Buffeted by strong economic headwinds, LATAM Cargo is looking to boost its fortunes with a new portfolio of products tailored to customer need.
The new line-up will be unveiled next month, said Gabriel Oliva, the carrier’s marketing and commercial development director.
Latin America’s largest cargo carrier has been struggling in adverse conditions since the Brazilian economy turned sour over two years ago, but its plight has recently worsened. A few days ago the airline released its results for the second quarter, which show further deterioration from the first three months of the year.
LATAM Cargo carried 224,000 tons in the quarter, a decline of 9.4% over the same period a year earlier. The carrier curtailed capacity by 6.1%, but revenue ton kilometres (RTKs) dropped 13.3%, sending load factors down four percentage points to 48.8%. Cargo revenue fell 22.3% to US$260 million.
For the first six months of 2016, LATAM has tabled an 11.5% drop in RTKs, whereas capacity shrunk 4.8% and tonnage sank 5.3% to 458,000 tons. The load factor for the first half of the year was 50%.
The Brazilian market has been hit the hardest, but the other countries in the region have also felt the impact of the decline in global commodity demand and the associated devaluation of their currencies, which has dragged down imports.
Exchange rates have helped boost exports to global markets. Perishables shipments to Asia especially have been climbing steadily, according to carrier reports. However, the slump in inbound traffic and, to a lesser extent, a decline in intra-regional flows, have wreaked havoc with yields.
Cristian Ureta, executive vice-president of cargo, noted that exports consist chiefly of commodities that cannot absorb high airfreight rates. Carriers need the inbound flows to balance this, he said.
Efforts to stem the downward yield pressure through capacity reductions have not turned the tides. Over the past two years LATAM Cargo has taken four B767 and one B777 freighter out of service.
The company unified the individual airline operations in the group under one brand back in April, and the integrated cargo division has been working on an overhaul of processes and offerings. In May it unveiled a new commercial strategy based on the three pillars of agility, reliability and trust.
The emphasis in this drive has been on close ties with customers and responsiveness to their needs. A special work team was deployed to collect information provided by customers and transform it into concrete actions, notably a revamped service portfolio better aligned to forwarders’ requirements.
“According to our customers’ needs, the new portfolio will include different types of products with specific attributes for each shipment, ensuring clear agreements and the transparency of information. Moreover, products will feature a new and innovative routing alternative, making more service options available,” said Oliva.
The carrier was already moving in this direction before the official launch of the new strategy. Last year it introduced a service for pharmaceuticals and subsequently started a loyalty scheme that gives customers miles for travel based on the amount of cargo they ship with LATAM Cargo.
The new product portfolio should tie forwarders closer to the airline. What is needed even more, though, is a resurgence of the region’s economies to generate more traffic.