Latin American e-commerce delivers freighter fleet growth amid general slump

Touching down at Sao Paulo Guarulhos International Airport (GRU), it's impossible to avoid the rows of parked passenger aircraft idled by the COVID-19 pandemic, which continues to rage in parts of Latin America. With the off-tarmac gloom, it's easy to miss the soon-to-land 737-400SF in bright yellow livery operated by Sideral Linhas Aereas, carrying parcels for Argentina-based e-tailer Mercado Libre. While it's natural to focus on the dire passenger aviation markets in parts of Latin America, and the still-pronounced reduction in bellyhold cargo capacity, online shopping across Latin America is booming. Carriers, too, are checking out with orders and LOIs for freighters, signaling that fleet renewal and growth over the next two years could make the yellow-emblazoned planes — and the dedicated air operations of other e-tailers — a more common sight at airports across the region. International cargo tonne kilometers for the region of Latin America remained down 24% in March 2021 compared to the pre-pandemic period in March 2019, according to IATA — well behind every other region the industry organization tracks. However, despite the appearance of sluggish cargo demand, freighter fleet growth persists. Latin American carriers will add a total of at least thirty-seven freighters from 2021 through 2022, based on orders and agreements currently known to Cargo Facts . While redelivery timelines are subject to revision, the number of planned aircraft being added for both growth and replacement represent more than one-third of the region’s active fleet of approximately 110 units. The additions vary widely in type, size and age, from a CRJ200 to an A330-300 , and will contribute to both renewal and fleet growth. Many incoming 737 Classics , for example, will replace aging aircraft such as the 727-200F, which is a significant portion of the fleet. Other aircraft, including ten 767-300BCF conversions LATAM Cargo has on order with Boeing, will grow the fleet. LATAM reinforces fleet backbone In terms of capacity, the largest growth by far will come from LATAM Cargo. In March, the carrier announced a firm order for four 767-300BCF conversions with Boeing, then in May exercised four options and added two more firm orders. As it stands, the carrier now has a total of ten 767-300BCFs incoming, with between five and seven joining by the end of 2022, and the rest by 2023. LATAM is the largest 767-300BCF customer and will be the first scheduled combination carrier to surpass twenty 767 freighters, assuming it keeps its currently active eight 767-300Fs and thirteen 767-300BCFs. [caption id="attachment_416134" align="alignright" width="500"] LATAM will add ten 767-300BCFs from late 2021 through 2023. (Photo/LATAM)[/caption] LATAM Cargo told Cargo Facts that it had decided to accelerate its 2019 fleet growth plan by about 50%, based on demand and the increased availability of passenger frames in the wake of the pandemic. The freighters will all be from LATAM’s existing passenger fleet, which, as of March 31, 2021, included seventeen passenger 767-300ERs, all with General Electric CF6-80C2 engines and between eight and fifteen years old. T he 767-300F is the “ideal” freighter for Latin America and LATAM Cargo, according to CEO Andres Bianchi . The carrier will allocate the first eight of the new conversions to major markets, including Colombia, Ecuador, Chile and Brazil, and is considering other new opportunities stemming from e-commerce growth, potentially including ACMI flying for third parties , domestically or regionally. On April 29, LATAM finally cancelled a single outstanding order for a 777F that it had inherited from Brazil-based TAM before its merger with Chile-based LAN. That order had long been stagnant. Outgrowing the belly As combination carrier LATAM doubles down on its freighter fleet, other low-cost and combination carriers are revisiting their cargo strategies, and although some have found success moving parcels over passengers, no other operator has revealed grand plans to move into freighter operations. Panama-based Copa Airlines told Cargo Facts it's ACMI-leasing a 727-200F from AeroSucre to offset the lack of belly capacity on its narrowbody passenger network. As for adding freighters in Copa livery, “we are not making any waves, not yet,” said Jaime Alvarez, senior director of cargo at Copa. GOLOG, the logistics subsidiary of Brazil-based low-cost carrier