Fernando Poitevin, the COO of LAN Cargo, has worked with LAN Airlines since 2005. He sat down with Air Cargo World in LAN’s Miami office to talk about airfreight in Latin America and how LAN’s merger with TAM in 2012 affects its cargo operation.
What is the outlook of the air cargo industry worldwide?
The outlook is promising. In the last two years, the market has been down, and now it’s almost flat. But we expect with the growth of the economy in Latin America, which is where we are basically operating, the volumes will at some point need to pick up. We have the Olympics in Brazil; we have the World Cup in Brazil. We base an important part of our operation on the growth of Brazil, which is our biggest market, biggest economy in the region. And we know that we will have [with] LATAM, the capacity and the assets to meet the increase in the demand. On one side, we have the passenger operation. You know that LATAM has approximately 320 aircraft today and has orders for more than 250 aircraft. Therefore, those aircraft that are going to be coming to the passenger operation are going to be at the same time giving us the capacity to move the cargo in the region. Today, for you to know, we move approximately 50 percent of the cargo in the freighter aircraft and 50 percent of our cargo in the passenger aircraft. And the second alternative we have, which is the one that we always actuate, is to continue growing our freighter operation – but not at this time. At this time, we are a lot more focused on fulfilling the growth and actuating the growth we are seeking, basically using the passenger fleet more efficiently. Why? Because we just merged with TAM, as you know, and the TAM passenger network fleet is underutilized cargo-wise. Load factors in our passenger aircraft and load in TAM are low, or lower than what we are accustomed to. And we know that with this new network that we have, we too can provide much more and better connections to our customers and transit times. We will be able to fill those circuits and achieve the load factors that we need.
What are the ramifications of the ongoing emissions debate for air cargo?
They’re similar to what happens with passenger. We have been, in the last five years, investing heavily in order to reduce carbon emissions, and the main and most important thing we do is to make sure we have a more-than-efficient fleet. We just made a very important investment six months ago in our cargo fleet. We introduced two new 777s to our fleet, so today, we have four, which have 15 percent lower emissions level than the other aircraft we used to fly. Therefore, we keep working on doing the business as green as we can. And that’s not the only initiative. We’re also working on an initiative where we just made an investment of more than $10 million in ultra-light containers. Those have a very positive and very interesting impact on the environment as well…So we know we need to work. What’s going to happen in terms of the cargo emissions fees and taxes that we are going to be receiving? I think it’s still unclear. What happened with European policy was somewhat withdrawn and went back. Today, it’s kind of standby. So we don’t know what’s going to happen. We know we need to work to make sure we have the most efficient operation we can have.
What are some of the latest air cargo technology trends that you’re seeing?
What we are seeing in the industry is that, as I said before, the wide-body passenger fleet has grown considerably and will keep growing in the future, and that somehow is taking some of the capacity that the only-freighter fleet used to serve. Therefore, today, freighter-only companies or either the carriers that have both freighter and passenger operations are worried and, I would say, looking very carefully at the size of the freighter-only fleet that they need to have to serve the market because the cost of the freighter fleet is very high compared to the cost of the passenger fleet for the transportation of the cargo. And that is because…the passenger fleet, it’s really paying the trip with the passengers. Therefore, there’s a tendency in the industry to assume that the cost of the passenger fleet are sunk already, and therefore the prices are lower there, and that is very challenging for the freighter operation. I would say that’s the most important trend that I’m seeing in terms of making the companies reanalyze and reevaluate the growth strategy fleet-wise.
How do you see the role of E-freight in the coming years?
That’s another key initiative for us. Again, we need to be more efficient. We need to provide a better service to our clients, and we need to have a green operation. E-freight definitely addresses the three of them. We are very committed to the initiative. We are working hard with the customers. We are working as well hard with the authorities, but the trip is long. The difficulties we are facing are important. Fortunately, recently IATA has been advancing on having a comprehensive agreement to meet both the freight forwarders and the airline industries, and I think that that could be a good step to make the initiative advance quicker, I would say, in the industry. We know we need to get there – that’s critical for us. But it hasn’t been easy.
What specific steps are you taking to this initiative?
We are working already on the e-Airway Bill just to make it a little bit easier. Today, we already have e-Airway Bill in Chile, and we are working now to expand it to other countries.