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The International Air Transport Association (IATA) data for April continues to paint a dismal picture for the global air cargo market. Year-to-date volumes were down 4.7 percent while available capacity increased 2.6 percent. The bright spot, however, has been the Latin American market, where for the past three months, volumes have been on the rise. But, as IATA noted in its recent report, ongoing and political uncertainties in the region present challenges for the air cargo industry.
Brazil, the largest Latin American economy, emerged from a crippling recession in 2016. Since then, it has been touch-and-go financially for the country. This year looks to be a continuation of uncertainty for Brazil with a new President who came into power on January 1; the country reported a first quarter economic contraction of 0.2 percent. For 2019, the GDP growth forecast for Brazil has been cut from 2.6 percent to 1.2 percent. There are, however, some bright spots according to a Financial Times article – there are signs of growth and investments in the private sector with corporate earnings healthy across many sectors.
Latin American-based air cargo carriers have also had their ups and downs. As an example, first quarter results from the region's largest carrier, Chile's LATAM Airlines Group, showed steep declines in year-over-year revenue but an almost 2.0 percent increase in volume. Exports such as salmon shipped from Chile led much of this growth.
The second quarter may show similar volume results as the carrier reported healthy export volumes of flowers. LATAM noted that for the three weeks before Mother's Day (May 12), the demand for flowers increased 90 percent, which translated to more than 7,400 tonnes of fresh flowers being shipped on the carrier.
In addition, LATAM Cargo signed an agreement with CSafe Global, a provider of active and passive temperature-controlled packaging solutions, to offer more options to customers shipping temperature-sensitive pharmaceuticals. The carrier achieved CEIV Pharma certification in 2017, the first airline on the American continent to do so.
In fact, the pharmaceutical sector is an important one for LATAM Cargo. In 2018, the carrier opened a dedicated pharmaceutical hub in Denmark. LATAM Cargo cited "strong demand" for pharmaceutical shipping on routes from Europe to Latin America that resulted in the opening of its tenth hub. From the hub, LATAM Cargo feeds the carrier's following services: Amsterdam-Viracopos-Santiago; Brussels-Montevideo; Amsterdam-Brasilia; and Frankfurt-Guarulhos.
Perishables such as food items also make up a large percentage of LATAM Cargo's volume – in fact, almost half of its total volume. In January 2019, LATAM announced a new direct route between Santiago, Chile and Chicago to not only expand its coverage of the U.S. market but to improve connectivity from Latin America to Asia.
In Chicago, LATAM Cargo's facilities will include 465 square meters of cold storage, which may be expanded if necessary, to minimize cargo exposure while in transit. Chile is the largest salmon exporter in Latin America, with a growing demand from the Asian market. Because of its trade importance, LATAM Cargo introduced Perishable-Salmon, which was designed to transport this product under strict exposure control. With this route, the product will have six points of entry into the United States and three connection points on its way to Asia. LATAM Cargo also plans to increase its weekly capacity to carry salmon to Asia by an additional 100 tonnes.
Representing only 2.6 percent of the global air cargo market, the Latin American market has always been described as ‘promising.' However, it is a region of constant flux as it tries to shed its status as an emerging market. Attempts to expand and privatize airports continue, but it remains a region lacking in meaningful infrastructure.
To achieve profitable air volume growth, the region will need to reduce bureaucratic red tape within each country's government, improve infrastructure and invest in private enterprises. Until then, Latin America will remain only ‘promising.'
Image Sourced by Pixabay
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