Rapidly growing demand from China and efforts to improve air logistics cool chains have created a dynamic environment for air freight’s global perishables markets, reports Ian Putzger
This spring, members of the Cool Chain Association (CCA) embarked on a collective effort to improve visibility with the objective of identifying inefficiencies in the perishables logistics chain. This pilot scheme brought together two airlines, a handling firm, a forwarder and a technology provider in a rare but developing example of end-to-end collaboration across the air freight sector.
Using data loggers provided by secure Near Field Communication (NFC) technology, the partners launched the project by monitoring five pallets loaded with berries and avocados travelling from Guadalajara to Kuwait. Three NFC loggers were placed on a lower deck pallet to measure the temperature at the top, bottom and in the middle of the consignment.
According to Philippe Schuler, a food waste campaigner who performed a preliminary analysis of the temperature readings of the trial, 40% of the food transported around the world needs refrigeration and 20% of food loss is caused by a breakdown in the cool chain.
Stavros Evangelakakis, chairman of the CCA and global product manager healthcare and perishables at Cargolux, remarks that the undertaking is still at the early stage, and it is still too early to identify the lessons of the project. “We did this in a very short time,” he says. “We need at least a year to collect the data.”
The CCA project marks a departure from individual efforts to track ambient temperatures with the goal of sharing and jointly analysing data from end to end, getting a holistic view of the cold chain and problem areas.
But another collaborative effort under the ‘Holland Flower Alliance’ banner – joining KLM Cargo, Amsterdam Airport Schiphol and Royal FloraHolland, which runs the Aalsmeer flower auction – is already yielding results. Launched three years ago as part of Schiphol’s Smart Cargo Mainport Programme, and using the Schiphol air cargo community system, run by Cargonaut, the partners have established the possibility to track shipments both by order number and air waybill number, so all parties along the chain can access shipment information. Usually shippers are not aware of AWB numbers.
The next step is going to be the creation of an app to track shipments from mobile devices.
“Cargonaut connected to the information-sharing working group and will support us in the development of this app,” comments Roos Bakker, director of business development of Amsterdam Airport Schiphol. “In addition to Cargonaut, it is important that all partners in the working group continue to support the initiative.”
Beyond the collaborative element and the identification of inefficiencies in the cool chain, the CCA’s project also aims to further standards and measuring metrics. For the latter, Schuler and Edwin Kalischnig, CEO of Xtreme Technologies (which provided the NFC loggers) favour the degree-hours metric, which is established by multiplying journey time with temperature. This can clearly show deviations from ideal conditions defined for a particular shipment.
IATA has recently blazed a trail in the formulation of standards with the establishment of the CEIV Fresh scheme unveiled in the spring, with Hong Kong International Airport and the two primary handlers – Hactl and Cathay Pacific Services – as well as the airline Cathay Pacific itself forming the first certified community.
Evangelakakis welcomes certification, as it reflects standards and product integrity, providing confidence in trade lanes. He reckons that some certified lanes will arise, similar to certified pharma corridors, but cautions that this will take time to unfold and is not viable for all routes. In contrast to the pharmaceutical sector, the values of the products are different and the ultimate responsibility does not rest with the producer but with middlemen, he points out.
“Rome wasn’t built in a day,” he comments. He adds that many airports and handling agents have been participating in initiatives to ramp up cool chain integrity. “A lot of airports do invest,” he stresses.
For some it is a key plank of their strategy. Dallas/Fort Worth identified perishables flows as central to its ambition to establish itself as a gateway connecting Latin America with Asia, and pushed for the creation of cool-chain capabilities on its patch.
Up in Canada, Halifax International Airport recently kicked off a CA$36 million (US$27 million) cargo expansion programme. Glen Boone, the airport’s director of cargo and real estate, expects the first building of the ‘Air Cargo Logistics Park’, a complex of three warehouses of about 50,000 sq ft (4,500sqm) each and apron space to accommodate five widebody freighters, to come onstream in the spring of 2021. The building will include at least 10,000 sq ft of cooler space, he says.
The airport’s perishables exports have gone through the roof, led by lobster shipments, with the lion’s share going to China. This has drawn a host of freighter services to Halifax. Korean Air and SkyLease lead the pack with twice-weekly 747 freighters, going up to three frequencies at peak times.
Other airports are less attuned to perishables traffic, which can sink plans for a new service, remarks Andrés Bianchi, CEO of LATAM Cargo. “In some destinations we’ve had trouble finding the right cooler or the right provider to be confident to launch,” he says.
One North American airport that LATAM had set its sights on only has a cooler capable of taking three pallets. “You don’t expect that in a large airport in the US,” he says.
Latin America’s largest cargo carrier is in the process of building a 17,620 sq ft (1,500sqm) perishables hub at Sao Paulo’s Guarulhos airport, boosting its cold storage capacity there by one third. The facility, which is due to open before the end of the year, is designed for transit cargo, reflecting the airport’s increasing role as LATAM’s long-haul hub for connections to Europe and North America.
The new project is about more than just boosting capacity. “It gives us the opportunity to handle that cargo differently – both in terms of transit times and the breakdown and build-up to match different aircraft types,” says Bianchi.
