Latin America comes into its own

Latin America is elevating its presence in the air cargo sector to meet growing demand in the region as new lessors, operators and freighter types enter the Central and South American airspace. More than 120 industry leaders and stakeholders gathered in Panama City recently for the inaugural Cargo Facts LATAM conference recently to discuss the latest market trends and developments within the region that will impact the industry and strategize on how to incorporate the latest regional trends into their operations. While the Cargo Facts team shared breaking news from the event immediately, the team now offers a glimpse of more highlights from the conference. LatAm air cargo is open for business Any presumptions about Latin America being an “emerging market” were dispelled as multiple carriers, including some backed by logistics companies, emphasized the need to support established markets and growing e-commerce demand in the Americas by boosting freighter operations to strengthen lift capacity. Copa Airlines, GOL, Aerolineas Argentinas and Mas, for example, recently established or expanded freighter fleets, but regional demand has also led to the introduction of new carriers such as Cargo Three, Awesome Cargo, Sky Cana and Sky High. [caption id="attachment_56863953" align="alignleft" width="450"] The Narrowbody panel at CF LATAM 2023. (Photo/Cargo Facts)[/caption] “It’s been a successful story,” Copa’s Senior Director of Cargo Jaime Alvarez said during a panel on the future of narrowbody freighters. “[Our 737-800BCF] actually has been busy and flying very effectively.” Alvarez added that the capacity for more freighters depends on how a business operates and market conditions which have raised some concerns. But he said there should be room to expand Copa’s cargo operations. “I am in a special situation,” he said. “I am in a hub with eighty destinations, so the capability I have to fill an airplane is better than anyone who chooses to come in and fly direct.” Mario Fernandes da Costa, chief financial and transformation officer of Modern Logistics, agreed that there is space for growth, but the pace and level of growth will be determined by client needs. “As a logistics operator, reliability is essential for our clients,” he said. During a panel on LatAm perishables, Chief Commercial and Cargo Officer at Sao Paulo International Airport Joao Pita emphasized the need to increase speed, frequency and efficiency of air cargo networks in Latin America to meet growing demand. "The entire LatAm supply chain needs to produce at a faster pace," Pita said. "Mexico is very close to the U.S. but Brazil, Argentina and Uruguay are far away from the prime consumer markets, so the ability of the entire network to connect quickly is a major issue in the region." The Airbus niche vs the Boeing presence Whether narrowbody or medium-widebody, most air cargo operators in Latin America fly Boeing freighter types. “I think the 737-800 is experiencing the beginning of a transition for Latin America,” Xtreme Aviation Chief Executive Carlos Cock said during the conference’s narrowbody panel, adding that he believes 737-800 freighters will take over the regional narrowbody market in the long run because they replace 737-400Fs and fill some of the void created when the 757-200F retires. “A321Fs, being the newer freighters to the market, have a period of a few years where they have to prove themselves and prove that the performance is going to be there throughout the aircraft aging,” Cock said. While Boeing remains the dominant freighter type in LatAm, Frank Diaz, chief executive of Dominican Republic-based Sky Cana, shared a perspective as an operator trying out both the 737-800F and A321-200P2F through ACMI arrangements. “In our experience operating both aircraft and with the world turning toward e-commerce, we have more success operating the A321F, specifically when it comes to moving volume,” Diaz said, adding that the A321 is more cost-effective for his company’s regional e-logistics operation. Modern’s Fernandes da Costa agreed with Diaz on the A321-200F, but said Modern Logistics chose to stay with Boeing and upgrade to the 737-800 freighter platform due to familiarity and the funds already committed to building its infrastructure around 737s. “To go from the 737 Classics to the -800Fs is a natural choice,” Fernandes da Costa said. “The 737-800F is more reliable and the economics are better, and we can provide better service to the market.” During the opening session of Cargo Facts LATAM 2023, Varun Nandlal, Global Crossing Airlines vice president of Cargo and Security, said the carrier had launched operations with an A321-200F earlier this year and another soon will enter service. “Using the A321F will give us flexibility to fly into smaller airports with shorter runways,” Nandlal said. Having the ability to serve airports that widebody freighters cannot is an advantage for the airline, he said. Global Crossing has initiated certification for its Colombian subsidiary, GlobalX Colombia, as it seeks to establish a foothold in Latin America . The carrier also has a charter agreement with Avianca to wet lease or charter four A321Fs over the next five years. [caption id="attachment_56863954" align="alignright" width="450"] Aero Capital Solutions Vice President of Commercial Americas Ryan Anderson. (Photo/Cargo Facts)[/caption] Aero Capital Solutions Vice President of Commercial Americas Ryan Anderson said he believes the 737-800F will serve a regional role and be an able replacement for the 737 Classic freighter, while A321Fs will meet the volumetric need for express shipping in Latin America. Meanwhile, in the widebody segment, Mas became the first carrier in the region to operate both A330-300P2Fs and -200P2Fs as the airline continues to build its A330F fleet, and new airline Awesome Cargo will launch operations with reconfigured A330-200s that it plans to convert to full freighters. Copa’s Alvarez agreed with the assessments of the reasons carriers chose between Airbus and Boeing freighters. “In our case, we are a 737-800 operator so there’s no chance for us to operate an Airbus,” Alvarez said. “We don’t move any e-commerce — I’d say very little — and that’s an interesting