Episode Transcript
[00:00:03] Speaker A: Hello and welcome to the Freight Buyers Club. I'm Mike King and this content is brought to you by Demerco Express Group. It's iata, it's Peru. We're in Lima. It's the World Cargo Symposium, which this year the host airline is Latam Cargo and I'm delighted to say I'm joined by CEO Andres Bianchi. Welcome to the Freight Buyers Club, Andres.
[00:00:29] Speaker B: Thanks, Mike.
[00:00:30] Speaker A: Being here so the first time in South America, you must be very pleased. What's it been like hosting? How does this play for LATAM and Latin America as a market?
[00:00:40] Speaker B: Well, I mean, first of all, thanks for having me. We're very happy that YATA decided to have the world cargoes impossible in the region.
And as the largest airline group in South America, we felt it was kind of our obligation to host it. And we're very happy with it. It's quite a different experience than just attending, but we're very happy to have had such a wonderful event down here.
[00:01:02] Speaker A: What would you say were the main takeaways from the event for Latin America, but also for the global air cargo market?
[00:01:08] Speaker B: I think for Latin America, first of all, we could show the rest of the industry what South America is about and I think it came out very well. We're very happy with what people experience and what people saw down here. In terms of the industry, I think probably, I mean, obviously the key password is AI, But I think when people look at AI, they're starting to realize it's more than just tech for tech's sake.
It's tech with a purpose. It's how do you deliver on the things your customer needs or the things your user, internal users need so that they can make things happen better, faster and more efficiently. And also I think that when you look at technology and in particular in this industry, it's not just one company that can do positive things with AI. It's better when it's broader and where there's collaboration within the ecosystem. We can probably look at major leaps in service efficiency and agility just on the LATAM network.
[00:02:08] Speaker A: For people that aren't as familiar with your operation around the world, can you break down the scope of your footprint bird belly with freighters and maybe tell us a little bit about any new services or new fleet additions, conversions that are underway that you'll be adding to your fleet soon?
[00:02:26] Speaker B: Happy to. First of all, when you look at Latam Cargo, we are the cargo arm of Latam Airlines Group and as I mentioned before, we're the largest airline group in the region. We Manage all of our freighters. We have 1977 freighters, but in addition to that, we manage the capacity of more than 300 passenger planes that we operate. That being a mix of widebody 777, 787s and 767s plus more than 200 A320 family aircraft that fly within the region and in the domestic market. Our footprint in general, we are a South American play.
When you look at our capacity, we're the largest provider of capacity between North America and South America and since 2024, also the largest between Europe and South America and also within the region.
And we've expanded that footprint combining the growth of the passenger business with the expansion of our freighter fleet.
[00:03:21] Speaker A: We were talking before we started.
I understand that perishables is a big market for you out of South America. Can you tell us a little bit more about that trade and any other markets that you're seeing growing?
[00:03:31] Speaker B: Yeah, it's interesting when you look at the global market, I think it was a Great stat yesterday.
35% of global air freight is what's considered a special cargo. When you look at South America in particular and operation, 65% of our cargo is what you would consider special cargo. And the vast majority of that in our case is perishables. That being salmon from Chile, flowers from Ecuador and Colombia, fruits and other vegetables from Peru and Brazil. So we need to have a very strong and robust cold chain and in order to ensure that we deliver our customers products in pristine condition to market.
[00:04:09] Speaker A: How about the lithium and pharma? Is that they big markets for you? Are they growing markets for you?
[00:04:15] Speaker B: Definitely. When you look at both commodities, lithium battery based products, to call it one way, which is basically like they are growing. They're everywhere from high end electronics to toys and that entails the complexity of carrying something that if improperly managed can be dangerous. So it's a fast growing market, but also a market that requires a very robust, safe operation. And in terms of pharma, it's also. We're seeing a lot of growth in the pharma sector. Again, another commodity that requires a very specific set of capabilities that we're very happy to provide our customers.
[00:04:53] Speaker A: Can I ask you about US trade policy or tariffs? Quite a tumultuous 2025. Obviously we've seen some of those tariffs now taken off. But de minimis exemptions was a big factor last year in E commerce markets. How did that play out for you? Was that a big, Was it a big factor in how you had to change your operations last year.
