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April 2013
Accessibility to the World
By Jim Froneberger

     When Chiquita Brands International was looking for a new headquarters location, one of the primary reasons they chose to move to Charlotte was Charlotte Douglas International Airport. With direct flights to many of Chiquita’s main business centers in Europe and Central and South America, Charlotte was a perfect fit.

     That scenario has played out any number of times, with Charlotte Douglas figuring sizably in corporate decisions to move to the Queen City as well as event planners to host in the city.

     As the largest connecting hub for US Airways, Charlotte may have the best air service of any city its size in the world. Charlotte business and leisure travelers benefit from over 700 daily nonstop flights to over 100 cities in the United States, plus 35 more around the globe. It is the 6th busiest airport in the world in aircraft movements, and is 11th nationwide and 25th worldwide in passenger traffic.

     Without a doubt, Charlotte Douglas has been a key driver of economic growth for the Charlotte region over the last three decades. According to UNC Charlotte’s Center for Transportation Policy Studies, the airport contributes nearly $10 to 12 billion in annual total economic impact to the region, and more than 100,000 jobs are either directly or indirectly tied to the airport and its services.

     Now, with the US Airways and American Airlines merger underway to create the world’s largest airline, and with the Norfolk Southern Intermodal Facility at the airport becoming operational late this year, Charlotte Douglas’ role will expand from being the largest hub for the nation’s fifth largest airline to a global hub for the world’s largest airline and one that can be simultaneously accessed by air, rail and highway.

     Alongside the new trade corridors being opened up to the East coast because of the expansion of the Panama Canal (to be completed next year), Charlotte Douglas is poised to become an “inland port” for world trade. It is no wonder the city of Charlotte and the North Carolina Legislature have recently begun battling for control of this crown jewel.

 

Successful Leadership

     T. J. “Jerry” Orr is the chief executive of Charlotte Douglas International Airport. As Aviation Director, Orr is responsible for all aspects of the airport’s operation. Orr is a native of Charlotte and a 1962 graduate of North Carolina State University where he received a bachelor degree in Civil Engineering. From 1962 until 1975, he operated his family-owned land surveying business. In 1975, Orr joined the City of Charlotte’s Aviation Department as a staff engineer and was named Aviation Director in 1989.

     He says his management strategy hasn’t changed from 24 years ago: “We decided that was about providing the highest level of service at the lowest possible price. So that’s how we structured the program, and that’s how we’ve always run the program.”

     Eric Spanberg of the Charlotte Business Journal captures the “plainspoken visionary’s” personality regularly in his news columns. One example: “At 71, Orr remains blunt and spry. His cryptic sense of humor is a constant, as demonstrated by his relish for telling CEOs and civic groups the airport is spending money ‘like a bunch of drunken sailors.’ The truth, of course, is anything but.”

     Or his description to Spanberg of running the airport: “We look at it like we’re running an infrastructure platform that is publicly owned and operated without any cost to the public, which is a pretty good deal. We run it very much like a business. We don’t like to tell people ‘no’; we don’t like to make people mad. We like to find common ground, knowing that if we make them successful, it will make us successful.”

     Although the 71-year-old hints from time to time about his imminent retirement, talking about how much he enjoys picking oranges from the tree outside his house near Charleston, when asked point-blank about retiring in 2013, he responds in his usual taciturn style, “No. Maybe another year.”

     Known for his unique style and fiscal stewardship, Orr is respected as a visionary in aviation by leaders in the industry. During his 38-year tenure at Charlotte Douglas, Orr has developed, implemented and refined unique solutions to challenges in an ever changing industry, resulting in an air transportation facility with continued airline growth that is one of the most cost-efficient airports in the world.

     Orr also developed the CLT Air Cargo Center and has led the extensive development of corporate aviation, resulting in the locating of seven Fortune 500 corporate flight operations at CLT. He has spearheaded the establishment of the airport-based intermodal facility, connecting four modes of transportation—air, rail, sea and highway—in one location, transforming Charlotte into a major global freight center.

     Voted Charlotte Business Person of the Year 2012 by the Charlotte Business Journal as man-in-charge of what has become an airport of international distinction and one that is vital for keeping and recruiting companies and jobs to the region, he is noted for being “off limits” to political rhetoric and none too keen on excessive supervision.

     It doesn’t matter if you agree with his management style; the results speak for themselves—he has steadily built Charlotte Douglas into the nation’s most efficient operation, working closely with US Airways/American Airlines to secure its hub status, and is creating the airport of the future.

     According the Air Transport Research Society, Charlotte ranked as the most “cost-competitive” airport among 30 large U.S. airports studied. And among several dozen airports in North America, Charlotte also had the lowest landing fees for a Boeing 767.

     Orr is quick to point out that even the airport’s bond rating as well as passenger traffic have increased over the last few years, both of which are against the flow.

 

Significant Growth

     The airport that preceded today’s facility was privately owned and used only on weekends for air shows and military pilot training. In 1935, with the leadership and foresight of Mayor Ben Elbert Douglas Sr. (for whom Charlotte Douglas International Airport is named), Charlotte voters approved a bond that brought the airport under the management of municipal administrators and set the stage for the expansion that was to come.

