Rates and yields have climbed in Latin America as imports soar, with freighters shifted elsewhere.
Airports in Latin America are looking to beef up their cargo infrastructure. They need to boost capacity to cope with a surge in e-commerce that has swept into the region and is expected to continue to rise. RIOgaleao, the operator of Rio de Janeiro’s Jobim international airport, has been preparing for the start of operations of an international e-commerce giant in January.
To begin with, it has allocated 1,000 sq m in the warehouse to the new operation, but aero business director Patrick Fehring, is bracing for more.
“They want to take another warehouse next door that needs refurbishment. I think there is more to come,” he says, adding that RIOgaleao is going to recruit 50 people to work on e-commerce in anticipation of growth in the segment.
In Uruguay the arrival of Temu earlier this year caused an unexpected spike in cargo beyond projections.
“Sometimes it’s three times as much as we were expecting, and there are projections that it will double,” reports Maximiliano Lema, head of business development at the Latin America Cargo City (LACC) at Montevideo’s Carrasco International Airport.
“It has not caused any constraints, but it’s been a major impact,” he says, adding that the surge has been a challenge for final mile providers and for customs. LACC has been having talks with other e-commerce platforms that are examining what Temu has been doing in Uruguay.
LACC has been a conduit for regional distribution beyond Uruguay’s borders, most prominently in the pharmaceutical arena. Recently it has conducted some pilot programmes, testing systems and teams to move e-commerce to Brazil.
“We need further development in infrastructure and capacity to go after larger volumes,” says Lema. This summer LACC obtained the concession for part of the airport’s former passenger terminal, which will be turned into a cargo facility. Construction will likely start in January or February with a view to completion within 12-15 months, he estimates.
Parent company Corporacion America Airports recently won the concession for another six airports in Uruguay in addition to its existing two locations. Most are small airports for domestic traffic, but Rivera airport, located on the border with Brazil, has binational status, so it would be possible to run Brazilian flights as domestic operations, which would open up some interesting opportunities, Lema says.
The surge in e-commerce flooding into South America has changed the market situation significantly, comments Diogo Elias, senior vice-president of Avianca Cargo. It reversed a decline in inbound demand that had set in in the latter half of 2022, while the return of passenger operations boosted capacity. Yields and loads factor were still down in the first two quarters of this year, but they have since pushed up the numbers for the year, he notes.
Yields and rates received an additional boost in September and October from the exit of a number of freighter flights from the region as airlines chased higher rates out of Asia. The list of carriers that have reduced their freighter footprint in the region includes Qatar Airways, Martinair and Cargolux.
“The market shifted substantially during the third quarter, with several European and Middle Eastern carriers shifting down on core routes from Latin America and repositioning this capacity into Asia to support the demands of e-commerce. This is an exceptional development which also has an impact on the air cargo industry in Latin America,” observes John McDonald, executive vice-president and head of airfreight, region Americas at DB Schenker.
LATAM Cargo, the largest carrier in the region, has pushed into this gap, stepping up its B767 freighter flights to Brussels in late October from previously four to 12 weekly frequencies, turning the Belgian capital into its main European hub.
At the beginning of November Turkish Airlines (THY) stepped into the gap with a weekly B777F flight from its Istanbul base via Liege to Miami, where it interlines with Avianca Cargo. This is a joint operation of the two carriers, borne out of a partnership agreement the pair signed last year. Avianca moves traffic between Miami and the region for THY and gets space on the partner’s freighter across the Atlantic.
Elias says that Avianca is using the space to sell service to Europe, supplementing its passenger flights to Madrid, Barcelona, London and Paris. It currently does not operate freighters across the Atlantic.
The airline took delivery of a converted A330 freighter in July and is due to get two more originally marked for delivery this year but now expected to come on stream in the first and second quarters of 2025. Avianca is using them to consolidate its flights to its US hubs (with Los Angeles mostly served by Mexican partner Aerounion).
“I’m short on fleet today,” remarks Elias, adding that the shortage of available aircraft is affecting both passenger and freighter operations. He expects this problem to persist for the coming one or two years.
Fehring in Rio shares his frustration. He has been waiting for the launch of planned passenger flights by Qatar Airways and THY, which have been postponed owing to lack of available aircraft, and it remains unclear when they will get under way.
