business there.
“There are some plans and good ideas in place for using Anchorage as an entry point to then do distribution out of there. It doesn’t exist today, but it’s something that could develop in the future. So we’re investing in expanded facilities when it comes to maintaining our operation right, both from a technical perspective and a flight operations perspective and a ground handling perspective, accommodating the growth that we have there with dedicated parking spaces for our aircraft,” CEO Michael Steen said in a video interview.
Atlas Air plans to build the facility, which would include a hardstand for up to 13 widebody aircraft, as well as a warehouse, maintenance hangar, flight crew operations base, storage for ground support equipment and administrative office, said Teri Lindseth, deputy airport director for planning and development, in an email exchange. The project is expected to be completed in 2027, although the timetable is up to Atlas and subject to change, she added.
“Anchorage International Airport is excited about Atlas Air’s lease application in the Airport’s West Airpark, as it will solidify our status as one of the top five busiest cargo airports in the world and support the local and state economy. The planned uses, including aircraft parking and cargo warehousing, underscore our airport’s continued growth in air cargo,” said Lindseth.
The public comment period has closed with no submissions of concern. Negotiations on exact lease terms are underway.
“With the expansions in our feet, we estimate that next year we’re going to be up to 10,000 departures. That’s a 40% increase. That kind of gives you an indication where the market is growing, what trade links are growing, and obviously the investments that we are making as well,” Steen told FreightWaves.
Atlas currently operates on space administered by the airport and lots leased to ground handling companies. The move to a larger, self-controlled site provides Atlas Air more room to accommodate future growth and the ability to get priority for support services, including maintenance, than is available at multi-user facilities.
Air logistics experts say Anchorage needs more infrastructure to deal with the increased traffic and bad weather. Major storms as recently as last winter have crippled cargo operations for days. There is a shortage of paved parking areas and when there is significant snowfall taxiways can become clogged with aircraft. De-icing capacity can also be overwhelmed during weather events.
“I would say a majority of their [Atlas’s] capacity is in the Pacific, so they do really need an effective operation in Anchorage in order to have efficiency through their entire network,” said Neel Jones Shah, who recently left Flexport where he served as chief customer officer and global head of airfreight. “Because if one key point, like an Anchorage collapses on you because of weather and Fairbanks is closed, what are you going to do? You have no choice but to overfly with severe payload restrictions or or start canceling lots of flights. So, it leaves you in a pretty vulnerable spot.”
Harsh weather conditions, which also make it difficult for ground personnel to maneuver cargo for a large portion of the year, are why other freight consultants privately dismiss Anchorage as an effective transload location.
Transloading shipments between aircraft, with all the sortation, storage and consolidation involved, is very different from Atlas Air’s current business model of providing contracted charters. Through long-term or as-needed agreements, Atlas furnishes the whole plane to customers that decide where to fly. Whether the world’s largest operator of 747 jumbo jets could create a true gateway for cargo and take advantage of hub-and-spoke possibilities is an open question.
Another group, private equity-backed Northlink Aviation, is separately developing an air cargo terminal on the airport’s south campus. It too has a 55-year lease and plans a facility with freighter parking areas, an air-side warehouse, a ground service equipment facility, offices and other features.
Express carriers like DHL, FedEx and UPS use Anchorage as a distribution point but have the advantage of controlling their entire air and ground network around the world, including systems, facilities and personnel. Northwest Airlines swapped cargo at ANC for several years before it was acquired by Delta Air Lines in 2008 and United Airlines also had a short-lived hub operation there at the turn of the century.
One logistics professional, who spoke on condition of anonymity so as not to jeopardize business relationships, said a modest warehouse would be useful for Atlas as a place to offload cargo when a plane needs to be removed from service for some reason.
Steen declined to elaborate on how the new facility might go beyond an aircraft support function to a rerouting center for cargo, which would open the potential to serve more destinations, or provide an estimate of the project’s cost.
“The development is going through various approval phases, so I really can’t go into exactly what that plan is going to look like. We will announce that when everything is ready and outlined,” he said. “But it’s going to basically support the growth that we have in our operation up there.”
Focus on international, large freighters
The planned expansion aligns with Atlas Air’s recent decision to concentrate on dedicated widebody service for a growing base of international logistics, manufacturing and retail customers after e-commerce giant Amazon in late May opted to shift 25 aircraft it controls for domestic logistics from Atlas to Sun Country Airlines and ABX Air over a 12-month period. Under the existing agreement, Atlas Air provides crews, maintenance and insurance for the Amazon-supplied aircraft.
