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LATAM Open to Exclusive E-Commerce Cargo Partnership
A year on, in countries that are still struggling to contain the spread of the illness, the effects of the COVID-19 pandemic continue haunting the airline industry and damaging its results by shattering passenger demand. This way, companies keep trying to seek solutions, especially in the cargo sector, where demand has been resilient throughout 2020.
In South America, the trend is not different. In an article published by Reuters this week, LATAM Airlines Group, the largest airline conglomerate in Latin America, confirmed it is open to “signing an exclusive contract with an e-commerce operator,” as it looks to bolster its cargo demand going forward.
Andrés Bianchi, the chief executive officer of LATAM’s cargo division, has also discussed the possibility of developing a cargo operation model “where different players who want to participate in e-commerce have access to capacity and use our network,” he told Reuters.
In recent years — and especially after the pandemic started, prompting people to stay at home — e-commerce operators have been aggressively pushing into the South American markets, benefitting from air cargo deliveries in particular. In November, for instance, Buenos Aires-based MercadoLibre hired four aircraft from different airlines to transport its packages around Brazil.
Azul, on the other hand, has converted a handful of its passenger Embraer 195 to cargo aircraft — though they can’t be in an all-cargo configuration since no all-cargo version of the type has been certified — in 2020, mostly for use of its e-commerce customers.
Either way, whatever option LATAM opts into will likely benefit greatly from the group’s unmatched capillarity throughout the region. Although based in Santiago, Chile, the group also operates full subsidiaries in Brazil, Colombia, Ecuador, Paraguay and Peru, serving most of the continent’s countries. Reuters says that, according to Bianchi, the focus is on increasing capacity in Brazil, Ecuador and Colombia.
While LATAM is still struggling with passenger revenue, the group’s cargo revenue has soared in the past year. This came even though, with much less passenger capacity, cargo capacity also trended down as fewer aircraft were being operated.
Still, compared to the same quarter in 2019, LATAM Airlines Group registered a leap of 26.7% in cargo revenues throughout the last quarter of 2020, reaching $354.8 million. Such figures are even more impressive as cargo capacity was actually reduced by 24.1% in the same period. Traffic diminished by 10% and the cargo yield jumped by an incredible 40.8% compared to the same quarter in 2019.
This suggests there might be a bottleneck in LATAM’s supply and demand relation when it comes to cargo. The airline announced at the beginning of March that it would convert four of its 767-300 to full cargo aircraft by 2022, likely as a solution to that problem.
Between 2022 and 2023, four more are expected to be converted to an all-cargo configuration, reaching, according to LATAM, an increase of 80% in the group’s cargo capacity in the next 30 months and getting the group’s dedicated cargo fleet to 19 strong.
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