     Charlotte’s airport was an airline “hub” long before people even called them that. In the early 1970s, Eastern Air Lines used Charlotte as a regional connecting point, funneling passengers from other cities in the Carolinas to connect with flights to the Northeast, Florida and upper Midwest.

     But it was the Airline Deregulation Act of 1978 that ultimately set Charlotte on course to become one of the nation’s largest airline hubs. In a regulated environment, Winston-Salem-based Piedmont Airlines’ mission had been to serve smaller communities and feed passengers to Eastern and Delta in places like Atlanta.

     But after deregulation, Piedmont was free to expand its own route network, buy bigger airplanes, and fly passengers to their final destinations without funneling them to the bigger rivals. Charlotte was perfectly positioned along the east coast flyway between the Northeast and Florida, and in 1979, Piedmont picked Charlotte as its first hub.

     While deregulation was a boon for Piedmont, Eastern struggled to adapt its cost structure to the changing market environment. As Eastern was dying, Piedmont flourished, eagerly assuming all of Eastern’s vacated gates. In 1989, Piedmont merged with USAir, and in 2005, USAir and America West merged to form US Airways.

     Fueled by the mergers, Charlotte has continued its meteoric growth trajectory. Total annual enplanements have grown from less than two million passengers in 1980 to over 20 million in 2012. In 2010, the airport was the fastest growing airport in the world outside of the Pacific Rim and Middle East.

Synergistic Growth

     While many cities have seen air service decline as the industry consolidates through mergers, Charlotte has bucked the trend. US Airways has continued to add both domestic flights and international destinations, and the airport’s other domestic carriers—Delta, American, United, Jet Blue and Air Tran—have also added service. This month Southwest Airlines flights will replace those of their Air Tran subsidiary as part of the operational integration of those two carriers.

     Earlier this spring, US Airways and American Airlines announced an agreement to merge, creating the world’s largest airline. According to airlines officials, the new carrier will operate as American Airlines and be headquartered in Fort Worth, Tex., where American has its headquarters now.

     US Airways’ CEO Doug Parker will serve as CEO, and the new American will offer 6,700 daily flights to 336 destinations in 56 countries with hubs in Charlotte, Chicago, Dallas-Fort Worth, Los Angeles, Miami, New York, Philadelphia, Phoenix and Washington, D.C.

     Parker says he is confident of antitrust approval because both airlines networks are so complementary: “One of the holes in the American Airlines system is up and down the East Coast, particularly the Southeast. Charlotte fills that hole extremely nicely.”

     Furthermore, Parker contends the merger will strengthen the industry because American will become the largest airline but remain comparable to Delta, United and Southwest, with American-US Airways accounting for 25 percent of the total airline seats in the United States.

     Both airlines’ officials as well as Orr expect Charlotte to prosper as an American hub—anticipating that traffic will continue to grow. According to Parker, US Airways and American Airlines overlap on 12 routes out of 900, which bodes well for retaining almost all of the employees. Executives from the airlines hope to close the deal in the third quarter.

 

Running a Tight Ship

     Ask the airport’s aviation director to explain Charlotte’s success and he will tell you it all starts with smart cost control, as well as offering a high quality product that meets airline and passenger needs. Unlike some other cities that have built large, sometimes extravagant terminals at enormous cost, Orr says Charlotte has stayed true to the principle of building the airport one brick at a time.

     “I’m a small businessman and I run this airport like it’s my own small business,” declares Orr. “Revenues need to exceed costs; you don’t spend money you don’t have; and you don’t spend money that you don’t need to. We’ve built only what we could afford, but we built everything to be expandable. So we’ve just added on to it as the demand is there.”

     Orr says the airport’s efficient operation helps keep the rents and fees paid by the airlines the lowest of any major domestic airport. According to Fitch Ratings, CLT’s cost per boarded passenger is only about $1 per passenger, compared to a national median of $9.97. Airport concession and parking revenue also helps defray operating costs for both the airport and the airlines.

     Orr predicts continued growth after the merger as a direct result of the airport’s low cost advantage.

     “The new American can choose to feed Latin American and Caribbean passengers through Miami or they can choose to feed them through Charlotte. But the cost per passenger in Charlotte is $1, and the cost per passenger in Miami is almost $20. Do the math.” He also points out, “Miami is a very crowded airport. Charlotte is a lot easier to navigate.”

     Orr also looks at American’s extensive international network and sees potential for many new international destinations out of Charlotte Douglas. Between now and 2020, experts predict that 75 percent of the growth in air traffic will come from emerging markets like Latin America, and Orr thinks that Charlotte will capture its share of that growth.

     “To start service to a new international city, an airline must negotiate with the foreign government, get State Department approval, obtain a gate, hire staff, and set up the operation in that new city before they ever carry the first passenger,” explains Orr. “That’s a lot of work on the front end. But with the merger, the new American could start flights fairly easily from Charlotte to many of the places they already serve. That means we can grow our international traffic more quickly.”

