Fed up with cargo congestion, freight forwarders flee O’Hare airport
Cargo congestion has gone from bad to worse at Chicago O’Hare International Airport, forcing importers to wait several days to retrieve shipments and prompting two large logistics companies to migrate airfreight operations an hour west to an uncrowded facility in Rockford, Illinois.
There is so much cargo piling up at O’Hare that airline-handling agents for the first time in memory are actually renting warehouses in surrounding townships to hold the overflow until it can be sorted for customer pickup, local trucking and logistics professionals say.
The problem stems from the rush of ad hoc all-cargo aircraft being substituted for grounded passenger jets amid the travel downturn combined with the surge in e-commerce orders, inventory replenishment and ocean shipping backlogs that have companies turning to air to move their goods. Major gateways like O’Hare are used to a mix of traffic, including scheduled freighters and frequent international passenger flights that bring freight in smaller chunks.
The onslaught of shipments is colliding with staffing shortages at airport warehouses, which are unable to quickly break down or consolidate shipments for transfer to other supply chain parties.
“The wave of freight that’s come through in the last couple of months has just been enormous. Most of the airlines don’t have enough room. So many times we go to deliver export freight and they’re turning us away because there’s just no room on the floor for them to accept freight,” Joe Valdez, the airport department manager for R&M Trucking, said last week during a virtual meeting of the International Air Cargo Association of Chicago.
“At times, when we go to certain airlines, there are pallets sitting out in the yard where drivers have to go around them because they just don’t have room in the building,” he added.
Cargo volume by weight at O’Hare grew 14.8% in 2020 to more than 2 million metric tons and freighter flights increased 25% to 30,399, according to the Chicago Department of Aviation. Critically, international imports carried on widebody jets jumped 22%, more than any other major gateway in the U.S., including Memphis, Tennessee, and Louisville, Kentucky, home to the respective global air hubs of parcel giants FedEx and UPS, an analysis by consultant Logistics Capital & Strategy shows.
Cargo bottlenecks are nothing new at O’Hare. Many terminals are outdated, lack modern technology, have limited truck access and dock doors, and haven’t adopted appointment systems, according to industry officials.
The situation deteriorated last year when a constant stream of freighters began arriving with personal protective equipment and other medical supplies from Asia to help combat the COVID-19 virus. At the same time, third-party ground handlers released many workers when airlines scaled back passenger flights and lost others to illness. Social distancing also makes warehouse operations less efficient and cargo-only passenger flights require larger crews to hand more boxes in the cabin.
Ground handlers say they’ve had difficulty rehiring workers because of generous federal unemployment benefits and stimulus checks during the pandemic.
There has been no letup since then. Swamped ground handlers are taking nearly a week to sort freight from arriving flights and trucking is scarce for airport pickups and local deliveries, freight forwarders say.
Many shared warehouses have shortened their hours and stopped giving out import freight between 10 p.m. and 3 a.m., a period that serves as a valuable release valve so everyone doesn’t congregate in the middle of the day, R&M President Jerry May said at the meeting.
R&M has 135 drivers dedicated to airport shuttles and their idle time per day went from three to five hours to almost 12 or more, according to company officials.
“They’re just sitting in a line. They went from doing up to four turns per day to one or one and a half,” Valdez said. “That’s how bad it’s gotten in the last 90 days.”
Sometimes the carrier has to bring in substitute drivers to replace those who use up their on-duty hours, which are capped by highway safety regulations.
A manager for a leading forwarder that does business at the airport, who asked not to be named so as not to jeopardize business relationships, said truckers can wait several hours for a load only to reach the counter and discover the freight isn’t ready because the ground handler hasn’t communicated with the forwarder.
The source described reports of how attempts to secure faster service have even been digitized. Yesterday’s discreet passing of paper currency to a warehouse employee has been replaced with a few discreet taps on a smartphone and a funds transfer via electronic means.
A common practice for years is for warehouses to allow high-volume trucking companies to pre-stage trucks. The forwarder described one location that recently had seven dock doors with trucks waiting for import freight but no drivers. “There’s arrangements being made by recovering truckers to stake out doors in return for service. That reduces the available capacity” for others, he said.
The cargo volume is so overwhelming that some ground handlers, including those for China Eastern and China Cargo Airlines, are renting warehouse space in neighboring jurisdictions outside the airport because they can’t handle it all in their existing facilities, the forwarder said. In some cases, warehouse operators are subcontracting to competitors.
“Then it becomes a guessing game to a certain extent over which warehouse is my freight going to be in. So if one gets full, it goes to the other, and you have people spending two to three hours at the wrong warehouse,” he explained.
