All eyes on Amazon… and Brazil

Azul currently operates 124 passenger aircraft, but will soon add two 737-400 freighters.

After a severe three-year recession that began in 2014, Brazil’s economy appears to be on the rebound, with GDP growth of 0.7%, y-o-y in 2017, and expected growth of 1.9% this year, according to the IMF. Although this will not be nearly enough to reverse contractions of 3.8% in 2015, 3.6% in 2016, it is a start – and if recent news out of Latin America’s largest and most populous country is any indicator, the air freight and logistics industries are bullish on future demand for their services. For the first time in a while, carriers in the region are no longer looking for long-term parking options for their freighter aircraft, instead, they are sourcing new additions to their fleets.

Last month, we reported on Brazil-based airline Azul Linhas Aéreas Brasileiras’ plans to acquire two used 737-400Fs,  and launch an “integrated logistics solutions company” with Correios (the country’s postal service). Separately, there is now speculation that Amazon and Azul are discussing potential cooperation that could see the e-tailer leverage Azul’s Cargo Express unit for expedited intra-Brazil deliveries, according to Reuters.

A partnership between Azul and Amazon would make sense given Amazon’s purported interest in expanding its presence in Brazil. Third-party merchants have long been selling on the e-tailer’s Brazilian site, but it has yet to launch a marketplace for its own products. That too could change, as Amazon is reportedly considering leasing a 50,000 sq.-meter warehouse on the outskirts of Sao Paulo.

Azul, for its part, could have the network reach necessary to overcome Brazil’s logistical challenges. Even before the addition of narrowbody freighters, Azul has become a formidable carrier in the cargo business. Its 124-unit passenger fleet includes seven A330-200s which operate alongside a significant number of narrowbody and turboprop aircraft to over 100 airports across the country. In recent years, Azul has seen significant growth in its cargo business. Cargo revenue was up close to 60% in the fourth quarter of 2017, and 50% for the full year.

But Azul is not the only carrier expanding in Brazil. In June 2017, after a few years in a prolonged “start-up” state, Brazilian all-cargo carrier, Modern Logistics launched operations between Campinas Viracopos (VCP) and Recife (REC) with a sole 737-400F (25374). Modern has since put a second 737-400F (24125), on lease from Jetran, into service, and then last month, it acquired a third 737-300F (24463), on lease from KV Aviation.

Prior to the recession, the company’s ambitious management team, which includes CEO Gerald Lee (former VP of JetBlue and co-founder of Brazilian carrier Azul), outlined plans to grow Modern’s fleet to 45 freighters by 2019, with a mix of 737-400Fs and ATR 72Fs. Even though meeting that target now seems impossible, Modern Logistics is a company to watch as growth resumes.

In parallel with the rise of Modern Logistics’ airfreight network, the company is also expanding its road feeder and trucking operations. Demonstrative of Modern’s road operations is a recently-announced partnership with motorcycle manufacturer Harley-Davidson. Harley Davidson plans to gradually increase output at its Manaus-area factory and will use Modern Logistics’ road and airfreight network to transport bikes to the manufacturer’s 21 dealerships throughout Brazil. Newly-minted bikes will be flown to Brasilia or Viracopos from Manus, and then trucked the remainder of the journey. The pair says the partnership will reduce average delivery time to just four days.

Those interested in learning more about the market for freighter aircraft in Brazil and Latin America are invited to join us at the 2018 Cargo Facts Symposium, to be held 10-12 October at the Omni San Diego. To check out this year’s exciting agenda, visit www.cargofactssymposium.com  

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