The Latin American market is making a remarkably huge contribution to Lufthansa Cargo’s high net sales, Carsten Hernig, Head of Latin America & Caribbean, confirms. For months, there has been unprecedented demand for main deck capacity both westbound and eastbound to keep supply chains running on routes across the Atlantic. This increased demand led to rising prices.
Mr Hernig does not mention any concrete earnings but confirms that Lufthansa Cargo’s Latin American business is performing extremely well. Which is kind of an understatement, given that sales
have been shooting through the roof these past weeks and months. Hello, El Dorado! At first sight, however, a very ordinary development. “When demand for transport capacity outgrows supplies,
prices tend to rise,” the executive says, recalling universal market rules. However, on second glance, there are some peculiarities driving the business.
Take Mexico City, where the carrier runs a CEIV-certified terminal subsidiary at the airport, able to accommodate pharmaceuticals and other temperature critical goods. “Apart from us, there is only one other local supplier operating a CEIV-licensed cargo terminal, which has a very positive impact on our transports, throughputs, and revenues.”
Another competitive advantage, he says, is Lufthansa Cargo's staffing policy. Instead of cooperating with local sales agents, the carrier relies on its own personnel to manage its day-to-day business. In Mexico, 20 staff stand on the payroll, in Brazil it is 30, followed by Argentina with 15 employees. Uruguay is the only freighter destination in Latin America where Lufthansa Cargo relies on the support of local sales and handling partners.
Dense road feeder network
“Our own colleagues are experienced, skilled, and know the local markets inside and out, which gives us great flexibility of action.” This is paramount, as the volume of shipments, as well as the composition of the products and the quantities to be uplifted are constantly changing. They also look after the extensive road feeder network that Lufthansa Cargo operates in Latin America, which includes offline stations such as Monterey in Mexico, Porto Alegre and Rio de Janeiro in Brazil, to name but a few. In addition, they manage transits based on interline agreements with local carriers, thus widening Lufthansa Cargo’s network throughout Latin America.
CFG: Brazil is one of the hotspots for Covid-19 infections. In what way has the pandemic affected you, your family, and your job?
CH: It is true that the number of victims is very high, but, personally, we have come through the pandemic quite well so far. However, the schools have been closed since March 2020 and just reopened last week. This has been very stressful for our children and also for us as a family.
Because of many precarious working conditions and probably also for political reasons, there was no complete lockdown in Brazil - in contrast to Argentina - to contain the spread of the virus. At least the state has given people a minimum level of financial support, which has gone completely unmentioned in the European press. The option for short-time work, which did not exist here before, has also been introduced.
CFG: What impact has the pandemic had on the Brazilian economy?
CH: The hundred-million-dollar question! Currently it is still unclear whether the economic slump is massive or only a small dent. What is astonishing, is the fact that Brazil’s export rate has grown in 2020 despite Covid-19, although this does not apply to air freight. Combined with a 50% devaluation of the national currency, this has made Brazilian products such as car parts or industrial goods manufactured here more competitive on the world market, along with pharmaceutical products stemming from local production and sold on international markets. Speaking of pharmaceuticals, Chinese, Russian, and Indian vaccines are being flown into Latin America on a large scale. As a result, the vaccination rate is increasing very rapidly and is surpassed only by Chile, where a high number of people have already been vaccinated against Corona.
CFG: Apart from expertise, what are the decisive factors for success as a cargo airline in the Latin American market?
CH: Of course, know-how and market knowledge are particularly important. But that is not enough. You have to understand the culture of a country, the thinking and collective behavior of its people. Brazilians, for instance, have a very life-affirming attitude that makes contacts easier, which distinguishes them from many Europeans.
Capacity offering of 2,000 tons per week
Coming back to air freight, Carsten Hernig says that since the beginning of this year, Lufthansa Cargo has been operating only B777Fs on routes to and from Latin America, replacing the MD-11Fs that were still being utilized on some legs. There, the German cargo crane concentrates on 4 submarkets: Mexico (Mexico City, Guadalajara), Brazil (Viracopos, Curitiba, Recife), Argentina (Buenos Aires), and Uruguay (Montevideo). In total, that amounts to 9 freighter flights per week, which corresponds to a capacity offer of almost 2,000 tons, east- and westbound flights combined. “This does not compensate for the loss of lower deck capacity due to the Corona-related thinning out of passenger traffic, but it is a substantial offering to our customers to maintain their intercontinental supply chains,” the manager holds.
This is complemented by preighter operations which ease capacity shortages to a certain degree. In addition to Lufthansa Cargo, preighters have also been deployed by LH Group member Swiss WorldCargo. “The Swiss colleagues do this very effectively, for example, with flights to destinations such as Lima or Chile,” Mr Hernig says.
Exports on the go
Asked about the import-export-ratio, Mr. Hernig states that imports of European industrial goods continue to dominate the flow of cargo as was already the case before the outbreak of the pandemic. Simultaneously, exports of Brazilian and Mexican produce have picked up remarkably of late, consisting primarily of perishables, but with automotive parts, pharmaceuticals, and other industrial items gaining new relevance. “In Argentina, it’s a different ball game: There, one of our main commodities is riding horses requested by European breeders and equestrians. This is a very special market in which we are very well positioned thanks to our extensive experience with animal transports.”
Although imports to Latin America dominate – in particular: machinery, tools, pharmaceuticals, and other industrial goods – exports are also running surprisingly well, the manager concludes.
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