The question for airlines and forwarders is not why they should increase air cargo infrastructure in Latin America. The question is why wouldn’t they?
Buoyed by high prices for the commodities they export, the major nations of Latin America have enjoyed strong growth in recent years, but that slowed down in 2014. Last year, the aggregate growth rate for GDPs in the region was just 1.1 percent, the slowest rate since 2009, according to the United Nations Economic Commission for Latin America and the Caribbean (ECLAC). The overall sluggish growth in the region resulted from slow or negative growth in some of its largest economies: Argentina (-0.2%), Venezuela (-3.0%), Brazil (0.2%) and Mexico (2.1%).
However, all is not sullen in the Americas. Boeing has projected that the economies of the Latin America region are forecast to grow an average of 3.8 percent per year between 2013 and 2033. The South American economy is projected to lead with an average annual growth rate of 3.9 percent over the forecast period. Brazil is expected to remain the region’s largest economy, with forecast growth of 3.9 percent per year, accounting for 58.4 percent of South America’s total GDP by 2033.
With the scope for potential being huge, a number of players in the air freight industry are betting big on the region. In a recent development, FedEx’s growing freight forwarding and customs brokerage arm is expanding its services connecting to Latin America to tap the expansion of automotive, aircraft and electronics industries.
FedEx Trade Networks has enhanced shipping options on trade lanes connecting Frankfurt and Hong Kong to Mexico City and Guadalajara; Frankfurt to Sao Paulo and Campinas, Brazil; and Dallas to Mexico City, Guadalajara and Monterrey, Mexico. The new options build on the company’s 2013 expansion of its presence and service capabilities in Latin America through the opening of new offices, forging alliances with regional service providers and launching new freight forwarder options.
“We’re committed to supporting our customers with more shipping options to Latin America to meet their growing business needs,” said John Gazitua, managing director, FedEx Trade Networks, Latin America-Caribbean region in a statement. “Mexico and Brazil are two strong examples of key markets for the automotive, aircraft and electronic industries, and we are very focused on providing total end-to-end international freight forwarding solutions and greater market access in the area,” he added.
Serving Latin America’s rugged geography, LAN CARGO, the cargo division of LATAM Airlines Group, has built up a stable of twelve 767-300Fs - the largest non-integrator 767F fleet - and supplemented them with leased 747Fs and more recently its own 777Fs.
In his assessment of the Latin American market, Matias Lagos, LAN Cargo’s vice president-sales, South America, holds positive expectations in the medium term. “On the one hand, exports from Latin America to the United States have developed sustainably during the last few years, thanks to the momentum provided by the growth of the perishable products industry in Brazil, Colombia, Chile, Ecuador and Peru. The strengthening of the dollar and the recovery of economic activity and demand in the U.S. have also helped. We believe that these conditions will remain in place and will promote export growth during the next few years.”
The future of imports is more difficult to predict, Lagos feels. “Even if the last couple of years have been difficult as a consequence of the economic slowdown and the decline in exchange rates, we believe that, gradually, markets will start to recover and return to reasonable growth rates. Regional and domestic markets, where our network allows for a privileged position, have also developed considerably.”
A combination of freighters and wide and narrow-body passenger aircraft allows LAN Cargo to offer customers the possibility of connecting 126 cities in Latin America with the main cities in the United States, Europe, Oceania and Asia. Talking about increasing connectivity, Lagos adds, “In January, we opened a new route that connects Guarulhos with Cancun. Also, we will add the Brasilia-Orlando route in June and the Guarulhos-Barcelona route in October.”
In other news, TAM Cargo inaugurated its new cargo terminal — the result of R$38 million in investment. Intended exclusively for domestic cargo, the new terminal is the largest owned by LATAM Group in Brazil. The terminal has been restructured and provides new services that represent a significant improvement, considering that the previous one, also located in the vicinity of the airport, had a total surface area of 9,800 m². This is the largest and most modern cargo terminal that LATAM Airlines Group owns in Brazil, with a capacity to handle more than 1,000 tonnes of cargo daily.
Meanwhile, LAN Cargo has been working to improve its infrastructure, mainly at connection hubs and regarding perishable cargo capacity. “We recently inaugurated our domestic cargo warehouse at Guarulhos in Sao Paulo and projected investments for 2015 will be of approximately US$10 million,” added Lagos.
From this summer, IAG Cargo is significantly boosting its Latin America network by launching a new route into Colombia and reopening its route into Cuba. The new services will connect Cali and Medellín in Colombia and Havana in Cuba to IAG Cargo’s worldwide network of 350 destinations, and will bring the total of IAG Cargo gateways in Latin America to 19. Additionally, IAG Cargo is increasing the number of flights it offers to and from Santo Domingo in the Dominican Republic from five flights a week to daily, effective from April 1, 2015.
According to Steve Gunning, CEO at IAG Cargo, “From pharmaceuticals to perishables Latin America is fast emerging as one of the most important international trade centres – both for production and consumption. From our Madrid hub we have already been able to offer businesses in Latin America and beyond some of the best connectivity options in the world, linking up markets from Asia Pacific all the way across Europe and into Latin America. These new services further enhance our excellent network proposition to and from this region and will be an important enabler of Latin America trade.”
IAG Cargo expects to see good export flows of flowers and fruits from Cali and Medellín and imports including books and clothes. Cuba’s famous tobacco products, meanwhile, are expected to be amongst the main exports out of Havana, while imports should comprise perishables and mechanical goods. Havana is also an important stopover for the transhipment of goods including flowers, fruits and textiles. On the Santo Domingo route meanwhile, IAG Cargo will continue to support the strong flows of general freight into the Dominican Republic and fruit and vegetables exiting it. Through specialist products such as Constant Fresh (perishables) and Prioritise (express) IAG Cargo is well placed to support these flows, offering businesses in the region high-quality services that get goods to market on time and in optimum condition.
Earlier in 2014, Qatar Airways made its debut in the Latin American market with a service to Mexico. The Qatari carrier launched a twice-weekly Boeing 777 freighter service between Doha’s Hammad International airport and Mexico City’s Licenciado Benito Juarez International Airport.
A big focus in the last year and a half in the region has been reconfiguring the freighter network to work more closely with longhaul belly capacity. One example of this is a feeder freighter operated by MAS Air of Mexico (also part of the LATAM group) from Los Angeles, which feeds into TAM and LAN flights out of Mexico. Meanwhile, $30million has been spent on upgrading hub facilities in Lima, Guarulhos (Sao Paulo), Manaus, Miami and Santiago to enable smoother connections between freighters and belly - for example to keep perishables cool in transit.