September 1, 2023

Avianca’s new cargo focus serves it well in soft market

[ad_1]

MIAMI — A focus on network expansion and multiple initiatives to improve customer service appears to be paying off for Avianca’s cargo division, which outperformed the vast majority of the air cargo sector in the first half amid an industrywide downturn.

While most airlines saw cargo business tumble by a third to a half during the period, the Colombia-based carrier’s cargo revenues only contracted 17% from a year ago to $326 million. Sales were 30% higher than budgeted because management anticipated the market normalizing after a supercharged two years of freight demand associated with pandemic distortions of the global economy. 

In 2022, Avianca transported more than 450,000 tons of cargo on freighters and 128 passenger jets, including large Boeing 787s. More than 50% of the airline’s transported cargo is flowers, fruit, vegetables, meat and other perishable goods.

Avianca Cargo currently operates six factory-built Airbus A330-200 cargo jets, with access to an additional five freighters operated by Mexico-based cargo subsidiary AeroUnion. It also has four leased A330-200 and A330-300 converted freighters on the way. One of each is expected to arrive in the first half of 2024 and the other two between the fourth quarter of 2024 and the first half of 2025. 

Without any fleet additions, Avianca Cargo since last year was able to grow capacity 30% on routes between its Miami hub and Latin America by redeploying aircraft to higher areas of demand and utilizing them more.

Earlier this month, the carrier introduced a weekly service between Miami and Vitoria, the fifth freighter destination in Brazil. The service reduces transit time by eliminating the need for a truck connection to Rio de Janeiro or Sao Paulo. Rhenus Logistics is using the flights to move high-tech goods to Brazil for a major client. Ceva Logistics said it is exporting fruit and fish from Vitoria to the U.S. and Europe via Miami. Avianca in the spring launched a twice-weekly route between Quito, Ecuador, and Los Angeles with a stop in Bogota, Colombia, adding another North American port of entry for flower, fruit and fish shipments. Three-quarters of Avianca’s exports from Ecuador are flowers.

Avianca’s strategy to make cargo a priority and invest in more freighters began 20 months ago as the company emerged from bankruptcy with a stronger balance sheet. At the time, the airfreight market was red hot because of ocean, rail, warehousing and manufacturing backlogs. Business has cooled off for more than a year, but Oliva said the airline is attracting customers with better network offerings, infrastructure and service.

“We are really proving that we are serious about our cargo strategy. So customers are tendering their cargo. We have a lot of room to grow still, regardless of the softness,” Avianca Cargo CEO Gabriel Oliva said in an early June interview at the Cargo Network Services conference here.

The Latin American carrier in April agreed to explore avenues of collaboration with Turkish Cargo, including the possibility of capacity sharing on each other’s freighters. The two airlines currently have interline agreements for cargo carried on passenger jets, similar to code sharing in the passenger world, which allows logistics companies to book a shipment with one carrier that will get transferred at an intermediate airport and move with the partner airline on a single airway bill. Sharing space on freighters would expand Avianca’s reach in Asia and Europe, while Turkish customers would have more connections to South America.

Oliva told FreightWaves that the current focus is on harmonizing digital systems, operations and service levels, including a standard operating procedure for pharmaceutical products, to improve the value proposition for customers. The company has said it expects the Turkish cooperation to initially drive 10,000 tons of annual incremental volume and eventually lead to block space agreements.

Avianca Cargo is investing in its airport facilities, too, revamping warehouses to make the layout more usable, expanding refrigerated rooms in Medellin, and adding roller beds in Bogota and Miami that can move palletized cargo between handling equipment, as well as dedicated dock doors. 

Systems quality and innovation

Beyond physical assets, Avianca Cargo is striving to raise the bar on its processes, efficiencies and service levels. 

Management is participating in three freight marketplaces — Freightos, cargo.one and CargoAI — for selling cargo space with spot pricing and instant booking. Many airlines only use one neutral site or don’t participate at all yet. And in August, Avianca Cargo joined Airblox, an online hub that enables freight forwarders to compare capacity from multiple airlines and electronically book blocks of space for a period of time with static rates as opposed to quotes for immediate shipments.

The International Air Transport Association last spring certified Avianca’s Miami and Los Angeles stations for meeting top standards in the safe handling and transport of lithium ion batteries, and the Santiago, Chile, station for excellence in perishable freight. The accreditations, which demonstrate the company has implemented a quality management system, follow previous certifications at the headquarters and station levels for perishables, pharmaceuticals and lithium batteries.

Avianca expects the Fresh designation, which requires having cold-storage facilities, will enable it to attract more salmon shipments from Chile because customers can be confident their shipments will maintain maximum freshness. Other practices it follows to maintain shipment temperatures include measuring facility temperatures, using data loggers in containers, setting maximum times that perishables can be exposed to noncontrolled temperatures, temperature mapping in controlled zones and auditing ground handling.

Avianca in July also joined Cargo iQ, an organization that provides metrics and global quality standards for airlines to close data gaps, protect shipment quality and deliver on time. The goal is for partners and suppliers to adhere to the same standards.

More FreightWaves/American Shipper stories by Eric Kulisch.

Subscribe to the American Shipper Air newsletter.

Avianca bankruptcy exit fuels cargo expansion

NOVEMBER 7-9, 2023 • CHATTANOOGA, TN • IN-PERSON EVENT

The second annual F3: Future of Freight Festival will be held in Chattanooga, “The Scenic City,” this November. F3 combines innovation and entertainment — featuring live demos, industry experts discussing freight market trends for 2024, afternoon networking events, and Grammy Award-winning musicians performing in the evenings amidst the cool Appalachian fall weather.


[ad_2]
Source link
In this article:
Share on social media:
Facebook
Twitter
LinkedIn
Telegram