Pent up demand, increased loading efficiency and cargo volumes continue to grow, but elevated air freight rates and capacity limits strain the global flower trade. We take a look at the current state of the floral air cargo industry with Air France KLM Martinair Cargo. (This interview was first published in the November 2021 edition of FloraCulture International.)
FCI’s Editor sat down with Turin-born Pier Luigi (Pigi) Vigada – a Regional Director Eastern, Southern Africa and the Indian Ocean at Air France KLM Martinair Cargo – to discuss the state of the floral air cargo trade.
Vigada has been part of the international flowers and fresh produce business since his first appointment in Kenya in 2001, then moving to South America, Italy, Switzerland, the Netherlands and, with a different scope, back to Africa in 2018. He has played a pivotal role in bringing the company to its position as one of the world’s major air carriers of cut flowers and foliage.
Pier Luigi (Pigi) Vigada: “It’s been 20 months since the coronavirus pandemic threw international supply chains – not least that of cut flowers and foliage – into chaos. We have been going full throttle despite the market being under severe pressure.
The overall outlook is positive, the load factor is 100 per cent. However, the market is under severe pressure with around 20 per cent capacity shortage in Nairobi. Out of the 5,000 tonnes needed on a weekly basis, there’s a shortage of between 1,000-1,200 tonnes.
According to our company’s Second Quarter 2021 results, published in July 2021, air cargo capacity increased by 66 per cent in Available Ton Kilometers (ATK) compared to the second quarter in 2020.
Despite this increase in capacity, the company’s load factor gained 5.2 points and the unit revenue per ATK at constant currency improved by 0.5 per cent.
Compared to 2019, a still limited cargo capacity is available while the demand remains high.
At the moment, the Group transports more than 100 shipments of Covid-19 vaccines per month. The distribution of vaccines continues to increase gradually, and the Group expects further growth in the third quarter, notably to Africa and South America.”
“Despite all the media headlines that air cargo vaccine supply receives, the company is fully committed to supporting the global flower trade.
Air France operates 5/week dedicated to vegetables mainly to the Rungis whole market in Paris. KLM operates 5/week which, due to aircraft payload/performance, are better optimised for carrying vegetables and fish. That is mainly dense cargo.
Our five weekly Martinair freighters operating via Johannesburg and Harare are mainly dedicated to the transport of flowers. The Martinair side of our business has a deeply rooted tradition in floral air cargo that goes back 26 years. All throughout these years, we have continued supporting the horticultural industry in Kenya and Zimbabwe, in good and bad times. It is no secret that it’s a good time for airlines to move cargo and perishables around the globe, and Eastern and Southern Africa -which are the areas that are under my responsibility – are no exception.”
Meanwhile, I am happy to see how the pressure on available air cargo capacity encourages growers to use available space better. So the loads per cubic metre are increasing, which is indirectly lowering the sector’s carbon footprint.
Increased revenues are mainly linked to capacity optimisation rather than the crazy prices we have seen around the globe for other products.
Our choice to continue operating from Kenya has been dictated by the historical trade ties between Kenya and the Netherlands and the support KLM and Martinair have always delivered to the horticultural industry. There have been opportunities to generate extra revenues around the globe, especially during the first pandemic days or even today’s galore. Yet, the rationality of keeping an eye on our footprint has prevailed.”
“The price debate is always tough, especially when products with smaller profit margins are involved.
In discussions with our counterparts, we maintained open, two-way communication. Customers recognise that the 2019 air freight prices are partially to blame for the current lack of capacity. The real market prices were too low for freighter operators to continue deploying capacity when there were plenty of opportunities around the globe to make those flights more profitable.
I believe the industry has learnt an important lesson and will not fall into the trap of “cheap is needed” again. What the airline industry and all other actors within the floral supply chain need is a fair price and this applies also to the growers. Costs have gone up at all levels and air freight is no exception.
We are anticipating seasonal price hikes for years to come. This prediction is based on the lack of capacity which in a market such as Kenya needs around 5,000 T/week and is now short of about 1,200 t/week. This lack of capacity will probably create a selection between products that can sustain these prices and others that cannot.
We do see that happening in South Africa with some fruits products that simply cannot sustain the airfreight transportation costs.
This situation will stimulate some to seek alternative ways of transport like sea freight. We do foresee growth in that sector as well.
For now, capacity remains tight, and shippers are paying higher rates. We find it challenging to predict the return of belly capacity to previous levels globally. “It depends in which part of the world you are in and on the type of travellers you have. Leisure travellers are clearly in the recovery lead as they resume travelling around the globe. Corporate travellers will take a bit more time to return to the old habits of business travelling. Industry market studies indicate we should be back to pre-covid levels, but not before 2023. As for Kenya, the demand is there and we should already be able to operate regularly as pre-Covid.
I believe the industry should question whether all products are worth being produced and subsequently exported. In several horticultural sectors, there’s been a change in consumer demand and shippers production. The lack of capacity will not be solved quickly, and customers will make their decisions.
We see better packaging, which increases the weight/m3, thus ensuring an improved optimisation of the m3 available/week. Interestingly, we do also see growers improving their output /hectare.
There’s room for quality improvement in both production and marketing of products at the consumer level.
For example, nanobubbles technology is a step in the right direction. Farmers can irrigate with much cleaner and more oxygen-rich water, which enhances their production considerably.
However, there’s intense competition out there. Kenya has a great variety of flowers, but I am not sure whether enough buyers know they are sourcing from Kenya.”
“During the first half of 2021, Air France-KLM Cargo Sustainable Aviation Fuel (SAF) Cargo programme welcomed 22 partners, showing the sustainable commitment of our partners. The Group’s sustainability policy and CO2 footprint compensation are widely recognised and deeply embedded in our strategy and vision. Our investments in a Sustainable Aviation Fuel (SAF) plant has been promoted to the trade both on the passenger and on the cargo side. We are incredibly proud that, together with the dedicated SAF division of the company, we have been welcomed by the freight forwarding community and subsequently supporting our programme. We do believe this is an industry task and not a specific AFKLMP one. Thus, every effort made by each of the players will contribute to the success of developing a more sustainable fuel to be used by our fleet and help our customers reduce their CO2 footprint. We have noticed that the horticultural industry is very sensitive to the topic and fully engaged in the project.”