Perishables make up about half of the airline’s cargo volume. Unlike the general cargo market, which is down, this sector has remained robust – either stable or growing, according to Bianchi.
A big factor in this have been exports of salmon from Chile. In the space of four years, China has roared from a negligible market to the dominant destination for this commodity. The Middle Kingdom has also gobbled up over 90% of Chile’s cherry exports.
China has also been a voracious taker of Norwegian salmon and a considerable factor in plans for a seafood centre at Oslo airport with an intended capacity of 250,000 tonnes a year. However, these plans are in limbo after Worldwide Flight Services – the designated operator of the facility – and airport operator Avinor agreed in May to terminate their letter of intent.
Fish farm fire sale
As it happened, Norwegian salmon exports went through the roof this summer, but for the wrong reasons. A deadly algae bloom killed some 8 million salmon at Norwegian fish farms in a single week in May. Racing to sell off their fish stock before they could get affected, Norwegian fish farms went on a ‘fire sale’, flooding global markets. As a result, Canadian salmon farms redirected their sales efforts largely to the North American market.
This was not the only adversity that perishables forwarders had to contend with. Cherry and strawberry crops in North America were hit by rainy and cold weather conditions, resulting in as much as 20% lower volumes overall and less fruit of export quality.
Trade conflicts have also upset perishables flows. US producers that had been selling primarily to China have been hit the worst. As China raised tariffs on US lobster to 40%, this flow shrank severely, while Canadian lobster exports to China, already growing rapidly, took off with a vengeance.
On the other hand, Sino-Canadian tensions have had an impact on Canadian cherry exports to China. While not hit with tariffs, they have been subjected to increased inspections and also faced longer delays in inspections and clearance, reports Brendan Harnett, chairman and CEO of Flying Fresh Air Freight, Canada’s leading perishables forwarder.
In retaliation to Washington’s decision to scrap the Generalised System of Preference status for India, the government in Delhi has imposed eye-watering tariffs (up to 70%) on a list of US products, including almonds, walnuts and apples.
This could open the door to apple exports from Canada to India, Harnett notes, pointing out that many farmers in British Columbia are of Indian origin. However, he does not expect a marked spike in the near term, noting that India has been a rather price-sensitive market.
He has seen growing demand in Vietnam. However, in the absence of direct flights from Canada, this is a tough market for Canadian producers to compete in, he says.
The flood of lobster shipments to China is no longer a boon to Flying Fresh and other forwarders in Canada, nor for the national flag carrier. The arrival of SkyLease, which runs two to three B747F charters a week to Halifax, was ushered in by First Catch, a Chinese-owned seafood forwarder based in Halifax, which is using the B747 flights.
“These charters are subsidised by the Chinese government,” says one forwarder. “They’re hurting forwarders who ship on scheduled aircraft.”
Whereas cherries and lobster can sustain charter rates, most perishables cannot, remarks Bianchi. A commodity like salmon could not support a freighter operation without sufficiently profitable flows in the opposite direction. Moreover, salmon works well as belly cargo, which makes competing difficult for freighter operators, he adds.
In February LATAM started twice-weekly B767-300F flights to Chicago. In the main, these feed Chilean salmon to freighters leaving Chicago for China, specifically Air China and Cathay Pacific.
“One reason why we launched Chicago is that it allowed us to connect to transpacific capacity that was open,” says Bianchi. “It’s been a successful experience. We’re planning to expand it, but now we don’t have enough freighter capacity to address this.”
Ultimately it all hinges on how much the consumer is prepared to pay for the fish, he points out. This can make the difference between sending salmon fresh by air or frozen by ocean carrier.
In some cases, it may be best to combine air and ocean transport into a multimodal offering to get the best of both worlds, argues Markus Fellmann, regional head of perishables for the Americas at Panalpina.
“Supply chains are becoming more efficient, manageable and sustainable. The perishables industry overall can benefit from a more agile transition – or rather interaction – between transport modes according to market needs,” he states.
Amsterdam Schiphol is also looking increasingly to combinations with other modes.
“In view of the scarcity of our capacity, Schiphol also looks at rail links and sea freight,” comments Bakker. “Air cargo is always important for fresh goods, but there are definitely other options for transport.”
To reduce the complexity stemming from a myriad of types and designs of flower boxes in use, the Holland Flower Alliance (HFA) has developed a standard flower box. After trials on the Nairobi-Amsterdam route, it unveiled the design last December, declaring that it allows for 15% more weight to be carried on airline pallets compared to other flower packaging solutions.
“The developments are going very well,” comments Bakker. “However, we have arrived at a point where flower farms are still in doubt about the investment. We have done a lot of pilots with the HFA at different farms and we have to go further with the results of it. I am still optimistic.”
LATAM is working on “a couple of initiatives” for packaging solutions, but Bianchi is reluctant to reveal details at this stage.
“It always boils down to the value of the commodity,” remarks Evangelakakis. “With papayas and mangoes, you can’t add more cost in packaging. You can use thermal blankets, but it boils down to the fact that you have to minimise the cost.”