Fruitful connections: How avocados can shape airport strategy

Smack in the heart of Shanghai’s former French Concession, at the crossroads of Wulumuqi Road and Wuyuan Road, lies an unassuming store fronting a large sign that reads, “Avocado Lady.”

Curious visitors to Shanghai are often intrigued by the shop’s name, and venture inside to see if there is, indeed, a lady offering avocados for sale. On most days, customers will find the Avocado Lady inside her densely-packed minimart stocked with row after row of imported produce, cheeses and other delicacies, most notably the namesake crates full of avocados. Affixed to each avocado is a small sticker containing a universal price lookup (PLU) code used by cashiers around the world to weigh produce, and most strikingly, the words “Product of Mexico.”

Asking the vendor about the logistics miracle that brought the avocados across the Pacific, from Mexico into China, leads nowhere, however, because her shop purchases its wares directly from wholesalers. Luckily for the Avocado Lady, airfreight professionals scattered across the world work to handle the complicated cool-chain logistics in the most economic and efficient manner possible.

Unbeknownst to Avocado Lady are the connections between her Latin American produce and major logistics gateways in the United States, where one airport, Dallas-Fort Worth (DFW), deep in the heart of Texas, is working to construct an air bridge between Latin America and Asia.

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Passing through Big D

China’s insatiable demand for perishables, from Mexican avocados to Chilean blueberries, has been a boon for airfreight demand across the Pacific – but for many commodities moving between distant city pairs without direct flights, there is no single, clear-cut path. Did Avocado Lady’s bumpy-skinned fruit start their journey on a flight from Mexico City or Guadalajara? Or were they trucked to Dallas before being loaded into the belly of an American Airlines 787? While only the forwarder knows for sure, DFW Airport’s executive vice president for global strategy and development, John Ackerman, told Air Cargo World that his cargo division is doing everything in its power to ensure DFW is an attractive option for forwarders.

In the past, DFW, like most airports, sought to increase its cargo handle with attempts to lure new flights and add cargo capacity. But between 2007 and 2014, even as new flights were added, airfreight tonnage gradually declined at an annual rate of 0.8 percent. As the story of avocados illustrates, demand must be allocated to capacity, and these allocation decisions are not made by airports or airlines, but by forwarders and supply-chain managers. Within the supply chain, “DFW realized that future airfreight growth would depend on defining opportunities in the same way as these business partners,” Ackerman said.

The realization that such decisions were driven by more than just aircraft landing fees led DFW to narrow its focus to particular commodities traveling along specific trade lanes, and to consider total landed cost advantages. According to Ackerman, “this new focus on total landed cost allows us to speak to forwarders and supply chain managers using the language and metrics that they do, and also sharpens our focus on those markets where our airport has a total landed cost advantage compared with competitor cargo gateway airports in the United States.”

DFW is currently the largest second-tier airport in the United States, ranking number five behind Miami, New York-JFK, LAX and Chicago O’Hare, with a handle of just under 670,000 tonnes in 2015. Elevation to tier-one status will require DFW to capture a larger chunk of the airfreight tonnage carried annually between Asia and Latin America via the United States – which coincidentally totals 670,000 tonnes as well – plus a larger share of Texan exports.

Given the special handling requirements of perishables moving between Latin America and Asia, goods typically travel via an air-truck-air, or truck-air route combination through gateways well-equipped with cold-chain infrastructure. Until March 2016, when American Airlines opened a 4,000-square-foot drive-through perishable facility, DFW lacked such infrastructure meaning that shipments of perishables often bypassed DFW for other gateways.

Think like a forwarder, not an airport

Located in the south-central section of the U.S., DFW has long had a dominant hold on air imports into Texas, with about 70 percent of the market, but exports are a different story. The airport has less than one-third of the total market for air exports of cargo originating within Texas, and a much smaller fraction for those originating in Latin America.

