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Feb. 2014

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FEBRUARY 2014 COOL CARGOES 14 THE JOURNAL OF COMMERCE www.joc.com O N A RECENT day in mid-December, two 747 freighters flew into MidAm- erica St. Louis Airport loaded with 250,000 pounds of Chilean blueberries. Just days later, another 160,000 pounds of the fruit landed at the airport. For MidAmerica, which has ambitions of becoming an air cargo hub for perish- ables, it was the busiest single day — and week — in the airport's history. The importer, North Bay Produce, not only is a big buyer, but also operates the airport's new cold storage facility. North Bay President Mark Girardin valued the blueberries at $1.3 million and said the record-breaking shipment was a sign of increased traffic to come. Company and airport officials are trying to establish MidAmerica as a cargo hub connecting South America to consumers in China through a trade route to Ningbo. Girardin isn't the only one in the air cargo industry to approach 2014 with antic- ipation. Airline profit expectations remain strong, according to the International Air Transport Association's quarterly survey of airline CFOs and heads of cargo. Growth in cargo volumes is expected to pick up over the next year, at rates not seen since mid-2010, according to the sur- vey released in January. Michael Webber, an air cargo consultant, throws a little cold water on the outlook, warning the industry is mistaking a partial recovery from disastrous levels over the last few years for resurgence in the business. The brightest spot for air cargo, he said, is perishable food and pharmaceuticals. "The cold chain end of the business looks better than the rest," he said. One possible reason for optimism among air freight forwarders specializing in the cold chain is ultra-slow-steaming by ocean carriers, an operating trend that has slowed carriers' aggressive campaign to convert lucrative air freight shipments into ocean cargo. "Slow-steaming by the ocean carriers may give air cargo a chance to catch their breath and give a small sigh of relief," Webber said. "But as far as permanently stopping the bleeding, I don't think it will do that." He doesn't dispute, however, that the cargo departments of passenger airlines will remain interested in perishables. "For belly carriers, perishable cargo is basically found money for them as they serve their destinations. They can still usually beat freighters on time, and they are not pay- ing for freighters or one-direction cargo." Market losses in other areas of air cargo, such as electronics and car parts, has "upped the stakes dramatically for the importance of perishables to the air freight industry," Webber said. In tonnage terms, ocean dwarfs air so dramatically, he said, that very slight gains in the ocean industry from a modal shift would be a huge disaster in the air industry. There is a long list of air freight and express carriers that have gone out of business, Webber noted. "So many freight carriers and express carriers are gone, but they left facilities that are still there haunt- ing the airports. And they are not the type of buildings that can be easily converted into cold storage," he said. The good news for those in the perish- ables end of the business is that cold storage is "just about the only thing an airport is willing to spend money on," Webber said. New or expanded cold storage facili- ties have opened on or adjacent to airports in Dallas, Miami, Los Angeles, Washing- ton, D.C., Detroit and Houston. Despite some inroads by ocean carriers, about 90 percent of California cherries are exported by air, according to Robert Brown, export manager for Delta Packing of Lodi, Calif. "The influence of the steamship lines right now in that crop is minimal," he said. "It's a tight window for the fruit. It can be a 30-day voyage to Asian markets." With even a slight delay tacked on the end of that transit time, the fruit could be spoiled he said. Although Delta hasn't exported any cherries by ocean for the past few years, it has shipped small quantities — four or five 40-foot containers in a 12-month period — still just a tiny percentage of the company's overall cherry exports. "It depends on fuel prices and airline freight lift — air rates and capacity," Brown said. "Some differential in price can still be worth using air. How much depends from situation to situation." Shipping a carton of perishables to Aus- tralia currently costs an average of US$10.90 for air freight and $3.50 for ocean, he said. "About a year ago, it was around $20 a carton to Australia. Then it's a little different." Several factors dictate that early sea- son fruit likely will always move by air. For one, the earliest picked varieties aren't as sturdy for long shipments, Brown said. And, as with all seasonal fruits and vegetables, the first wave to reach mar- kets commands higher prices in grocery stores and at restaurants. As seasonal novelty wears off, shipping by ocean can be a way to keep down costs and be more competitive with consumers. "The new technology with modified atmosphere helps somewhat," Brown said. "As the technology improves, people might revisit how we ship cherries." CC Contact Stephanie Nall at stephnalljoc.gmail.com. AIR FREIGHT'S FRUITS OF VICTORY In a signal that one area of airlines' business is anything but perishable, airports are boosting investment in the cold chain By Stephanie Nall

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