Podcast: AeroUnion, Avianca on freighter fleet upgrade

Jeff Lee
Hello and welcome to this episode of cargo facts connect, the podcast of cargo facts, the newsletter of record for the air cargo and freighter aircraft industries for over 40 years. I’m Jeff Lee, editor of cargo facts and it’s Friday, the second of August. Mexico recently gained its second A330 p2f operator, with AeroUnion flying an A330-300 as part of a collaboration with Colombia-based Avianca Cargo. The two carriers aim to eventually operate a combined, uniform fleet of A330 freighters as they reinforce their presence in Latin America. This week, I spoke to AeroUnion CEO Danilo Correa and Avianca Cargo senior vice president Diogo Elias to hear more on the fleet upgrade and their growth strategy.

Jeff Lee
Danilo, you obviously recently started flying your first A 330 P 2F. It’s been a few weeks, I believe. So why don’t you tell us how, how it’s been and how happy you are with the the performance of the new addition to the feet.

Danilo Correa
Thank you, Jeff. And basically we are really happy to receive or to welcome that new technology to our company because it’s a it’s a radical turnover to to our numbers in terms of ability, in terms of capacity of cargo, it’s a unit and it comprehends also an improvement, a big improvement in fuel consumption.
We are, we are expected to reduce about 30% fuel consumption impacting the positively the, the, the environmentally footprint as you as you can imagine and also the brings a lot of a benefits and opportunities to our network and to our company because for example let’s say the the utilization is 4 hours per day, the higher than the previous technology or the previous sleep, that’s a huge number and the capacity cargo is a 60% more. So it is a full of benefits all over the the the technology. So we are really happy for that. And the company is transforming itself internally because of that. So this is a cross roads and this is a turning point in our history and we’re really happy for that.

Diogo Elias
Adding to that and as we talked. Early in the year, Jeff on this it’s a consolidation of, I mean it’s a very important milestone because it’s a it add on our strategies as a different cargo, not only the P12, but also I mean the fleet but also the partnership that we have with with aerounion. It’s it’s deeper than the regular partnership as as you as as you know, but just to remember, More than a year ago, it got approved the our commercial contribution agreement, as we say it, CCA which is a contract that sets that Avianca cargo and Aerounion are partners in different different ways, not only commercial but also network strategy besides the the services like maintenance and other stuff. But mainly the strategy and and integrated fleet plan. So this is part of an integrated fleet plan that we have as a group as a two companies as integrated and it’s complementary since I see I reunion, it’s a Mexican, UC has has a long history there, I guess more than 20. The big milestone here is that since 1213 months ago we are fully coordinated between the among our teams, strategy, Operations and fleet markets as we are allowed to approved by the Colombian Government DOT in the US and Mexican for sure so. And to see now then, then this milestone else we incorporate that 3:30, which is the same fleet that we have, sure there’s a minor changes, but as it be 2F that we don’t, we don’t we don’t have BCF right now as if all feel freighters uh now this is a picture of and is at 300 dash. Sure those are small changes. I would say, I mean they’re very important is strategic ones, but this is a milestone for for the partnership because the old fleet that that as the needle said it’s the is not as reliable as and new technology is not as efficient and it’s not as big. So we are up gauging we are, uh, more reliable and with much more capacity. Not only because it’s a 60 tons aircraft versus 4038 tonnes of freighter that everyone has, but also operates much more as Danilo said, more than 4 hours a day as we in reliable.

Jeff Lee
Danilo, I mean just speaking of your your fleet, I know you also recently very recently retired the your A300 fleet. And I guess that was part of the plan, with these, uh, incoming A three 30s. But uh, how? What’s the I mean, you also have two older 767 2 hundreds, right? What’s the, what went into that decision to to replace the or to retire the A3 hundreds instead of the 767s? And what’s the plan for the 2 76 sevens now?