[00:05:15] Speaker B: I think tumultuous is kind of an understatement at this point. But I believe that you can divide this in two. One edge tariffs and all related to the trade war and the other one are probably more structural changes around E commerce and indemnities in particular. So we're going to the first one. I think it required most of the players within the ecosystem to try to figure out how targets were going to be charged, what was their actual impact and what was going to happen when they eventually, I mean, they were adjusted or reduced. And how did mean, how do you adjust to that particular, to those particular scenarios? In our case, we did a lot of planning on, okay, if this happens to Colombian flowers, for example, how do we redesign our operation? Because we're heavily dependent on flowers to do our returns into the US So it's a lot of planning. Luckily for us, we didn't have to implement a lot of those plans because as you mentioned, some of those tariffs were adjusted downwards eventually.
Now, on the more structural side, when you look at E commerce and we've seen this trend in many of our markets, started in Brazil, Chile, adjusted Later, later in 2025, you're seeing the de minimis exemptions being either reduced or eliminated. And probably that points to a more structural change in terms of leveling the playing field between local retainers and E commerce. The minimis was providing to some extent certain benefits to E commerce players.
And when they, I mean, when they were small, probably nobody noticed. As the E commerce players exploded in size, governments decided to adjust. And you can see different ways of adjusting to that. For example, Brazil has this program called Remici Conforma, which is a pretty smart way to address issues.
And I think you're seeing other countries implement similar things. I think everything that promotes trade is good, but I think when you look at the sustainability of trade, having a level playing field is probably necessary to make that growth sustainable over the long term.
[00:07:18] Speaker A: I mean, there's this cliche, cargo always finds a way, trade always does find a way. Did you see growth in other markets last year as the US became a bit more complex?
[00:07:27] Speaker B: I think trade always finds a way. And you're seeing some trade lanes develop faster than others.
Some countries export more or replace some of the regional producers. And in that regard, I think airfare provides a very useful way for shippers to adjust to those changes quickly and be able to respond to customer demand.
We are not immune as an industry to those changes. You probably see some numbers dropping or growing less, but in general terms, I think the impact has been lower than originally expected.
[00:07:58] Speaker A: How have you been affected? And I'll just timestamp this for everybody. We're talking on the 12th of March. So if you listen to this, in the future, things might have moved very quickly. Things are changing day by day. But as we're talking now, we have war in the Middle east. There's these big geopolitical buctions. How has that been playing out for Latam Cargo?
[00:08:15] Speaker B: I mean, as you correctly mentioned, it's March 12th or less than two weeks since the war started and it's been sending shockwaves all through the supply chain. Right.
I think we're yet to see the actual implications of that.
I believe that a lot of shippers are trying to understand what are the long term implications of the war before they adjust their supply chains. I mean, restrictions on certain key trade lanes remain for a longer period of time.
I think it's going to be likely that we see some major adjustments where people source and how they source.
[00:08:52] Speaker A: I mean, fuel is going to be the big factor on the freight buyers club. We look at container shipping markets as well as the aviation markets. And wherever you look, we're seeing fuel surcharges, we're seeing spiking prices. How do you explain that to customers and what does that look like for your business model?
[00:09:09] Speaker B: I mean, we have a fuel surcharging mechanism in place. It's pretty transparent and most of our customers understand it because we've been using the same system for years.
And I think in this particular instance with the changes being so dramatic, it's easier for customers to understand the need to pass on those incremental fuel costs to the rates. Now it's more complicated where the volatility is high than when you see sustained and stable increases in price. And I think probably the challenge today is, okay, you make an announcement and the next day the price drops and then the next day the price goes up again.
So I think the complexity is going to be more on how to explain the timing more than on the need of price increases. In the event that all prices remain
[00:09:55] Speaker A: at this level, what's next for Latam Cargo? What can we expect in 2026 and beyond?
[00:10:02] Speaker B: 2026 is going to be a year in which we're going to basically grow. Using our widebody passenger fleet, we expect to grow 5 to 7% in APKs.
We've experienced significant growth on the freighter fleet over the course of the last four years with the incorporation to the fleet of the converted 767s that brought in from the passenger side. We went from roughly eight freighters five years ago to 19. So we're stabilizing that growth. We are consolidating that growth and we are leveraging the expansion of the passenger fleet so that we can grow next year. And actually, it's going to be probably more attractive growth for our cargo customers because we're going on cargo heavy destinations like Astrodoms and, and Brussels on the, on the white belt, white body side.
[00:10:46] Speaker A: Andres Bianchi, thank you very much for joining me today on the Frake Buyers Club.
[00:10:50] Speaker B: Thank you. Cheers.
