Still an uphill climb ahead
While it’s tempting for carriers to get excited about potential for a healthier air cargo market, there are some constraints to the profit optimization equation that are showing themselves to be real roadblocks. LATAM’s Bianchi outlined the main problems as a trifecta: “Infrastructure, warehousing, and eventually slots… are becoming an issue, and that’s forcing us to rethink, to some extent, how to route.”
One of the elements that has perpetuated the slow economic growth in South America is the lag in infrastructure development in many countries. “In general, the infrastructure we use in South America needs improvement,” Bianchi continued. “Some of the airports are not up to standard. We are working with them to meet requirements of our customers. Having the right infrastructure is critical to get the cool chain done correctly.”
Rio’s GIG, one of the major air hubs in Brazil, is setting the bar for the future of infrastructure development in the region. “We have an incentive as an airport operator to invest in our cargo infrastructure because the cargo business in Brazil represents anything between 15 and 20 percent of the airport revenue, which is very high,” said Fehring.
Avianca, a major carrier in the region, said government subsidies were part of the recent success. The support “has been felt through Latin America, however, domestic policies have affected its development,” Avianca’s managing director, Andres Osorio, said to Air Cargo World.
Limited slot capacity and slow customs procedures are also throwing a wrench into capacity optimization for airlines in the region, with Mexico City International Airport (MEX) the most infamous. “As a freighter company in Mexico, the biggest challenge is a lack of slots at the airport. You need to maximize aircraft utilization,” said Luis Fernando Alvarado Rizzo, general director of Mexican carrier AeroUnion.
“Unfortunately, it’s becoming challenging to do that at MEX because you need at least two flights a day per aircraft,” Rizzo said. “And if slots are limited, you end up doing just one flight a day.” As if coordinating the fast transportation of highly perishable cargo is not challenging enough, throw a capacity constraint on top of it.
Industry members also emphasize the complexity associated with customs procedures between Latin American countries and trading partners around the world. Depending on the two parties involved and in which direction the trade is flowing, procedures can be either fairly simple and expedient, or complex and sluggish – the latter of which is not acceptable for perishable cargo. Many countries that are recipients of Latin American perishables have strict requirements surrounding their import procedures due to produce’s capacity to carry disease.
“Customs in Mexico are extremely complicated; customs in Colombia are very easy; customs in Brazil are very complicated; customs in Argentina are impossible,” de Narvaez said, highlighting the variation from country to country. Atlas Air operates a large Latin American network, and Michael Steen, the company’s executive vice president and chief commercial officer, said that customs procedures can cause three- to six-day delays in expediting freight.
Jörn Schmersahl, CEO of Rhenus’ Air and Ocean division for Europe and the Americas, offers a forwarder’s perspective, saying the company sees a “trend and necessity to optimize processes on customs clearance. Especially for European businesses, imports into Brazil can be challenging due to very specific customs regulations.”
For example, duties and taxes, which are often quite steep, must be prepaid before a shipment is sent to Brazil, said Azul Cargo’s Frota. However, “other couriers receive cargo in Brazil, clear, pay and then ask for reimbursement and time of delivery,” he explained. “This is often a problem,” he added, as these costs sometimes surprise customers.
Getting those Brazilian papayas from GIG in Rio to the mouths of eager Chinese consumers before they spoil is a significant challenge. While there is still a long way to go in addressing constraints experienced by cargo carriers, like slot capacity issues and poor infrastructure, there’s an industry consensus that the future of airfreight in Latin America is bright. With economic revival, investments in cargo facilities, and growing interest from international consumers of produce, connecting Latin America to the rest of the world is becoming an increasingly enticing prospect.
We won’t be surprised to see fresh Brazilian papayas offered in grocery stores in the farthest reaches of the world come winter.4 - Readers Like This Post