This concept note explores the opportunity for establishing infrastructure and equipment to transform Hewanorra International Airport (HIA) in Saint Lucia to an efficient air cargo distribution hub in the OECS Member countries. The OECS members and territories comprise eleven states namely Antigua & Barbuda, Dominica, Grenada, Montserrat, St. Kitts and Nevis, Saint Lucia, St. Vincent and the Grenadines, Anguilla, British Virgin Islands, Martinique and Guadeloupe.
A. The problem that this project seeks to address
This project seeks to speed up delivery of air cargo to destinations within the OECS members and territories and the wider Caribbean. Wikipedia defines an air cargo transport hub as ‘an air cargo distribution hub acts as a central node, often using a hub-and-spoke model, where shipments from various origins are rapidly received, sorted, and consolidated into larger aircraft containers for efficient redistribution to final destinations, minimizing transit times and optimizing space’.
B. Project Objective
The objective of this project is to improve inbound and outbound logistics for air cargo within, into, and from the Caribbean.
C. Project Goal
The goal of the project is to establish a single regional air cargo hub at the HIA that will receive air cargo from all countries for redistribution to various Caribbean destinations.
D. The Theory of Change behind this project design
When the air cargo hub is established (activity), there will be increased efficiency in goods redistribution (output), leading to a reduction in clearance times (outcome), ultimately stimulating the regional economy of the OECS (impact).
E. The main activities will be to:
1. Seek AITA endorsement for Hewanorra International Airport as an international air cargo hub
2. Establish a private management company to manage the facility’s affairs
3. Construct a special cargo terminal into and from which, aircraft can discharge and load cargo
4. Secure a fleet of aircraft to distribute cargo to OECS and other Caribbean destinations
5. Recruit and train employees to manage the operation
6. Acquire an information system to manage the movement of goods through the hub
7. Embark upon a promotion strategy to attract large cargo carriers and regional distributors
F. The current situation
i. Caribbean countries comprise of mainly island states where trade is primarily served by shipping carriers that ply north to south routes between Florida, USA and Guyana. During the 1970s and 1980s inter island trade amongst OECS States was primarily facilitated by schooners that facilitated imports from Barbados and Trinidad and Tobago. With the modernization of seaports in the OECS to containerized cargo, the schooner trade is no longer feasible.
ii. There are increased volumes of OECS imports generated from online shopping and door-to-door delivery. The economic impact of e-commerce resulting from the combined activities of international courier brands and non-vessel operating common carriers (NVOCCs) increases each year.
iii. Despite Barbados’ high inbound air traffic activity, there is limited space for expansion near its already busy airport. HIA has access to over 100 acres of undeveloped land next to its runway, on which a modern cargo handling terminal can be built.
iv. Why St. Lucia? She is located roughly midway in the eastern Caribbean chain, ideal for short distance air cargo voyages to OECS countries.
G. Economic benefits to OECS countries
i. Each year Barbados and Trinidad & Tobago import large volumes of fresh food from extra-regional countries. Over the past 5 years Barbados and Trinidad and Tobago have had a combined annual food import bill of at least USD 700 million. The majority of OECS States are located within a 200-mile radius of Barbados and within a 500 mile radius of Trinidad and Tobago. Given their agriculture based economies, banana export experiences and close proximity, OECS countries can sustain reliable daily supplies of fresh produce to these two targeted countries.
ii. With the collapse of its banana industry (with St. Lucia exporting limited quantities to the UK), OECS countries are experiencing an exodus of persons from profitable farming. This has resulted in many farm holdings being unproductive with farmers not having the collective bargaining power to negotiate new export market access arrangements. With the renewed prospect of new markets, a cargo hub in the OECS will trigger the resuscitation of farms to produce alternative high value crops and value-added products for regional export.
iii. There is an urgent need for a quicker and more predictable distribution of pharmaceuticals and medical equipment in the OECS. There are less than ten regional suppliers of pharmaceuticals (3 in Trinidad and Tobago, 4 in Jamaica and 2 in Barbados), non of which can guarantee same day dispatch and delivery of such goods to any OECS country. A St. Lucia based cargo hub can significantly reduce their clearance times.
H. Operational matters
i. A public/private management company is best placed to manage the facility’s affairs during the first five years of operation. From the sixth year it can operate as a full private entity and listed on the OECS stock exchange to raise equity capital to boost its financial independence.
ii. Start off using a 12-hour daily distribution operation using a hub-and-spoke network.
iii. Start operations with six aircraft with a view to expand the fleet.
I. Start up budget
This operation will require a budget to fund the activities listed in paragraph E above:
– Seek AITA certification for Hewanorra International Airport’s cargo upgrade
– Establish a public/private management company to manage the facility’s affairs
– Construct a special cargo and office terminal into and from which, aircraft can discharge and load cargos
– Lease a fleet of six ATR 72 aircraft for one year to distribute cargo to OECS and other Caribbean destinations
– Recruit and train employees to manage the operation
– Acquire an information system to manage the movement of goods through the hub
– Embark upon a promotion strategy to attract large cargo carriers and regional distributors
J. Opportunities
1. The Caribbean’s courier trade is growing at a rapid pace and online sales companies like Amazon are responding to this trend. In anticipation of sales in certain regions and to reduce delivery times, Amazon has set up a regional distribution centre in the Dominican Republic to target the eastern Caribbean. Similarly, a facility can be set up in St. Lucia.
2. The larger Caribbean suppliers in Trinidad, Barbados, Jamaica, Guyana and Belize can use the warehouse spaces at the cargo hub to store and distribute urgently needed stock in other Caribbean countries.
3. St. Lucia’s southern region can be transformed to an industrial support zone, taking advantage of large quantities of available lands. There is a need to re-engage the Southern Free Zone that was initially set up for the purpose of manufacturing and easy export.
4. Angel investors that rely on a reliable distribution networks will appreciate the cargo hub as good location to conduct business. Businesses engaged in activities such as specialised machinery, information and technology, auto parts, tires, security systems, specialized foods and pharmaceuticals can establish themselves in proximity to the cargo hub, rather than have multiple locations in several Caribbean States.
5. The HIA authorities can expand on warehouse space to attract more manufacturing operations of OECS businesses resulting in improved regional supply.