However, Ackerman said routing can be more flexible and that airfreight flows for exports originating in both Texas and Latin America will “begin to shift over to DFW if the airport identifies and builds relationships with forwarders and shippers,” and by focusing on trade lanes that are competitively priced. In addition, DFW will likely benefit as an indirect result of network expansion by American Airlines, and its oneworld partners. In June, for example, oneworld carrier Qantas launched new freighter services from Australia to DFW with a 747-400F.

In an effort to establish relationships with forwarders and shippers, the DFW team has participated in more industry events and has begun thinking more like a forwarder. The DFW team also meets with forwarders at conferences and joins their organizations, whenever possible, Ackerman said.

In early 2016, DFW commissioned a perishables market study that analyzed DFW’s competitiveness on 579 different import, export and transit trade lanes. Speaking of the results, Ackerman said that, on 183 of these lanes, “DFW showed a clear competitive advantage through the combination of low total landed cost, availability of lift, and transit time, when compared to other major U.S. gateways.”

Beyond DFW’s continued role as a gateway for Asian imports to the Central U.S., most of the trade lanes identified in the study, he added, fall within one of these specific spheres of advantage: Imports from South America, particularly perishables imports from Chile and Brazil, to the Central U.S. region; Exports from Mexico (hard freight and perishables) and the Central U.S. region (hard freight) to Asia; Exports of California-grown perishables to Western Europe; and Transit freight from Chile and Brazil destined for China, Taiwan, Japan and South Korea. Industry expert, Neel J. Shaw, president of JS Aviation, and chief commercial officer at Able Freight, the second-largest perishables exporter out of Mexico agreed that DFW likely has growth opportunities when it comes to inbound perishables from South America. That is, “if they can convince importers and brokers that Dallas is better for their business” in terms of cost, and speed to market.

The robust analysis of this study proved that DFW’s hypothesis about the airport’s geographical position creates competitive Asia-Latin American advantages, Ackerman said. “With a greater understanding of DFW’s total landed cost advantages, the airport can start reaching out to forwarders and establish and grow business partnerships,” he said.

American Airlines recently invested in cold storage facilities that have already attracted forwarders wishing to route perishables through Dallas. “Being able to provide an expanded cooler network during those warm Texas months gives us peace of mind when we route via their [American Airlines’] Dallas hub,” said Chris Connell, president of Commodity Forwarders Inc. (CFI).

In addition to forwarder relationships, DFW also seeks to leverage its pre-eminent position on the Mexico-Asia freight market (via road feeder services) to extend further into South America. DFW has become the number-one destination for freight moving in bond from airports in Mexico to the U.S. for air export to Asia, which Ackerman believes “gives DFW a significant competitive advantage to expand the airport’s sphere of competitiveness southward into South America.”

Operators of said road feeder services tell Air Cargo World that they expect the continued expansion of cool-chain facilities at the DFW to drive more perishables through the hub. Shaw, on the other hand, added that while he was “not expecting a paradigm shift” because of the existing outbound capacity from Mexican gateways, he could see DFW as being “potentially decently positioned to handle some of Mexico’s growing perishables exports.”

Freighters to the rescue

A key component that had been missing from this vision has been scheduled freighter service between DFW and destinations in South America. That, too, is changing. In June, Cargojet began operating a 767-300 freighter on an ACMI basis for Air Canada Cargo, offering scheduled service between Toronto and Mexico City via DFW. Moving forward, the true game-changer could be the recent metal-neutral agreement between American Airlines and LATAM. Ackerman said he is optimistic that, as a result of this deal, DFW could soon see some LATAM freighters.

So far, the new strategy may be working. Since last year, growth has returned to DFW’s cargo operations. The airport’s 2015 cargo handle was up 3.3 percent, year-over-year, and 2016 is seeing cargo growth more than doubling the pace of passenger traffic growth – up 3.3 percent, y-o-y, through April, compared with 1.2 percent for passenger volumes.

There’s now a good chance the Avocado Lady’s Mexican avocados are arrive in China by way of Dallas, but that’s only a tiny fraction of the volume. Latin America has many perishables to offer, and, if DFW keeps thinking like a savvy forwarder, these other foodstuffs may pass through Dallas as well. Back to top

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