Danilo Correa
OK, Jeffrey. Strategically speaking there is corresponds to a plan, as you already mentioned, we have already figured out that the A310 is A 3 hundreds should be grounded by the first half of this year. Which finally, of course, and it corresponds, of course. Our attempts to efficiency factors and the way ability factors in terms of the the level of service that we are offering to our customers. We wanted to enhance our capability to to offer a better service to our customers than that’s why that explains that the the whole, the strategic change that we are experiencing and that had a one party, the first half of this year with the three hundreds and in the second half of this year, we are facing out also the 767 aircrafts that remaining ones. So we are replacing a not only the number of aircraft, but also hey making wider the number of of tons per aircraft, 60% percent more. So it seems serious. One aircraft by the other, but in in general terms it hits our efficiencies, our cost efficiencies, but also our reliability and the the cost, the customer of service that we are offering and the capacity of cargo that we can move, you need to of of them. So that is an. It’s a big decision that they basically transform our numbers and our profitability and it brings a reunion to a new IT up in a in the in the history, whole time with the Avianca cargo alive. And we are basically getting the best of our fleet commonality and that brings a lot of benefits and a making the the network complementary and enhancing our hopes for connections throughout all the throughout all of the cities in Latin America and it give us a basically a reinforcement in our value proposition to our customers and it is a it is a new new offer for our customer. So they we are really, really pleased to, to, to have this to happen and and to experience all the benefits, a consequence of our plan, our strategic plan in order to reinforce our presence in strategic markets.

Jeff Lee
Right. So you were talking about the international market, of course, how are you seeing, right now at least, the difference in the market demand and what the market’s looking like between North and South America or within the Americas compared with the transatlantic market?

Diogo Elias
Well. First, with our main markets, with the perishables out of out of South America, specially in Central America, we see they’re strong uh compared to last year. They’re growing compared to pre pandemic volume, they’re growing even better, so they’re strong. They’re consistent. They’re all year-round cargo. So we see them consistently, there’s not much more room, for example, as we saw in in COVID times that you can charge twice, 3 times, 4 times. Perishables does not have that room because they’re not high high aggregated products. So, but they’re very good because they they give us the balance out of Santiago out of Bogota out of Quito out of Medellin out of Brazil and Lima whatever and southbound have been difficult time more difficult than than last last, last uh two years I would say 2-3 years part of marketing being soft getting soft in Brazil and Chile in Argentina especially we see those markets out of Miami for example smaller than before and cheaper than before and the thing that we are getting much more influenced in those markets are the ecommerce the cargo from from China and and Hong Kong and everywhere in in China, in Asia, out of those markets and the main markets are to Europe and to USA. But there was also there’s also cargo going to Brazil, to Chile, to Colombia and the way they get here is either through Miami either through LAX, Chicago, which are the main hubs to get down to the South America, especially in Miami for sure. But LA Chicago is also playing a role there and direct flights as well. So that’s where we see the influence of the ecommerce getting into our markets. So I we do see that the flow comes as well.

Jeff Lee
Danilo, what about you, with AeroUnion? Where, which areas do you see the the most potential for for growth?

Danilo Correa
Doubtless, Jeff, basically, we have the distribution beyond NLU is a new facility here in Mexico that brings a lot of opportunities or businesses in order to connect not only through Bogota hub but also through Miami Hub and direct routes to all the Latin American, Central America and Caribbean markets. So that’s a big issue that we are working on, especially taking the benefits of the hubs in Botan niami, but also as I already mentioned, they operating in the direct direct routes to Latin American markets. We’re running numbers in order to confirm what is the our next moves in in that direction so that it brings a lot of opportunities to our Business today. Besides of course, to reinforce our presence, our strategic position in in Los Angeles and Mexico market that is traditional one for for our history. So that’s the the main issue here. And of course this is a running business and we of course we’ll find the new opportunities to take advantage of.

Jeff Lee
At NLU obviously, the good thing about that is that you have plenty of space to expand your facilities, right, Danilo?

