DFW’s new cargo strategy paying off

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 self-proclaimed Avocado Lady inside her densely-packed mini-mart 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 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 which brought the avocados across the Pacific, from Mexico into China leads nowhere however, because her shop purchases its wares directly from wholesalers. Luckily for 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 in the heart of Texas is working to construct an air-bridge between Latin America and Asia.

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, to Los Angeles where they caught a connecting flight to Shanghai? Or were they trucked to Dallas Fort Worth before being loaded into the belly of an American Airlines 787? While only the forwarder knows for sure, DFW Airport’s EVP global strategy & development John Ackerman tells Cargo Facts 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, air freight tonnage declined at an annual rate of 0.8%. 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,” said Ackerman.

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 look to total landed cost advantage. 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 MIA, JFK, LAX and ORD with a handle of 669,331 tonnes in 2015. Elevation to tier-one status will require DFW to capture a larger chunk of the 670,000 tonnes of airfreight carried annually between Asia and Latin America via the United States, as well as a larger share of Texan exports.

Given the distance between Latin America and Asia, perishables typically travel via an air-truck-air, or truck-air routing, often bypassing DFW for other gateways such as LAX. Closer to home, DFW has a dominant foothold on air imports into Texas, with about 70 percent of the market share, but exports are a different story. The airport has less than one-third of the total market for air exports of cargo originating within the State of Texas. However, Ackerman believes routing to be 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 in trade lanes where the Airport offers total landed cost advantages.” In addition, DFW will likely benefit as an indirect result of network expansion by American Airlines, and its oneworld partners. On 9 June, for example, oneworld carrier Qantas launched new freighter service from Australia to DFW with a 747-400F.

In an effort to establish relationships with forwarders and shippers, the DFW team has increased participation in industry events and has even started to think more like a forwarder. 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.” Results from the study have also put investment in new cold-chain and fumigation facilities on the agenda. “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,” said Ackerman.

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 various airports in Mexico to the United States 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 during the next few years.” A key component missing from this vision has been scheduled freighter service between DFW and destinations in South America. Earlier this month on 9 June, DFW got one step closer to South America when 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 is optimistic that as a result of this deal, DFW could soon see some LATAM freighters.

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

There is a good chance the Avocado Lady’s Mexican avocados passed through Dallas, but Latin America has numerous other perishables to offer, and, if DFW gets its way they too will pass through Dallas.

For now, here’s a quick video of a Beijing-bound American Airlines 787 taking off from DFW. Any guesses as to what is in the belly?