Sun Country flies Boeing narrowbody 737-800 converted freighters for Amazon, and ABX Air operates the Boeing 767-300, a medium widebody.
Steen at the time said Atlas Air would reallocate resources to intercontinental operations, where the profit potential is greater and large freighters are in demand.
The incoming 747-8 freighters from BOC Aviation will be deployed by late third quarter primarily for cross-border, e-commerce shipping, according to last week’s announcement. Steen declined to identify which businesses the freighters will be assigned to but indicated one is for a new customer.
Atlas Air currently operates 60 747 freighters, more than any airline in the world.
The three Boeing 747-8s have an interesting backstory: They previously flew for AirBridgeCargo, which is owned by Russian interests and was forced to shut down because of western sanctions following Russia’s invasion of Ukraine in February 2022. Singapore-based BOC Aviation repossessed one of the aircraft in mid-2022 while it was in Hong Kong for maintenance, and temporarily leased it to Air Belgium. The other two, stored in Moscow, were repossessed in March. A U.S. court last year ordered AirBridgeCargo to pay BOC Aviation $406 million after it defaulted on leases when it couldn’t maintain required reinsurance coverage.
Eight other freighters are scheduled to join the Atlas fleet this year. Two 777 production freighters ordered from Boeing last year are expected to enter service in the fourth quarter for an undisclosed customer. Ocean shipping giant CMA CGM’s startup airline is also giving Atlas two Boeing 777-200s to operate on its behalf over the Pacific Ocean. The inaugural flight connected Hong Kong to Chicago on Sunday, CMA CGM announced. Atlas Air also acquired four previously owned Boeing 747-400 cargo jets that will join the fleet in the third quarter. Two of those will be dedicated to Shein and Temu by the end of the quarter.
Two of the 747-400s were bought from Silkway West Airlines in Azerbaijan, which reportedly is standardizing its freighter fleet around the GE Aerospace and Rolls-Royce engines rather than Pratt & Whitney engines. The other two freighters previously belonged to China Airlines and were acquired from a U.S. dealer.
Parent company Atlas Air Worldwide Holdings has 121 aircraft, including 86 freighters in airline operations and 25 aircraft owned by leasing subsidiary Titan Aviation. Among the 86 cargo jets flown by Atlas Air are eight 737-800s that Amazon will take back by next summer. Atlas also operates 10 widebody passenger jets for charter customers.
Atlas Air operates about 15% of the global large widebody fleet, more than any carrier outside express network carriers DHL, FedEx and UPS. And the 11 widebody freighters this year are more than any other carrier in the general cargo sector is adding.
Atlas Air Worldwide last month took $90 million in senior debt financing from Investec Aviation Finance for the acquisition of three Boeing 747-400 all-cargo aircraft.
The 747-400 model is older than the 747-8 and many flying today are becoming candidates for retirement, but Steen said they still have excellent value for Atlas because the fleet is relatively young at an average age of 23.5 years. The two aircraft from Silk Way West are less than 19 years old.
“There’s a lot of life in those aircraft, and they’re performing extremely well in our system,” he said.
The 747-8 has 20% more payload capacity than the 747-400 and is 16% more fuel-efficient than its predecessor.
Titan Aviation last year bought five 777-300 passenger aircraft and leased them to passenger airlines, including two to Qatar Airways and one to Air France, with the understanding they potentially could be modified into freighters, Steen said, confirming initial reporting by Cargo Facts. Three companies have started passenger-to-freighter conversion programs, but aviation authorities have yet to certify any of them for commercial use.
“When those leases are up, which is going to be several years from now, those aircraft will become good conversion candidates, and we will evaluate the various conversion programs that are now being developed,” he said.
Positive market direction
Steen predicted the air cargo market will remain strong into peak season because of a limited supply of widebody lift combined with high demand. Industry freight volumes are up 13% year to date compared with 2023.
“I think you’re going to see the trend continuing. There is going to be an increase in volumes [while widebody freighter capacity is constrained], and rates are going to be affected as a consequence,” said Steen, adding that favorable market conditions will extend into 2025 and beyond as demand grows three to four times more than freighter supply.
Atlas Air did not have any systems go down when the bug in a CrowdStrike security update for Windows systems pushed computers around the world into an unrecoverable reboot loop. But the company was impacted because many pilots who fly to Atlas bases from home were stranded when passenger airlines canceled and delayed flights, the Atlas chief said.
Click here for more FreightWaves/American Shipper stories by Eric Kulisch.
Twitter: @ericreports / LinkedIn: Eric Kulisch / ekulisch@freightwaves.com
RELATED READING:
Atlas Air to end Amazon flights, focus on international customers
