Shifting Trade Winds: How trends, tariffs and tech create new cargo routes

LATIN AMERICA ↔ EUROPE

New routes are also heating up, for various reasons, on the other side of the planet, especially between Latin American and European markets.

At Colombia-based Avianca Cargo, European interest in perishable cargo from Latin America has grown nearly 18.5 percent in the first seven months of 2018, compared to the same period in 2017. Much of the demand comes from fruits and vegetables, said Carlos Arango, commercial director at Avianca Cargo’s Miami office. During the first seven months of 2018, Avianca carried 14,000 more tonnes of edible perishables, year-over-year, while flower export flowers rose nearly 17 percent, y-o-y, reaching 61,000 tonnes, he said.

Latin American exports are mostly centered around perishable products, “especially flowers from Ecuador and Colombia, and also asparagus, fruits and fishes from other countries in Latin America,” said Andrés Bianchi, CEO of Chile-based LATAM Cargo. In the other direction, he said, the goods are mainly industrial equipment, electronics, automotive parts and pharmaceuticals.

Bianchi said LATAM has also seen an increase in traffic from Latin America to Europe. “While flower exports have remained stable, growth has come from other perishables, like mangos and salmon,” he said. “Latin America to Asia has also grown, mainly by the salmon exports from Chile to China, and part of this traffic is transiting via Europe.”

Most of Avianca’s Latin America-E.U. trade is done via widebody passenger operations between London Heathrow (LHR), Madrid (MAD) and Barcelona (BCN). “We’re adding a new passenger route to Munich, therefore adding cargo capacity in this lane,” he said. “We also have interline relationships that enable us to tap into this market.”

As with many emerging markets, Bianchi said some lanes on the Latin American-Europe corridor may have capacity restraints, while others may be saddled with excess capacity. This imbalance is associated with the import/export mismatch that exists on all South American markets, “which – due to cost issues – is very difficult to balance fully.” Bianchi said this pattern is “further exacerbated by high volatility of the import markets in Latin America due to the economic and political instability that we have seen.”

To combat this imbalance, Bianchi said LATAM has focused on designing a flexible air cargo network, which combines its freighter and passenger networks. This year, alone, he said, LATAM has launched freighter operations between Brussels (BRU) and Madrid (MAD) and linked Montevideo, Uruguay (MVD), to its European network. “By generating a broader, interconnected network, we believe we are able to better navigate the structural imbalances and volatility of our core markets,” he said.

Infrastructure in Latin America is also one of the “weak links on the logistics chain,” Bianchi said, calling for further investment in airport facilities across South America. “But we think that a cargo-only airport is not what is needed, since that dilutes the benefit of combining freighter and passenger flights into a single network and thus, hinders the possibility to offer better connectivity and more options to our customers,” he explained.

Latin American airport infrastructure has strengthened in recent years, Bianchi said, thanks to new and more efficient connection centers associated with the reality of the global air market. However, economic policies and current government resistance have hampered the speed of development, he added. As a result, the Latin American airfreight industry has not been allowed to grow along with the large cargo hubs in other regions of the world.

Some of the traffic also depends on the changing tastes of consumers. Quint Wilken, global head of airfreight perishables at Panalpina, wrote in the Panalpina Blog about 42,000 kilograms of frozen guacamole that the forwarding giant flew from Guadalajara, Mexico, to the U.K.’s London Stansted Airport (STN) in 10 chartered shipments earlier this year. While most frozen food is sent by ocean vessels, avocado is so delicate that, even in frozen form, it must be consumed in a matter of a few weeks after harvesting.

“Perishables traffic from Mexico has been increasing steadily for the last four years, and fresh produce has become a regular staple,” Wilken said. The cold-chain facilities at Panalpina’s air hub in Huntsville, Alabama, he added, were recently expanded to accommodate the added traffic.