april2023 - 14

Industry Expert Column
with investments to expand capacity. Carriers have increased
flight frequencies across all regions and are adding new freight
schedules, according to DHL.
Operators are also expanding their footprints. DHL Express,
for instance, is building a new gateway facility at Munich Airport
that's nearly seven times larger than their previous space. The
company is also growing its partnership with Canadian carrier
Cargojet, adding five Boeing 757 Freighters to the dozen that Cargojet
already operates to service DHL's global aviation network.
Despite the cloudy economic outlook,
carriers and freight forwarders with an eye
on long-term growth are moving ahead
with investments to expand capacity.
medium-widebody 767 freighters are well-suited for certain
markets in South America, where it's less efficient to use large
aircraft on some cargo routes. That fleet expansion has allowed
LATAM to design and implement tailor-made long-term solutions
for strategic customers on less-typical routes by leveraging the
fuel-efficiency and optimal size of those aircraft.
That expansion will allow LATAM and its cargo subsidiaries
to improve connectivity between North and South America and
strengthen capacity from Colombia and Ecuador - key routes for
that region's flower industry. Additional flights will also support
Chilean salmon exports and boost capacity between Brazil and
markets in North America and Europe.
Challenges on the Horizon
Passenger-to-freighter conversions are a critical component
of capacity-building strategies for LATAM and other operators
amid limited production of new freighters by Boeing and Airbus.
Competition for conversion slots is intense and the availability of
feedstock for that work presents another potential bottleneck.
Operators scouting for those planes may have to wait longer
or pay more than they expected. Labor shortages tied to the
pandemic can also hamper those efforts - for example, if
there aren't enough staffers on shift for maintenance painting
or other work.
Other areas to watch include the shifting of some cargo
Newer entrants are also deepening their designs on the airfreight
market. Ocean shipping giant Maersk continues to scale
up its new air cargo business, adding a second Chicago-area
hub and launching two weekly U.S.-Korea flights. Also Amazon
has bolstered its logistics network by launching a European air
cargo network, including a regional air hub at Leipzig/Halle Airport
in Germany.
Established operators like DHL see the above developments
as less of a threat than an opportunity, particularly when it
comes to boosting network flexibility. For example, DHL has
purchased cargo and belly space from other cargo and passenger
operators with room to spare.
Evolving Outlook in Latin America
The Latin American airfreight landscape offers a somewhat
more upbeat picture versus the pre-pandemic environment.
While air cargo demand in the region was lower in January
and in the fourth quarter of 2022 compared to year-ago levels,
numbers are still higher than in 2019, according to WorldACD.
Demand could increase further as a result of China's relaxation
of COVID-19 restrictions and as shifting macroeconomic
conditions increase the likelihood of a " soft landing " for the
global economy.
LATAM Cargo doubled down on its fleet after shifts during
COVID-19 demonstrated the importance of freight revenue to
the overall business. Before the pandemic, LATAM Cargo had
a fleet of 11 Boeing 767 freighters. By adding another 10 Boeing
converted freighters to the fleet, LATAM plans to nearly double
its capacity, with up to 21 aircraft by the end of 2023. These
14 || Ground Support Worldwide || April 2023
volumes from air freight to ocean as container shipping costs
decrease from COVID-era highs and products that shippers had
been flying to avoid transport delays move back to more affordable,
but slower, modes of transport. However, some freighter
capacity could be removed from the market as rising passenger
travel demand expands the amount of available belly space -
potentially crimping the profitability of freight-only cargo operations.
Operators are also keeping an eye on labor talks at U.S.
West Coast ports, which could increase air cargo demand if an
impasse blocks the flow of imports through those gateways.
While the pandemic-era logistics boom may be receding,
improving global economic forecasts could potentially bring bluer-than-expected
skies for the air cargo market as China's economy
reopens and US inflation moderates.
ABOUT THE AUTHORS
FIONA HENDERSON
Fiona Henderson is a partner with global law firm Norton Rose
Fulbright. Based in New York, she is a banking and finance lawyer
with extensive aviation sector experience advising lenders,
investors, issuers and operating lessors on cross-border financing
and sale and leasing transactions.
JEFFREY WEEKS
Jeffrey Weeks is senior aviation legal counsel at DHL Worldwide,
where he provides legal and general commercial advice to DHL
airlines and business groups across jurisdictions including Europe,
Africa, Asia and North America.
JORGE GALVEZ
Jorge Galvez is senior vice president of marketing and development
for LATAM Cargo at LATAM Airlines.
PHOTO COURTESY OF THE AUTHORS
april2023

Table of Contents for the Digital Edition of april2023