situation. Everybody talks about e-commerce and a lot of it flies out of Miami, but we’re not even considering Miami in our network.” Converting LatAm’s freighter market While the LatAm market continues to gain momentum, the number of conversions and conversion orders is leveling off, according to Bob Convey, senior vice president of sales and marketing at Aeronautical Engineers Inc. “We are seeing a bit of a slowdown or a correction in the volumes but it’s different for each type,” Convey said during a conversion market panel. He said a slight downturn in orders has been seen with 737-800Fs, especially as lessors have delayed speculative orders due in part to feedstock availability and decreased demand. “We’ve had a handful of cancellations — three or four — most of them are really push-outs driven by a lack of feedstock,” he said. “In terms of Latin America, it has always been a slow market,” Convey added. “But we’re seeing 737-800s come in. Aerolineas Argentinas just took a couple of ours and we have another customer with several on order.” Meanwhile, Gustavo Ribeiro, head of business management and contracts, services and support at Embraer, said he expects the first delivery from Brazil’s prototype facility for the E190F conversion program by mid-2024. “We’re talking to a lot of people throughout the world and we can see the demand for the E195F and E190F,” Ribeiro said, saying Latin America has multiple passenger E-jet operators that may have an interest in the freighter version. Fellow panelist Avensis Aviation Chief Executive Cris Sutter, said during a panel on the widebody conversion market in the region, that his company is in talks with a Latin American customer about two A330s, and will offer details in the coming weeks. [caption id="attachment_56863956" align="alignleft" width="450"] Cris Sutter, chief executive of Avensis Aviation. (Photo/Cargo Facts)[/caption] Avensis, which announced its new A340 freighter conversion at Cargo Facts LATAM 2023, also finds the A340 quadjet a compelling proposition for the customer as the aircraft is free of ETOPS limitations and a natural fit to the A330 modifications Avensis has already developed. “We were working with a customer whose cargo operation model is around the A340 and, of course, the cross sections of the A340 and A330 are exactly the same,” Sutter said. One-stop-shop solution Many at the conference said there is a need for one-stop-shop solutions for customers that would include air freight, customs and last-mile delivery options. Brazil generated more than $20 billion in the domestic e-commerce market in 2022, and Latin America is one of the fastest-growing regions globally, Cargo Facts Consulting Director Guillermo Ochovo said during a presentation at the event. Countries with the largest share of e-commerce growth in the LatAm region in 2022 were Brazil with 23%; Argentina with 19%; Mexico at 18%; Chile and Colombia not too far behind with 16% each; and Peru with 14%. Meanwhile, in the Dominican Republic, e-commerce was a $85 billion market last year and is projected to be worth around $164 billion in 2023, Sky Cana’s Diaz said. With surging demand for e-commerce, LatAm operators shifted strategies to support their customer base beyond air transport. “It’s up to the airlines to help exporters have a tool,” Cargo Three Interlines Director Rodrigo De Narvaez said. “We are no longer a carrier; we are a tool.” De Narvaez said carrier Cargo Three has essentially become a part of the export companies it serves, and stressed the importance of making sure the airline takes responsibility for delivery of each shipment. Copa’s Alvarez offered a different take, saying there is a blurring of boundaries regarding who exports and who provides the air service. “It is a vacuum that will find a solution one way or another,” Alvarez said. “It might be the freight forwarders flying or it may be the airlines going directly without a freight forwarder.” Diaz said that a company cannot be the customer and the operator unless it is as big as Amazon, but logistics companies will likely deal more with ACMI providers. “We will see more of that in the near future as the number of internet users grows within the region as it had [in 2022] from 44% to 67%,” Diaz said. While the LatAm e-commerce sector shows great potential, cooperation is needed from governments, businesses and operators to adopt unilateral policies, customs and regulatory compliance measures for seamless growth, according to conference panelists. Looking forward Another major challenge in the region is high import taxes, Ochovo said during his presentation. He cited Luis Ramos, chief executive of Aerocharter de Mexico and founder of Awesome Cargo, who said complex trade rules in the region could deter cross-border spending. Meanwhile, Mas Chief Executive Luis Sierra emphasized the importance of open-skies agreements in the region, saying fifth-freedom rights would enable countries to strengthen global trade. “Typically, fifth-freedom rights have been in place forever, but if the country does not have a local carrier and they want to promote imports and exports, they need to authorize this policy,” he said. [caption id="attachment_56863955" align="alignright" width="450"] CEO of Aerocharter de México and Founder of Awesome Cargo Luis Ramos. (Photo/ Cargo Facts)[/caption] The perishable production capabilities in Peru, Argentina, Colombia, Guatemala, Panama and Mexico make them worthwhile hubs, Ramos noted, adding that Awesome Cargo hopes to merge its existing business with those production powerhouses in order to lower the trade imbalance and improve payloads and yields. The import-export imbalance persists, Sao Paolo Airport’s Pita said. “When I talk to airlines, they say, ‘You don’t need to convince me that I have cargo to bring to Sao Paulo. If you want to help me out, show me how to get my plane out of GRU full of cargo.’” Cargo Three’s De Narvaez said he is confident the industry will overcome these hurdles. “Perishable exports decreased by almost 40% during the pandemic, but the perishables continued growing, so the exporters started trading perishables beyond their natural market,” he said. “We tend to grow with the problems.”

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