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Positive vibes

LATAM Cargo is expanding operations to its core markets while undergoing a complete overhaul of its product line-up to boost yields. Ian Putzger looks at the market recovery and the outlook for its cargo business

Latin America’s largest airline is boosting its intercontinental reach. Having launched flights from São Paulo to Boston in early July (its second new US route from its Brazilian hub opened in eight months), LATAM Airlines has set its sights on transatlantic expansion. It plans to start services to Lisbon in September, followed by flights to Tel Aviv three months later – the only direct route between Latin America and Israel. In the first half of next year, management intends to add Munich to the network.


Andrés Bianchi, CEO of LATAM Cargo, is looking forward to the new routes. Outbound they will further enhance the capacity that the carrier provides to exporters from the region. In the opposite direction, the cargo division is working on building feeder networks to the new stations, he says. Above all, Munich should offer good access to the industrial centres in southern Germany.


LATAM’s international expansion has been hampered by the problems of Rolls-Royce engines on the 787-9s. “We were probably one of the hardest hit companies. About half of our 787 fleet was grounded at some point,” remarks Bianchi.


LATAM has some more 787s on order as well as A350-1000s. “We’re looking for growth in our widebody capacity,” he says.


The airline’s freighter fleet has also seen some change. Earlier this year it sold is remaining two B777-200 cargo planes to Atlas Air. The 777s – ordered at a time when Latin America was booming and before the merger with TAM, which brought in a lot of belly capacity – were meant for Europe and trunk routes in Latin America but are not well-
suited to multi-stop routings. The 767, historically the backbone of the freighter fleet, is better suited to the airline’s core markets and eight hour segments, according to Bianchi.


He has been unequivocal on the importance of freighters in the airline’s business, calling them ‘an integral part of LATAM’s cargo proposition’. The departure of the final two 777 freighters does not reduce the carrier’s freighter capacity, as it is adding more 767-300 cargo aircraft to its line-up.


It took delivery of one in May and is adding three more by converting passenger aircraft from its own fleet into all-cargo configuration. The first of these
is due to enter service in November, and one each is to come on stream in 2019 and 2020.


The unit due in November will be used to cut back on LATAM’s use of ACMI capacity but the following two are earmarked for expansion. These shifts will bring the freighter fleet to 12 units. The withdrawal of the last 777F prompted a reshuffle of the carrier’s transatlantic freighter schedule. In lieu of three weekly 777 flights to Europe, it now operates five weekly frequencies with 767s, which is roughly the same capacity in terms of ATKs (available tonne-kilometres) Bianchi notes. At the same time, LATAM shifted the routing and is now serving Madrid and Brussels.


“We took advantage of the higher flexibility to open Madrid. Brussels had a lot to do with the constraints in Amsterdam,” says Bianchi. The results have been better than expected, he adds.


In the Americas LATAM made one change to the freighter operation this year, adding Antofagasta in northern Chile to the network with twice weekly flights from Miami that continue to Santiago. The airport is an important gateway to supply mining activities in the region.


At this point some potential destinations are under review but no major additions or changes are on the agenda. “By and large, we are keeping the same network,” says Bianchi.


Buoyed by the recovery in its home region, LATAM Cargo has been on a roll. After a contraction in 2016, owing to a depressed market (particularly Brazil, the largest economy in its region), cargo revenues climbed again last year, up 6.7% over the previous year. The momentum held in the first quarter, which saw a 16.6% rise in cargo revenues to $295.8 million. Yields advanced 7.1% in the period, while the load factor was up 1.9% points. >>


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