In January, the Chicago City Council approved a lease agreement with a development firm to expand O’Hare’s Northeast Cargo Facility, which will boost the airport’s cargo capacity
Rockford refuge
The overcrowded conditions and service delays at O’Hare have pushed German logistics providers DB Schenker and Senator International to relocate some airfreight operations to nearby Chicago Rockford International Airport (RFD).
The freight forwarders have signed long-term leases to occupy more than half the space in two airside warehouses currently under construction by the Greater Rockford Airport Authority.
Regional hubs for UPS and Amazon have driven rapid growth in recent years at the cargo-centric airport, which is also attracting more independent freighter operators that often run regular flights for logistics customers.
Both DB Schenker and Senator contract with all-cargo carriers to operate dedicated flights under long-term charters in which they control the schedule and the freight that goes on the aircraft. They continue to manage shipments through O’Hare, either on passenger aircraft, pure freighters or charters, but Rockford will handle flights for their private-label airlines. DB Schenker’s contract carriers include AirBridgeCargo Airlines, Atlas Air, Cargolux, Magma Aviation and National Airlines.
The challenges at O’Hare warehouses last fall finally convinced DB Schenker to look for an alternative gateway for its own-controlled aircraft. The last straw was when leased freighters had to wait in Anchorage, Alaska, on a couple of occasions because all the parking spots at O’Hare were taken, Benno Forster, senior vice president and head of operations and procurement for the Americas, said in an interview.
“The lines for picking up freight are very long. We see the same issues on the export side. In order to make the cutoff, we have to go very early. So we had to be innovative to find ways to help our customers” and avoid penalties for not fulfilling door-to-door transit commitments, he said.
The service experience is completely different in Rockford, where the forwarders say they get personalized attention as the main customers.
“You touch down and five minutes later your plane is parked. That’s really difficult to beat,” Forster said. “The handling agent is able to unload the plane, load it directly on our trucks and within no time we arrive in our warehouse in Chicago.”
Sometimes freight gets to the DB Schenker warehouse in Chicago faster when it lands in Rockford instead of O’Hare, he added.
DB Schenker’s uses several carriers for its private air network, including this Icelandair passenger aircraft with the seats removed. (Photo: DB Schenker)
When the warehouse near Chicago began running out of space, DB Schenker asked the handling agent at RFD to deconsolidate large container shipments so they could be trucked directly to individual customers. That quickly led to discussions about co-locating within a new cargo center under development.
The first building is nearly complete and scheduled for occupancy in July. Schenker will share it with Senator for a few months until the second building is finished and then move over to its permanent 50,000-square-foot home.
Forster said DB Schenker doesn’t view RFD as a temporary solution. Even if passenger services return to previous levels, the company needs a buffer warehouse because the Chicago facility is already too small.
Beyond speed and efficiency for processing cargo, secondary airports like RFD also have a cost advantage.
Tim Kirschbaum, the CEO of Senator International, said O’Hare is very expensive to use because of high landing fees and fuel consumption that cargo airlines bill to the customer.
“You burn a lot of money by burning a lot of fuel just to get to the runway,” he said. “From your parking spot to the runway, in the worst case, can take you 1.5 hours when there is rush hour. Your engines are running and burning fuel.” Even with sharply reduced passenger traffic today, it can still take an aircraft up to 30 minutes taxiing to the runway, he added.
The COVID-related delays in Chicago accelerated Senator’s pre-pandemic plan to start operating at Rockford in 2021 or 2022, Kirschbaum said. Instead, the Hamburg-based forwarder began regularly scheduled charter flights last summer with partner Magma Aviation. The airport’s ground handler, Emery, quickly set up a tent and freed up some hangar space for temporary freight processing because there weren’t any available warehouses for general cargo at the time.
Kirschbaum said Senator initially wasn’t looking at the move strictly for congestion avoidance but as a way to differentiate itself to customers with faster, price-competitive service. The forwarder currently brings in two flights per week and expects to add another frequency in September. Long-term plans call for more flights to RFD.
Senator is paying for several unique features to mirror those at its airside warehouse at the Greenville-Spartanburg airport in South Carolina. They include a drive-in pit that makes it easier to load and offload flatbed trucks because they are at the same height as the warehouse floor; a 40,000-pound overhead crane for lifting equipment and extra-large loads; and a cryogenic freezer shipped from Germany by Siemens to store MRI medical machines, which prevents expensive helium from seeping out and stretches out the delivery window.
Back at O’Hare, the outlook is for more of the same with air cargo demand expected to remain at peak levels all year and labor challenges until extended unemployment payments expire this summer.
“It’s just been brutal — the lack of accountability, the lack of visibility, not being able to recover the freight in a timely manner and to always have to explain to the customer what is going on,” said the logistics source.