Heart of the aerotropolis
Airport at center of development drive
Memphis Business Journal - by Andy Ashby
Photo Credit : ALAN HOWELL | MBJ
Memphis International Airport has come a long way from its birth as a 200-acre sod field used for airmail deliveries. Now, the 6,000-acre site on Winchester Road is home to FedEx Corp.’s main operations and a hub for Delta Air Lines Inc. It’s also the heart of the city’s effort to sell itself as “America’s Aerotropolis,” a key element in the area’s current economic development drive, dubbed “Memphis Fast Forward.” Arnold Perl, chairman of the Memphis-Shelby County Airport Authority board and a partner at Ford & Harrison LLP, likes to quote U.S. Secretary of Transportation Rodney Slater, who was in Memphis on April 17, 1998, for the dedication of the $110 million World Runway. “Aviation in the first half of the 21st century will be as important to the country as the interstate highway system has been in the second half of the 20th century,” Slater said. “There is no place in America that understands that more at its core than Memphis.”
Perl says the aerotropolis offers a blueprint for economic development in the city. “The aerotropolis strategy ties together the four modes of transportation with the airport as its anchor,” he says. “What aerotropolis achieves is bringing the community, both private and public sectors, together with spirit to achieve a bold vision of Memphis being one of the world’s great transportation centers, fueling further economic development and ensuring its place as one of the key access points in the global economy.”
Memphis is home to the nation’s fourth largest inland port with 16.3 million tons of goods transported annually and served by five Class I railroads. These are connected to the airport via a road system that is the third-busiest trucking corridor in the country and the trucking industry, which is represented by more than 300 truck lines locally. All of this activity has helped make Memphis International the largest cargo airport in the world for 18 straight years, with 3.69 million tons of cargo shipped in 2009. FedEx’s hub presence at Memphis International gives the city the latest drop-off times in the nation, a fact that has helped lure many companies in different business sectors, including biomedical companies like Smith & Nephew PLC and Medtronic Inc.
The airport opened in 1929 as a result of then-Memphis Mayor Watkins Overton’s Airport Planning Commission. In the late 1930s, the Works Progress Administration built the first modern terminal buildings. It eventually grew to 22 gates and became known as the Memphis Metropolitan Airport. According to Larry Cox, Memphis-Shelby County Airport Authority president and chief executive officer, the city owned the airport until 1969, when business leaders, especially future Airport Authority chairman Ned Cook, were able to get state legislation passed that allowed municipalities with more than 100,000 residents to create regional airport authorities. “There was insight then that aviation, from the 1970s and beyond, was going to be the stimulus to economic development that the interstate highways were in the 1950s,” Cox says. The goal was to take politics out of running an airport. “The Airport Authority allows us to operate as a business,” Perl says. Perl has been chairman of the Airport Authority for 14 years; the organization has only had three chairmen in its history. Cox has been with the Airport Authority for 25 years; it has only had three presidents since it was formed.
“Trying to do this with a leadership which changes every year would not work,” says Tom Schmitt, president and chief executive officer of FedEx Global Supply Chain and two-term chairman of the Greater Memphis Chamber. “What happens is that you have a couple of formal events and then hand it over after a year. You have to have that consistency.” In April 1973, FedEx started operations at Memphis International Airport with 33 planes. Company founder Fred Smith had approached Little Rock with his idea for a cargo airline company, but his requests for improved facilities were turned down. When he talked to Cook, then chairman of the Airport Authority board, he met with better results. “That spark became a multibillion-dollar company,” Cox says.
In its first few years of existence, FedEx almost went under a few times because it was forced into flying smaller airplanes due to the regulation of airlines, according to Cox. However, in the mid-1970s, the federal government deregulated the cargo airline business, allowing FedEx to use 727s and larger planes. “When he got those larger planes, he went from losing money to making money and growing,” Cox says. “It was constant growth and construction at the airport and there hasn’t been a day since where there hasn’t been construction at FedEx.” In 1978, the federal government deregulated passenger airlines and that industry took off. Memphis International Airport grew with it, expanding to 80 gates. In 1986, Memphis became a passenger hub for Northwest Airlines Corp. It became a Delta hub when the two airlines merged. “In 2008, when Delta announced its intention to merge with Northwest, most pundits predicted the closure of the Memphis hub, because it was the smallest in the United States,” Perl says. “Not only did Memphis retain this hub, but when the economy turns around, it’s our expectation that it’s going to grow.” Delta employs 1,500 people in Memphis and a similar number of Delta-connection partners at Pinnacle Airlines Inc., which is headquartered in Memphis. It has 230 flights a day to 87 non-stop destinations in 2010.
“I know there was a lot of concern and skepticism how Memphis and Atlanta could survive under the merger,” says Bob Cortelyou, senior vice president at Delta. Memphis fits into Delta’s plans by being a good gateway for the regions too far west of Atlanta, according to Cortelyou. Since the merger, Delta has mostly added flights from Memphis to cities in Texas, Arkansas and Louisiana. “We’re going to continue to expand on that,” Cortelyou says.
Cortelyou describes Memphis International Airport as an “economic powerhouse for the region.” He also says its favorable cost structure gives it a competitive advantage over many other airports. “We run the daytime and FedEx runs the nighttime,” Cortelyou says. “It’s a great 24-hour airport. All that activity helps to keep the costs low, which encourages us to add more service out of there and to increase the services we have.”
Photo Credit : PARADIGM PRODUCTIONS | COURTESY MEMPHIS/SHELBY COUNTY AIRPORT AUTHORITY
Flintco Inc. is currently building a $61 million air control tower and $121 million ground transportation center. The 336-foot-tall tower will be the third largest in the country and fifth largest in the world. A 24,000-square-foot building will house training rooms, administrative offices and terminal radar approach controls. It is slated to open in 2011. The seven-level ground transportation center is being built between the new tower and an existing three-level parking deck. It will have 4,500 parking spaces, two floors of rental car services, valet parking and additional services such as auto detailing and oil changes. The center will also have 840-foot-long moving sidewalks into the main terminal. “Memphis International Airport is not resting on its past success, but is planning for its future,” Perl says.
FedEx Corp.
Transportation company
HQ: Memphis
President: Frederick W. Smith
Employees: 244,000
2009 revenue: $35.4 billion
Address: 942 S. Shady Grove
NYSE: FDX