Rob Stapleton | Alaskafoto
Alaska’s Aces
The aviation industry flies forward despite global pandemic
By Vanessa Orr

he importance of the aviation industry to Alaska can’t be understated; not only does it provide a huge number of jobs in the state—almost 8 percent of all employment—but it is also responsible for transporting much of the food, products, and other necessities that residents need in their daily lives.

The industry also transports tourists, who bring money into the state, as well as much of the equipment needed to keep Alaska’s manufacturing and natural resource industries running. And with more than 82 percent of Alaska’s communities not connected to the road system, it is at times a literal lifeline for those living outside the handful of urban areas.

“The effects of the aviation industry ripple throughout the entire economy,” explains Bill Popp, president and CEO of the Anchorage Economic Development Corporation. “One out of ten jobs in Anchorage is in aviation, and those workers buy food in stores and purchase goods in retail outlets, as well as pay for services like auto maintenance and home repair.

“This creates a very significant ripple effect, which has been one of the great diversifiers of our economy in the last thirty years,” he continues. “This is especially important in times like these because it runs counter-cyclical to broader statewide and national recessions.”

By the Numbers
According to the study 2019 Economic Contribution of the Aviation Industry to Alaska’s Economy, the aviation industry generates nearly $3.8 billion in economic activity throughout the state’s airport system. It contributed more than 35,000 jobs to the state economy in 2017, including 26,000 jobs in the Alaska International Aviation System, which comprises Ted Stevens Anchorage International Airport (ANC) and Fairbanks International Airport.

According to the Alaska Department of Transportation & Public Facilities (DOT&PF), there are nearly 400 public-use general aviation airports across the state, and the department owns and operates 239 airports. These facilities are home to about 8,800 registered aircraft and 8,300 pilots.

In addition, the FAA reports that the state is home to forty-six repair stations, three FAA-approved pilot schools, 1,748 student pilots, and 1,449 flight instructors. There are also 51 fixed-base operators and 101 heliports. Alaska also has 109 seaplane bases—the most in the country.

In Anchorage alone, the numbers are impressive.

“The aviation industry is responsible for approximately 22,000 jobs related to the airport; about 16,000 direct onsite jobs and 6,500 offsite,” says ANC Manager Jim Szczesniak. “ANC has an economic impact in Alaska of about $1.84 billion a year—$1 billion in direct economic impact with the salaries of employees pouring into the economy and an $840 million multiplier effect.”

ANC is the world’s fifth busiest air cargo airport, carrying a little less than half of all of the world’s cargo in the bellies of planes passing through.

“ANC specializes in freighter aircraft, and that’s currently a very strong market,” says Szczesniak, adding that the cargo market follows the gross domestic product (GDP). “As we see changes in the global economy, it affects the amount of freight traffic we see.”

“Places requiring medical supplies also want them immediately; they no longer have the luxury of waiting three weeks to have something shipped by boat… Air carriers can get it there quickly, which is another strong reason why we’re seeing increased demand.”
Jim Szczesniak, Manager, ANC
The Good News
Even with all of the changes going on in the world due to COVID-19, freight traffic remains up at Alaska airports.

“The Anchorage and Fairbanks trans-Pacific routes for air cargo are doing well; while there was a slowdown in China over the last couple of months, they are currently trying to refill US markets, which means that the freight market is booming,” says DOT&PF Deputy Commissioner John Binder.

The Anchorage airport saw a surge in cargo flights beginning in March according to Popp, with air cargo numbers up roughly 16 percent to 18 percent. “We’ve seen very significant tonnage numbers in previous years, and it helps that we have a large number of international carriers on the Pacific Rim trade route between Asia and the United States,” he says. “Eighty percent of air cargo entering North America in 2019 from Asia landed at Anchorage first before going on to its final destination.”

Cathay Pacific, based in Hong Kong, is the largest freight carrier by landed weight, and other international carriers—Air China, China Southern, Asiana Airlines, and Singapore Airlines—add to the mix.

“We are a strategic location for cargo flights coming from Asia to North America because they need to stop here to refuel,” says Szczesniak. “Because cargo is heavier, most planes only fill up halfway with gas, so they need to stop here before continuing.”

UPS and FedEx also both have bases at ANC, which adds to the amount of cargo coming through the airport. Of Anchorage’s $25.4 billion GDP in 2018, $4.1 billion came from transportation and warehousing, a substantial portion of which is airport-related passenger and cargo business.

“What’s really unique is that an airport with this level of passenger size anywhere else in the United States would be a smaller economic player, but because of our cargo traffic ANC has much more economic impact,” says Szczesniak.

He adds that the Lake Hood Airport, which ANC also manages, has an added annual economic impact of $42 million, with more than 71,709 operations taking place in 2018.

Freight shipments have been steadily increasing at ANC, despite the pandemic.

“It was slower during the Lunar New Year in Asia, when all of the Asian factories shut down and people weren’t at work,” explains Szczesniak. “Then they ended up closed for a lot longer because of COVID-19. But now that they are up and running, they’re working on making parts to restock inventories and to relieve the backlog. And all of these goods are coming in on freighters.

“Places requiring medical supplies also want them immediately; they no longer have the luxury of waiting three weeks to have something shipped by boat,” he adds. “Air carriers can get it there quickly, which is another strong reason why we’re seeing increased demand.”

Depending on how the COVID-19 situation develops, demand could stay high for a while.

Cargolux, Europe’s largest all-cargo airline, is one of many international carriers that flies into Ted Stevens Anchorage International Airport.


airplane runway
Cargolux, Europe’s largest all-cargo airline, is one of many international carriers that flies into Ted Stevens Anchorage International Airport.


