FedEx could deliver more carriers to CVG

Posted at 6:00 AM, Mar 25, 2016
and last updated 2016-03-25 06:00:39-04

HEBRON, Kentucky – FedEx is getting new digs at the Cincinnati/Northern Kentucky International Airport, but aviation officials there are hopeful a new facility could also help them land additional cargo carriers in the near future.

CVG this week agreed to lease 10.9 acres of land to Aeroterm US Inc., a third-party developer/owner/manager of airport-related real estate, which will build a new multi-tenant cargo complex to replace an existing structure that's functionally obsolete. The building's main tenant is FedEx, but there's hope an increased capacity could up CVG's cargo game.

The airport has a stranglehold on the No. 9 spot among the largest cargo airports in North America and is coming off its second-best February ever in terms of landed tonnage. Currently, six carriers have cargo operations at CVG, and cargo represents roughly 54 percent of the airport's total landed weight, making it a key economic driver.

But its growth in that category has been primarily driven by DHL, which operates a super-hub here and is the midst of another multi-million expansion. Its latest airport project includes more ramp space to accommodate up to 16 additional aircraft, new equipment to increase sorting capacity and additional warehouse space.

DHL, however, predominately operates in the "overnight express" freight category, said Bobby Spann, CVG's vice president of external affairs. And the airport knows what can happen if it relies too much on a single dominant carrier – it's had a Delta Air Lines hangover, for example, for nearly a decade, since its merger with Northwest Airlines that led to an exodus of flights, passengers and jobs from Cincinnati.

"There's a lot of new opportunity out there that we're not competing well for based on (our) facility availability, and that's one of the things we're working on," Spann said. "It's important to stay diversified, even within cargo.

"We've kind of got a bulk of our cargo eggs in one basket with DHL," Spann added. "A lot of carriers that (handle) different types of freight than DHL are going to Columbus or Nashville or other airports, and we need to compete for that. This will give us that ability."

FedEx needs 25,000-30,000 square feet of space at CVG; Aeroterm, one of three companies to submit proposals for the project, has agreed to construct at least a 25,000-square-foot building with a $3.3 million capital investment.

But, if it can land other tenants, they've proposed a 132,000-square-foot facility, which would cost about $17 million to construct. CVG is leasing the land for a 35-year term that includes two five-year renewals. It stands to receive a $250,000 lump sum payment once the lease is executed and 3 percent base rent from the building's tenants, which will be charged 50 cents per square foot.

The new building will be built on the site of the former DHL hub in the west service area of the airport, near the existing cargo facility, a 1950s-era building that presumably will be demolished. Once the ground lease is executed, the project should take 12 months to complete.

"We were impressed they were willing to construct the building even if FedEx is the only tenant," said Paul Hegedus, CVG's vice president for commercial management. "We were looking to provide them better facilities."

The airport has other plans to modernize its cargo facilities, too, including plans to develop an adjacent site for cargo support and a second adjacent site for other supporting and retail services. Longer term is the development of a logistics park on airport property with approximately 400,000 square feet of warehouse space.

No timeline has been given for completion of those projects.

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