GOL, has steered clear of cargo-only flights and has no plans to add freighters, but spent much of 2020 expanding its same-day parcel delivery capabilities. GOLOG also entered into an agreement with the biggest bus network in Brazil to expand multi-modal air-bus connections, Director Julio Perotti told Cargo Facts. Mexico-based low-cost carrier Viva Aerobus began carrying cargo in the lower hold of its passenger fleet in January 2020 in partnership with ground handler and GSSA Aerocharter. Aerocharter handles all aspects of cargo sales, marketing, security screening and loading, General Director Luis Ramos Cabrero told Cargo Facts. “We've captured about 14% of the domestic cargo market in a year and a half,” Cabrero said. The operation is parcel-focused and expects to carry 20,000 tonnes of parcels annually during its first few years. Mas freighters for Mas and LAS In addition to LATAM, another carrier with significant upcoming medium-widebody growth is Mexico-based MasAir, which grew its fleet from just one 767F to three in 2020, and will continue to expand by bringing on four A330Fs in 2022. The A330s will be split evenly between -200P2Fs and -300P2Fs, with MasAir leasing the former two from Altavair and the latter two from CDB Aviation. At the time of the -200P2F announcement, MasAir told Cargo Facts that it liked the longer range of the type, but after the -300P2F announcement, noted that the higher volume of the longer variant will give it flexibility in deploying the right aircraft for the right operation. [caption id="attachment_415804" align="alignleft" width="500"] MasAir will have four A330P2Fs by the end of 2022. (Photo/MasAir)[/caption] The two -300P2Fs are the first that CDB has ordered (958 and 964, ex-China Southern Airlines), and the former arrived in Dresden (DRS) for induction with Elbe Flugzeugwerke (EFW) in late April 2021. The identity of the two -200P2Fs is currently unknown, but Cargo Facts believes they are two 2007-vintage units (834 and 868) that Altavair acquired from Etihad Airways. In any case, MasAir told Cargo Facts that it intends to use the A330s mostly for ACMI operations. The carrier, which has already been using one or two of its 767s for ACMI work for DHL, is keen to extend its wings to Europe and China. Despite investing more than $5 million in flight and technical crew, infrastructure and IT systems ahead of the A330s’ arrival, MasAir will continue flying its three 767Fs and said it may expand that fleet with further additions in the coming years. While Mas will keep its 767Fs, Colombia-based LAS Cargo is bringing in newer freighters to replace its legacy fleet of 727-200Fs, as part of a process that began with the addition of a 737-300F in 2019. Although the carrier had previously expected to add another 737-300F this year, LAS CEO Frederik Jacobsen told Cargo Facts the carrier now intends to take on a 737-400F on lease around August instead. LAS told Cargo Facts that it is looking to sell two of its 727s and, if the deal goes through, intends to add a second 737-400F toward the end of the year and could end 2021 with two 727-200Fs, two 737-400Fs and one 737-300F. The carrier also has two 737-800BCF conversion slots with Boeing in the third quarter of 2022. LAS already operates charters for customers including DHL, but said it sees growing e-commerce providing opportunities both internationally and domestically. New players and new types Latin America recently gained a new freighter operator in the form of Panama-based Cargo Three, which received its air operator certificate from the Civil Aeronautical Authority of Panama at the end of April 2021, and will soon begin operations. The certificate grants approval for Cargo Three to carry out non-regular transport of domestic and international cargo from its base at Panama City’s Tocumen International Airport (PTY). Parent JMB Aviation Group, of which Venezuela-based Transcarga is also a subsidiary, told Cargo Facts that Cargo Three plans to start flying in July, using an A300F for twice-daily flights between PTY and Miami (MIA). The carrier’s single A300B4-200F (227), a 1984-vintage frame it acquired from AeroUnion, has been in Sanford (SFB) for storage since the end of July 2020. When it comes to narrowbodies, most of the region’s carriers remain focused on 737 Classics, but one carrier has decided to step into the next generation of freighters and will likely become the first in the region to operate the A321F platform. Brazil-based