“With the mixture of the disruption of manufacturing in Asia and increasing challenges in the supply chain, we may see this continue into summer and beyond,” says Popp. “The surface transportation industry has seen a significant drop in the number of ocean-going container cargo ships transiting between Asia and West Coast ports, which means businesses may be switching supply chains if they can’t reserve space on ships. They may switch to air cargo if they can.”

“We’re definitely busy from a cargo freight perspective, and while we anticipate that it will be like this for a while, who knows how long it will last?” says Szczesniak. “Once the inventory restructuring and critical medical needs are over, things could change. Since the industry is based on GDP, we’ll need to guard against a potential recession scenario globally.”

The Not-So-Good News
The majority of the world is under stay-at-home orders with only essential travel permitted, and the tourism industry worldwide is undergoing a massive slump—and that includes Alaska.

“We are seeing a huge decrease in passenger service; it’s approximately 90 percent down,” says Binder. “Airlines are indicating reduced flights and operations for the foreseeable future—at least through summer and fall.

“Already, many cruise markets have cancelled sailings, which is directly related to air passenger service, because most people either come in or leave Alaska on an airline,” he continues. “It looks to be a challenging summer.”

Depending on how quickly the quarantine lifts nationwide, Binder says that some people with disposable income may still be willing to travel during the back end of the season, but the tourism portion of the aviation industry is facing big challenges ahead.

“The Anchorage and Fairbanks trans-Pacific routes for air cargo are doing well; while there was a slowdown in China over the last couple of months, they are currently trying to refill US markets, which means that the freight market is booming.”
John Binder, Deputy Commissioner, DOT&PF
Popp agrees. “Up until COVID-19, passenger numbers were very solid, and we were predicting more than 5 million enplanements this year,” he says. “It was going to be a banner year for tourism up until the pandemic.”

Even when the virus finally runs its course, its effects will remain.

“We’re looking at a lost tourism season most likely,” says Popp. “We’re not going to see hundreds of thousands of cruise ship passengers coming in or leaving in cross-Gulf traffic. That is going to have a pretty substantive impact on passenger operations.”

At ANC, passenger traffic is down 85 percent through TSA checkpoints, compared to a 92 percent decrease nationally. “We’re working with carriers to maintain summer capacity so that when travel restrictions are lifted, we can salvage what we can,” says Szczesniak. “We’re trying to make sure that the airport is ready to host the best tourism season that we can hope for, while at the same time continuing to protect Alaskans. We’re hoping for a treatment so that things can return to normal more quickly.”

In the meantime, the airport is doing what it can to help carriers.

“At our international airports in Anchorage and Fairbanks, we’re deferring rates and fees through June, hoping that we can span the gap between now and when airlines get federal resources if those become available,” says Binder.

“We know from a revenue perspective that when passenger carriers are down, you have to look at ways to reduce expenses,” says Szczesniak. “We are undertaking a number of energy conservation projects, including turning off escalators and the moving sidewalks, which take a huge amount of energy, as well as closing sections of the terminal to minimize expenses.”

For the airports themselves, help is on the way from federal sources. In mid-April the US Department of Transportation announced that airports in Alaska will receive upwards of $124 million in federal aid, a portion of the $10 billion made available to airports nationwide as part of the CARES Act. The funds are to preserve operations and protect jobs, whether that’s through capital projects, payroll, or utilities and debt payment.

And for Alaska’s largest air carrier, in late-April Alaska Airlines and Horizon Air announced the finalization of an agreement with the US Treasury Department and accepted $992 million to be used to pay employee salaries, wages, and benefits. The payment took the form of a $725 million grant and $267 million loan. In total, the funds are intended to cover about 70 percent of the budget payrolls costs for the airlines through September.

Conditions for receiving the grant and loan include “no involuntary furloughs and no reductions to rates of pay or benefits through September 30, 2020; to continue suspension of dividends and share repurchases until September 30, 2021; limits on executive compensation through March 24, 2022; and to maintain the minimum levels of air service as required under a Department of Transportation rule,” according to Alaska Airlines.

Alaska Air Group’s CEO Brad Tilden said of the funds, “This support enables us to protect jobs and maintain critical transportation infrastructure while we work over the next few months to assess our business and make thoughtful decisions.”

Unfortunately, federal assistance came too late to help RavnAir Alaska, which declared bankruptcy in April.

“When we became aware of the RavnAir shutdown, we held an emergency meeting of the Aviation Advisory Board, which represents different stakeholder groups,” says Binder. “Our primary concern was getting rural Alaska the essential things they needed as quickly as possible.”

The board was able to work with smaller carriers to continue moving this cargo, and Alaska Airlines reached an agreement with Ravn to use some of its facilities. The company also added flights to Cold Bay, Dillingham, King Salmon, and Deadhorse to provide more freight capacity.

“While everyone is aligned from a freight perspective, once passenger traffic picks up, that’s another discussion,” says Binder of the demise of the largest in-state carrier. “There is a lot of capacity gone with RavnAir’s closure, and we have to sort that out.”

Despite these setbacks, the industry is moving forward, and plans at ANC include more than $700 million in upcoming construction projects, which are expected to provide up to 1,500 new jobs. These include a $57 million, 98,000-square-foot domestic operations center for FedEx; an expansion of UPS’ existing facilities; a $200 million, 700,000-square-foot cargo warehouse for Alaska Cargo and Cold Storage; a 500,000-square-foot cargo transfer facility for 6A-XL Aviation Alaska; and a 300,000-square-foot air cargo warehouse for 6A Aviation Inc.

“Even in this environment, the fundamental proposition hasn’t changed—we’re still an important strategic location,” says Szczesniak. “We’re working with the developers to continue with these plans, even if there may be some delays.”