Economic Feasibility of an Air Cargo Handling Facility at Fargo, North Dakota

Abstract

Exports to Taiwan in 1990 via air freight were approximately $2.9 billion, and imports via air freight to the united States were$3.1 billion. Total U.S. exports/imports to/from Taiwan in 1990 were $11.5 billion and$22.7 billion, respectively. China Airlines operates three air cargo hubs in the united States: New York, Los Angeles, and Dallas. The real per capita Gross National Product (GNP) in Taiwan for 1989 was $7,512, up from$3,297 in 1985. This implies that the Taiwanese economy is one of the fastest growing economies in Asia. Trade volume between the united States and Taiwan has increased substantially over the last 10 years and is predicted to grow in the future. The objective of this study is to evaluate the economic feasibility of Fargo, North Dakota, as an air cargo handling facility for products shipped to (from) Taiwan. Two static transshipment models were used to determine the economic feasibility of an air cargo hub being located at Fargo. Both transshipment models minimized trucking costs of cargo from (to) customs districts to (from) air cargo hubs and air cargo costs from (to) hubs to (from) Taiwan for exports and imports. Total savings and market shares for both export and import models are presented by evaluating the feasibility of an air cargo hub at Fargo. The model, excluding Fargo as a cargo hub, results in $47 million in exports and$1.7 million in imports. Including Fargo as a cargo hub at the New York rate saves $2.73 million; at the Dallas rate,$2.84 million; and at the Los Angeles rate, $3.08 million. Fargo's market share is 11.8% for exports and 14.8% for imports. Fargo gains its entire market share for both exports and imports from New York for all models. In conclusion, this study indicates Fargo has a logistical advantage over New York and Dallas in shipping and receiving air cargo between Taiwan and Northern Plains states (Minnesota, Illinois, and Montana). This does not necessarily mean it would be economically feasible to place an air cargo hub at Fargo. In addition to logistics, economic feasibility depends on investment and operating costs, and a volume large enough to minimize per unit operating costs through economies of scale.