Azul told Cargo Facts that it intends to lease two A321-200Fs in the first half of 2022. Azul said that, prior to the pandemic, it had decided to expand its cargo operations with 737-800BCFs due to growing demand, but also started considering A321 freighters around the end of 2019. The carrier postponed and eventually canceled its 737NG plans last year. Azul leased its current two 737-400Fs (28198 and 28053, both ex-Miami International), built in 1997 and 1996, respectively, from Vx Capital Partners in 2018. The two PEMCO conversions will come off lease in 2023, at which point the carrier plans to add more A321Fs. Azul told Cargo Facts it will most likely opt for aircraft that are around fifteen years old, but declined to identify a lessor at this stage or say whether it has selected Elbe Flugzeugwerke’s (EFW) A321-200P2F or 321 Precision Conversions’ A321-200PCF. One advantage of moving into the A321F platform is clear; phasing out the 737-400Fs will not only lower the overall age of Azul’s fleet but, more importantly, streamline it to ATR, Airbus and Embraer models, excluding Cessna 208s under the Azul Conecta subsidiary. Notably, the carrier currently has four A321neos and forty-two A320neos. Azul said the greater range of the A321Fs will allow it to fly longer missions. The carrier’s 737-400Fs currently only fly domestically, with the longest flight being between Campinas (VCP) and Manaus (MAO). The Brazilian market has seen “very impressive growth” over the past year, in large part because of e-commerce, said Azul, which since late 2020 has been leading market share for domestic cargo, according to statistics from Brazil’s National Civil Aviation Agency. Still checking out Across Latin America, e-commerce continues to boom. Mercado Libre reported the total number of items it sold across its platforms had grown 110% year over year during the first quarter of 2021, to 222 million items. Gross merchandise volume, meanwhile, rose 114% compared to the first quarter of 2020, to $6.1 billion. Air cargo plays a significant role in increasing average delivery speeds. Since quietly assembling its dedicated operation in 2020, Mercado Libre’s Meli Air fleet now includes seven freighters with various carriers, operating eight routes in Mexico and Brazil. As is the case with e-tail globally, fulfillment speeds are getting faster. Mercado Libre said in a May earnings release that it delivered 74% of its orders within 48 hours, an increase of 21 percentage points from the first quarter of 2020. [caption id="attachment_416133" align="alignright" width="500"] Aeronaves TSM operates at least two DC-9Fs for Mercado Libre. (Photo/Mercado Libre Founder and CEO Marcos Galperin)[/caption] As recent freighter aircraft transaction volumes have shown, the number of planned freighter additions to Latin America-based fleets between 2021 and 2022 is likely to grow further. There are also lower-profile carriers in the process of finalizing deals to add new freighter conversions. Brazil’s largest all-cargo carrier by fleet size, Sideral Air, operates five 737-300Fs and seven 737-400Fs, including one aircraft for Meli Air, and is in the process of adding its first 737-800SFs, according to a source familiar with the carrier’s plans. It is likely Mercado Libre will take its own-controlled Meli Air operation further with more dedicated aircraft. Mexico-based Aeronaves TSM, for example, which until very recently had only operated DC-9Fs, MD-80Fs and CRJ200Fs, has now purchased two previously converted 737-400Fs and placed orders with Aeronautical Engineers Inc. for seven 737-400SFs, even as it continues to take on MD-80 and CRJ200 conversions. While Aeronaves TSM could not be reached for comment on its fleet growth, other observers have told Cargo Facts the influx of freighters suggests a long-term arrangement with an express provider or integrator. Even amid a generally suppressed passenger aviation market, growing e-commerce in Latin America — whether directly related to Mercado Libre or not — is clearly translating into opportunities for the region’s freighter operators. “E-commerce is still in its infancy, but you can see that there's traffic, and it is growing,” said LAS’ Jacobsen. “We have engaged in conversations with some of these e-commerce companies, so hopefully we'll be able to strike some sort of deal in the coming months.” This story originally appeared in the June 2021 issue of Cargo Facts .

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