In some markets capacity is a challenge for exports, reports Lorena Sandoval, managing director Florida, Caribbean and Latin America at American Airlines Cargo. “But there’s also overcapacity in some markets, especially in the deep south. Airlines from anywhere are flying especially to Sao Paulo and Buenos Aires. There’s been a big increase in nonstop flights,” she says.
American itself is ramping up its flights into Latin America this winter. It started service between Rio and Dallas/Fort Worth and boosted flights on the Miami-Buenos Aires and Rio-New York sectors. In addition it has slotted in seasonal flights until March from Santiago and Buenos Aires to Dallas as well as a daily Miami-Montevideo operation.
Stable volumes
IATA statistics for September show a 20.9% increase in Latin American airlines’ cargo ton-kilometre count year on year, by a distance the biggest expansion shown by airlines for that month.
While e-commerce has boosted inbound flows, especially to Brazil, traffic of other commodities has been relatively stable, Elias reports.
“Our volumes have remained constant year on year in the region as a whole. Brazil and Argentina are performing exceptionally well, with the former somewhat surprising given then inflationary pressure that the country has been experiencing in recent years,” remarks McDonald.
Lufthansa Cargo has seen strong inbound flows especially to Mexico and the east coast, whereas exports have been stronger on the west coast. The airline has stepped up passenger flights to Sao Paulo as well as Punta Cana and Cancun and increased its freighter service to Mexico.
“The automotive and pharma industries are recovering, which holds good potential, especially for the import business. Besides this, we see positive signs for the perishable season from November to April,” a company spokesperson commented.
Perishables, which constitute 70-80% of outbound traffic, have shown some ups and downs this year. Lack of rain in Ecuador and Colombia affected flower production, which failed to meet demand for Mother’s Day, Sandoval says.
“We hear from some perishables producers that they are seeing an impact of global warming,” she reports, adding that this has made it difficult to make accurate predictions about volumes.
“It has been very dynamic. We have to be more strategic with customers,” she says.
While salmon exports from Chile have been steady throughout the year, some commodities have been very strong, such as okra production in Central America, which American carries chiefly to London. Asparagus volumes out of Peru have been strong, and cherry output is booming, Sandoval says.
In dry cargo, textiles from Central America and auto parts have picked up, but these tend to be seasonal flows. RIOgaleao, on the other hand, has enjoyed a steady flow of aircraft engines and parts, which grew 21% this year in terms of value. Much of this is due to a large engine overhaul facility of GE Aerospace, which drew in over 500 engines in 2023. The airport’s oil and gas-related traffic has grown 18%, as more than 90% of Brazil’s production is in the region.
These flows have been helped by the start of a weekly Boeing 747 freighter service by Atlas Air. The plane’s noseloading capability has been crucial for these industries, says Fehring, who hopes for a second weekly frequency.
Pharma drive traffic
For LACC the pharma sector remains a major driver of traffic, with a boost from Glaxo Smith Kline, which started its regional distribution activities from Montevideo, shipping over two million doses of vaccines to Brazil and more than one million to Chile.
“It’s been ramping up nicely,” says Lema. LACC is having talks with several other pharma companies that are studying the feasibility of mounting similar activities at the airport, two of which are in an advanced discussion stage, he reports.
Avianca Cargo has underscored its focus on special products with certification of all four CEIV programmes and is now looking at IATA’s DG AutoCheck solution. “We see them as an enabler for setting standards for the industry,” says Elias.
He also has a strong focus on leveraging technology in order to enhance customer experience, from tracking to online bookings, where Avianca now uses most major platforms.
One airport that could do with a major upgrade in the customer experience is Sao Paulo’s Guarulhos airport, the largest air cargo gateway in Latin America. Congestion there reached alarming dimensions in late October, with cargo warehouses overflowing and rows of pallets lined up in yards and on aircraft parking positions.
Several airline organisations, including the Latin American arm of IATA, wrote a letter to the federal Minister for Ports and Airports warning that the problems had created “an unsustainable and chaotic situation with imminent risk of collapse of air operations and impacts on safety in the main Brazil airport”.
They called for an embargo on dry cargo for an initial period of at least five days, the establishment of a task force to remedy the situation and the authorisation of bonded trucking to take cargo to other airports for clearance.
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