A two-year waiver from the U.S. Department of Transportation could be just the beginning of a new era in air cargo for Puerto Rico.
Puerto Rico in April 2020 became the first and only location in the U.S. to receive a waiver for an international cargo and passenger transfer hub, allowing for unencumbered transshipment at three underutilized airports, on an island that already has the highest volume port system in the Caribbean. The waiver is a green light for more commerce connecting Puerto Rico to economies in the U.S., South and Central America, Europe and beyond.
The DOT had granted similar relief in the past for Alaska, Hawaii, Guam, and the Northern Mariana Islands. “As was the case in previous proceedings, we recognize that air service is of vital importance to Puerto Rico,” said the DOT, “and that it relies heavily on air transportation as a vital element of its economy.”
“Ever since the U.S. Department of Transportation granted Puerto Rico the air transfer waiver last year, we have prioritized efforts to take advantage of the opportunity that such authorization represents,” says Rodrick Miller, CEO, Invest Puerto Rico. “With the collaboration of a multisectoral task force, we are working to implement strategies that will make the island a world-class air transshipment hub. Through their initial outreach, this committee has identified interest in Puerto Rico’s capabilities from U.S. and international businesses, which are closely watching developments to gauge how the island can be an asset in their operations. The waiver supports Puerto Rico’s value proposition as a platform for innovation, production and development, highlighting our supply chain and logistics capacity, as well as advanced technology.”
The first step came four years ago, when Jenniffer González-Colón, Puerto Rico’s sole representative to the U.S. Congress, sent a letter to the DOT advocating for relaxing air cargo rules for Puerto Rico. That letter was followed by legislation proposing the addition of Puerto Rico to the Stevens Amendment, which has been transformative for Anchorage and the state of Alaska by allowing allowing exceptions to the prohibition of cabotage, or the transport of domestic cargo or passengers by foreign carriers solely between points within the U.S. Anchorage International Airport is now the world’s sixth busiest cargo airport.
Puerto Rico has its sights set on a similar transformation. A University of Puerto Rico report says a permanent waiver could mean as many as 6,000 new jobs and an overall economic impact of more than $403 million.
“The development of this project will make Puerto Rico more competitive for manufacturing operations established on the island as well as attract new manufacturing opportunities,” says Tom Vincent, president of the transportation and logistics committee for the Puerto Rico Manufacturers Association. “New direct flight service on passenger and air cargo lanes will provide added value for importers and exporters by reducing handling at transfer/connecting points as it will reduce handling and accelerate transit times. These last two elements are critical for the pharmaceutical, biopharma and medical devices industries, as many of their shipped products require controlled temperatures, and this scenario minimizes the risk of temperature excursions.”
And yes, he says, the alignment couldn’t be better with resurgent near-shoring strategies by companies looking to shore up their post-COVID-19 supply chains. It makes the potential for more high-value cargo capacity (including for the island’s strong electronics sector) all the more alluring.
Markus Ruediger, spokesperson for the International Air Transport Association (IATA), says SJU, the island’s biggest airport in San Juan, currently serves as a spoke, feeding hubs in such busy locations as Miami, Atlanta, JFK and O’Hare. The consensus among IATA experts is that the island could become a cargo hub too if an airline makes a commitment to operate a hub at SJU.
An Overnight Success Decades in the Making
It’s not as if Puerto Rico is starting from scratch. The island receives about 80,000 pounds of air cargo daily at the Luis Muñoz Marín airport alone. A total of 1,730 companies operate on the island, and pharmaceutical products represent 73% of all air cargo that passes through Puerto Rican airports.
Pharma and medical devices account for 25% of Puerto Rico GDP. A recent report from Invest Puerto Rico and JLL Puerto Rico documented the island’s status as the fifth largest pharmaceutical manufacturing hub in the world, with 2 million sq. ft. of biotech manufacturing space alone. The industry accounts for at least 78,000 jobs on the island, which is home to the sixth highest concentration of scientists and engineers in the world, and exports to more than 80 countries.
Twelve of the top 20 pharma companies have locations on the island, with more than 80 manufacturing facilities. JLL determined there are 38 more sites in Puerto Rico that would be ideal for rapid deployment for pharmaceutical and medical device manufacturing. The potential for more cold storage and warehouse development and airport expansion prompted by the cargo and passenger waiver just adds another layer of economic development promise to this U.S. territory.
The Puerto Rican government’s Air Cargo Committee has put together a detailed action plan that includes creation of a pharma and logistics-focused Center of Excellence for connected systems, IoT, and 5G open source R&D, and an institute of logistics with the island’s major universities. Infrastructure improvements are proceeding apace, including a new ramp that was built for and leased to FedEx Express at Luis Muñoz Marín International Airport in San Juan. In November 2020, a $135 million new runway at the Rafael Hernández International Airport in Aguadilla was announced.
“We continue to be well focused on optimizing our air facilities, in this case at the Rafael Hernández de Aguadilla International Airport, to continue contributing to the economic development of the western region and the entire island,” said Puerto Rico Ports Authority Executive Director Pizá Batiz in September when U.S. federal grant funds were approved for the project.
Puerto Rico stakeholders are putting the pieces in place to make a new and important air transport node a reality for global companies.
This Investment Profile was created under the auspices of Invest Puerto Rico. For more information, visit www.investpr.org.