 

Charlotte Regional Intermodal Facility

     Ironically, one of the largest projects currently underway at the airport isn’t really about airplanes per se. It’s an “intermodal facility,” offering a freight hub with a combination of available transportation (rail, highway and air). Add to that the direct access to shipping ports, and it becomes an “inland harbor.”

     Orr was the visionary for the concept back in 1994. He describes that they had an FAA-mandated master plan coming up (a federally required plan), and rather than just meet the plan, they wanted to take a broader look at how the airport fit in the Charlotte region and how it could grow.

     Orr commissioned strategic urban planner Michael Gallis to study the issue. “At the time, passenger traffic was soaring at the airport hub, but air cargo traffic was limited to freight coming to or from the local market. Charlotte freight was actually being trucked to international freight hubs in Atlanta and New York to be flown to world markets,” describes Gallis. As Gallis studied those larger freight hubs, he saw an opportunity for Charlotte to compete.

     “The freight infrastructure was very fragmented in these other cities,” explains Gallis. “The airport, rail yards and truck terminals were not near each other, nor were they well connected. So we realized that the way to out-compete these other cities was to develop a new kind of freight hub—one where all the different transportation modes would be located at a single center. That concept gave rise to the idea of building a rail yard at the airport between the runways.”

     The airport provides an attractive rail freight base not just because of the obvious proximity to air freight, but also for its easy access to Interstates 77 and 85. Those, in turn, link freight to three major Eastern seaboard ports: Charleston, S.C.; Savannah, Ga.; and Jacksonville, Fla.

     Freight arriving in containers at seaports like Charleston or Savannah can travel by rail to the intermodal yard and the containers can then be transferred to trucks so they can hit the roads to their final destination. This is sometimes referred to as an “inland harbor.”

     While traditionally there isn’t a lot of direct freight transfer between a rail line and an airport, the hope is the rail yard will attract a cluster of truck terminals that can feed freight to either the intermodal yard or the airport. Because all three modes of transport will be located at the same place, the transfer times will be reduced, as will complexity and cost.

     The idea made sense and took root. In 1998, Charlotte business executives began hatching plans for the freight center as part of a Charlotte Chamber initiative called Advantage Carolinas. Construction of an intermodal facility became an important part of the airport’s CLT 2015 expansion plans.

     With a lot of foresight and frugality, Orr realized that when the airport began work on a third runway alongside I-485 several years ago and needed 10 million cubic yards of dirt to stabilize the land, the cheapest, most environmentally friendly place to get that dirt was right next to the runway.

     “So after we moved all that dirt, we were left with a big flat graded area that just happened to be the same elevation as the main line of the Norfolk Southern railway that runs north of the airport. It all just fit together naturally,” Orr says matter-of-factly.

     Charlotte is a key hub on the Norfolk Southern intermodal system and on their Crescent Corridor stretching from New Jersey to Memphis and New Orleans, so it was a natural fit for them as well. And thus the graded land started the footprint of the rail freight yard. Gallis calculates an estimated $20 million in savings created by Orr’s forethought on the project.

     In spring 2012, the city of Charlotte and Norfolk Southern entered into a formal agreement for the $92 million regional intermodal freight hub between the two west-side runways, which will replace the existing, outdated 40-acre intermodal facility at North Davidson and North Brevard streets. Construction is presently underway, with operations commencing in late 2013 and completion expected in late 2014.

     “With a major international airport here along with highway and rail, you have accessibility to all modes of transportation. It places us at the intersection of those rivers of commerce,” Orr points out.

     “Charlotte Douglas has done something almost no airport has done, which is to lay the foundation for the future,” says Gallis. “The intermodal yard will be a centerpiece of completing a multimodal integration that does not exist anywhere in U.S. at a single facility.”

     Charlotte will become more attractive because companies will be able to move goods without having trucks on city streets. Instead, cargo can move by air, by tractor-trailer on interstate highways or by rail to nearby ports, with all transfers at a single, security facility.

     “It’s about creating an integrated global-trade hub that can move goods by any mode,” affirms Gallis. “It will transform Charlotte from a big airport to a global trade center…that’s a quantum leap.”

     City officials estimate the 200-acre freight hub will generate $9 billion in economic impact, creating 5,000 jobs over the next 20 years. Mayor Anthony Foxx says the hub “places Charlotte even more in the manufacturing, distribution, transportation and economic growth business.”

     Orr adds that the relocation from uptown will also relieve the center city of 500 tractor-trailer trips each day.

     Chamber president Bob Morgan likens Orr to a master chess player: “Jerry has the next 50 years mapped out. When Jerry leaves—if Jerry ever leaves—his successor won’t need to be a visionary because the vision is already there.”

     Nobody knows just when Jerry Orr will pack his bags, but for as long as he stays around, you can bet it’ll be good for Charlotte’s bottom­ line.

 

Jim Froneberger is a Greater Charlotte Biz freelance writer.
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