Danilo Correa
Yeah, it’s been a long a long way with the authorities here in Mexico and and they’re all the whole sector or freighter sector in order to consolidate our presence in the new facility. We have experience really good things, but we have experience difficulties as suspected. One of the difficulties we are expecting in order to to growth is basically the platform spaces that collapse at some specific peak times during the the year and that’s a big issue that the authority of the airport is working on trying to make wider platform spaces in order to comprehend or attend simultaneously about eight to 10 cargo aircrafts at the same time. Currently it is not more than six, so that is a limited capacity that we need to go through in order to to think about growth. But they are working on that. We are doing this joining forces with authority in order to that to happen in the current in the coming next year. So I’m positive about the the the facility and positive about the investment they are making and that facility and the opportunities that bring for the whole industry, but specifically for AeroUnion that is prepared for capturing all that specific opportunities.

Jeff Lee
RIght. So with your combined, uniform fleet of A330s, are there any markets, perhaps outside the the traditional regions that you’ve served, are there any new markets that you’re looking at?

Diogo Elias
So right now, our strategy is indeed to find new markets. We if you go back one year before I came here and up to now we started some niche markers in Brazil, Florianopolis, Vitoria, that’s in Brazil, we started and we consolidated some other markets like in Paraguay, Paraguay and Santa Cruz. And we also started the West Coast, which was very important with the in this partnership, I guess the main point for this partnership, because we didn’t use to fly the West and the way we fly it is bringing the flower market to the West Coast. So keep Bogota LAX and then we’re flying down Southbound to Mexico and there we consolidated two main markets besides a NLU which is Monterey and Guadalajara those are very big markets as well for ecommerce technology automotives and many different industries, technology as well. So consolidating those markets too and serving much better our customers in this combined fleet and Merida as well we didn’t use to operate Merida, which is close to Cancun in Mexico in consolidating this with Miami as well. So not only LA to Mexico, but Mexico to Miami, Miami to South America.

Jeff Lee
So I guess as a as a final point, Diogo and Danilo, what’s the main thing or the top one or two things that that you want to achieve or what goals do you want to reach by the end of this year?

Danilo Correa
Well, basically it’s consolidating all the benefits from the derived from the cooperative agreement with the Avianca cargo. It has a led us to capture a lot of benefits, synergies and efficiencies. You can imagine and the procurement in the commonality of fleet it in network technology processes, best practices and many other standards. And we have learned many, many beneficial aspects of the business in order to make this company world class at the same level, of course, hopefully as Avianca Cargo is, so we are really committed on that to happen. That’s our our number top priority. And as I already mentioned, regaining the confidence of our customers based on a major reliability and new a service or service promise or and of course in our standards of products, so customers and efficiencies are the the two names of the game here in Aerounion this year. In the rest of this year, in order to to be prepared for a successful 2025 next year with the new incorporation of the additional P2Fs that are coming.

Diogo Elias
Yeah, I have some very, a lot in common. I would say that most important things to keep, keep playing in this market is to have very efficient costs. We’re working on that. So we have many, many different initiatives in that. So part of the strategy is also having a better and better technology as a fleet to consolidate that fleet and all this strategy that in efficiencies that we have been pushing with the companies, it’s key in this moment. Consolidating new markets that we opened recently. What way we operate it, like the West Coast, the West goes down to Mexico and those niche markets and in close to within and close to Brazil and so as products keep the service level in a high standard and as we had been constructing this the last 18 months or two years and the way we see it is increasing our share of volume with our main global customers and besides that to have the best best team around. So that’s one of my one of my goals here is to keep the the talent and bring talent within Avianca cargo to have the best team, to operate so that those are part of work in progress projects, but also others that we are aiming to achieve by the end of the year.

Jeff Lee
Good, good. Well, good luck with that and congrats again on the A330. And let’s hope they don’t get delayed too much more. Thank you, thank you so much Diego and Danilo.

Jeff Lee
That was Danilo Correa, CEO of AeroUnion, and Diogo Elias, SVP of Avianca Cargo. Thanks again for your time. And that’s all the time we have today. For more coverage of the freighter aircraft market, visit cargo facts.com. Thank you very much for tuning in, and join us again next time.