Express growth surges in Latin America

Latin America is an important source of air express revenue and a driver of aircraft capacity demand despite the fact that operations are limited compared to Europe and Asia Pacific, with most capacity flowing from North America. As throughout the world, the air express segment in Latin America has grown faster than air cargo volumes with the shift in traffic to more B2C packages due to the rapid expansion of e-commerce. E-commerce sales in Latin America are estimated to grow 23% to reach $78 billion in 2020, positioning the region as the second-fastest growing e-commerce market after Asia Pacific, followed closely by the Middle East and Africa. In fact, Brazil, Mexico and Argentina account for approximately 70% of all e-commerce sales in the region. Internet expansion and the increase in the number of smartphone users have precipitated a robust adoption of e-commerce in Latin America although the region lacks a range of online shopping platforms. Political instability coupled with the region’s economic volatility in recent years has hindered potential investors, but a few platforms have emerged, including TiendaNube and Contextus in Argentina, and Canasta Rosa in Mexico. These platforms support small businesses and entrepreneurs by allowing them to sell products on their websites, but they do not compete with the region’s dominant e-commerce platform: MercadoLibre. MercadoLibre reported revenues $1.12 billion, up 85% in the third quarter ended Sept. 30, helped by a surge in online shopping and digital payment transactions during the COVID-19 pandemic. MercadoLibre recently announced the launch of Meli Air, a fleet of four 737 freighters that will complement the existing commercial airline network. The first 737-400SF in the MercadoLibre’s livery was unveiled earlier this week and will be operated by Sideral Linhas Aereas, with an air network focus in Brazil and around the states of Bahia and Sao Paulo, where the platform has its two largest distribution centers. Brazil is 5% bigger than the contiguous United States, and 86% of its population lives in its cities. The country’s industrial center is in the south, making a hub-and-spoke air cargo system centered on Sao Paulo attractive, however the population and industry of the rest of the country is largely coastal and located in the north and northeast. Therefore, utilizing Salvador, in the state of Bahia, as a secondary air hub allows MercadoLibre to reach the coastal urban centers of Recife, Natal and Fortaleza in the northeast. MercadoLibre also has a large presence in Mexico and relies on numerous commercial agreements to deliver packages across the country. Cargo Facts Consulting has analyzed the main air express companies in the region, their networks and recent area developments. See the map below for details. var divElement = document.getElementById('viz1604929717682'); var vizElement = divElement.getElementsByTagName('object')[0]; if ( divElement.offsetWidth > 800 ) { vizElement.style.width='1000px';vizElement.style.height='827px';} else if ( divElement.offsetWidth > 500 ) { vizElement.style.width='1000px';vizElement.style.height='827px';} else { vizElement.style.width='100%';vizElement.style.height='727px';} var scriptElement = document.createElement('script'); scriptElement.src = 'https://public.tableau.com/javascripts/api/viz_v1.js'; vizElement.parentNode.insertBefore(scriptElement, vizElement); Both FedEx and UPS show a robust air presence in Mexico from their respective hubs in the United States, with limited operations in the Southern Cone. From Miami, UPS also serves additional points in Central America, as well as Bogota and Quito. While FedEx grew its Latin American division in the early 2000s, adding service to about 50 countries and territories, CFC has not seen major investments in the region since that time. The latest development was the 2019 inauguration of the FedEx Logistics Center in Panama City to strengthen supply chain services in the region. Elsewhere in Latin America, DHL has been expanding its services, especially since exiting the U.S. domestic market in 2008. Its subsidiaries — DHL de Guatemala, DHL Aero Expresso and Vensecar Internacional — are based in the region, with Panama City and Guatemala City being the main hubs for forwarding shipments throughout South and Central America and the Caribbean. DHL also connects Miami with various Caribbean islands, in addition to San Jose and Bogota. Serving about 45 points in Latin America, including Mexico, with close to 130 weekly flights, DHL is the express carrier with the most extensive air network in the region. It connects more than a dozen airports in Mexico domestically as well as with U.S. cities; in fact, the growth of Amazon in Mexico in the last year has resulted in additional commercial arrangements for DHL to move packages from the United States and within the country. In our analysis, we included the two major airline groups in Latin America: Avianca and LATAM. Both filed for bankruptcy earlier this year and their financial situation may not allow them to make significant investments around their cargo division in the short term. Although their cargo business is not focused on express operations, they are included in this interactive map for comparison. The groups encompass various entities operating across South and Central America, including affiliates in Costa Rica, Peru, Brazil, Paraguay and Ecuador. If they are forced to shrink their cargo network or freighter fleet, DHL and Azul could benefit, CFC believes. When Azul Cargo Express signed a deal with MercadoLibre in 2019, it became the e-tailer’s preferred air shipping partner for domestic deliveries in Brazil. Last month the airline retrofitted an E-195 to fly as a dedicated cargo aircraft, adding it to its two existing 737-400 freighters. The record demand for services provided by the cargo division, coupled with the rapid expansion of e-commerce in Latin America, indicates that there is an opportunity for Azul to grow its narrowbody freighter fleet. Estafeta added a 737-400 freighter in March 2020 to its existing fleet of two 737-300Fs and two 737-400Fs. The additional aircraft has allowed the carrier to increase flight frequencies out of Guadalajara and San Luis Potosi. Estafeta relies on interline agreements with DHL and FedEx to transfer cargo internationally. The latest Air Express Market Outlook provides a historical overview and five-year growth forecast of key international and domestic air express markets through to 2025. The report analyzes the performance, positioning and strategies of key global and regional express operators, including Aramex, Blue Dart, DHL Express, FedEx, SF Express and UPS, in light of emerging competition from e-commerce platforms and postal companies. Given that almost two-thirds of the world’s freighter fleet is operated by or for express companies, this report also looks at the medium-to-long-term outlook for aircraft demand and subcontracted flying services. Purchasers of the Air Express Market Outlook will receive access to an interactive map application that brings the data in the report to life, expanding on topics such as global hub distribution and express air networks.

Express growth surges in Latin America

C.H. Robinson: Assisting customers in vaccine logistics prep

Air Canada looks to freighters to grow cargo business

Related Posts

Routes, risk and resilience: The transformation of global freight

June brings stability, not relief

May freighter capacity extends April’s higher operating level

Air Canada looks to freighters to grow cargo business

Cargo Facts Free Newsletters

Cargo Facts Connect Podcast

Follow Us

Welcome Back!

Retrieve your password