Chile-based LATAM Airlines’ cargo division has finally offloaded the 777 freighters it planned to remove from its fleet by the end of 2017. Atlas Air Worldwide Holdings acquired the freighters and announced that its Southern Air subsidiary will operate both freighters on an ACMI basis for DHL Express.
Southern Air has operated one of the newly-acquired 777Fs for DHL Express (which was leasing it from LATAM) on a CMI basis since 2015 and will officially begin operating the aircraft on its own certificate this month. The second 777F will join Southern Air’s fleet at the end of the second quarter of 2018 and bring the total number of 777 freighters owned or operated by Atlas Air Worldwide Holdings to twelve.
Overcapacity, at least on the freighter side, does seem to have been the case at LATAM Cargo, however. The carrier’s cargo division spent much of the past five years under a cloud, reporting nineteen consecutive quarters of year-on-year losses before finally rebounding to post a 2.5% increase in cargo revenues during the third quarter of 2017. Cargo Facts spoke to LATAM Cargo’s CEO, Andrés Bianchi, about how the new fleet strategy helped the carrier recover from its cargo slump.
“The 767 is the preferred aircraft we’ve used as a freighter, mostly because in the regions we fly, it combines both the right payload and range to address the markets we serve,” said Bianchi. “These are thinner markets compared to the large freighter markets you see between Asia and the US or Asia and Europe. These markets are much smaller, so you need a smaller freighter.”
The original decision to bring in the 777 freighter to LATAM Cargo’s operations was driven by the expectation that South America would see strong volume growth that didn’t materialize, as the economic downturn of a decade ago hit Brazil’s economy especially hard. That is beginning to change now, said Bianchi.
“When you think about the Latin American cargo market, you are very dependent on what Brazil does on the import side,” he said. “In general, we have a positive view, and that’s why we are bringing in additional 767s because we want to keep stable capacity this year in terms of freighter operations, and grow a bit going forward, combining that with the increase of our widebody operations outside and within the region.”
However, the additional 767s – three of which are scheduled to undergo passenger-to-freighter conversion with Boeing from LATAM’s own passenger fleet and begin cargo operations by 2020 – are not likely to alter LATAM’s current ratio of main-deck and belly utilization, which has recently shifted to favor belly-space in terms of total cargo volumes moved. “We think we’ll be able to grow at a similar mix going forward,” Bianchi added.
The important takeaway, Bianchi concluded, is that regardless of its move to shed its 777 freighters and increase its belly-space utilization to move cargo on passenger flights, LATAM Cargo has no intention of phasing out freighter operations, and may even continue to utilize the MD-11 freighter it has leased under an ACMI deal with Western Global Airlines after its transition away from 777Fs and to a 767F fleet concludes.
“To serve our customers well, particularly in the regions we operate in, freighters are an integral part of our value proposition,” he said. “It’s not that we are cutting our capacity, it’s that we are basically re-balancing and using a mix of aircraft that makes more sense for the future.”
In an interesting sidelight to the sale of the 777Fs to Atlas, and their operation for DHL Express, Deutsche Post-DHL CEO Frank Appel was asked in today’s earnings call whether he thought there was a risk of too much capacity entering the express market. His response was right to the point: After noting that there has been ” a sizeable increase in freighter costs,” he added, “I don’t think there is a remote risk of excess express capacity.”Like This Post