In depth analysis

Perishable air cargo, growing while other cargo wilts

The economic downturn has not dramatically reduced consumer demand for occasional flowers and delicious foodstuffs nor the drugs and medications that are most frequently transported by air.

By Rick Eyerdam

Shippers importing pricey seafood from Scandinavia or Alaska and popular libido drugs from Puerto Rico are constantly shopping for carriers that offer the most agile and secure links in the cold chain to sustain freshness and assure potency.

However, with the prospects of a flu pandemic looming large, the difference between a container of flu vaccine arriving fresh or spoiled could mean the difference between life and death. In fact, cold chain security for clinical trials, vaccines and other medications is already a major focus of IATA, a growing business for world airlines and a major component of the U.S. healthcare system.

At the CNS 2009 Conference in May and during interviews with industry experts one fact was evident. Shippers will eschew some of the high value consumer discretionary items that often occupy air cargo holds. But the economic downturn has not dramatically reduced consumer demand for occasional flowers and delicious foodstuffs nor the drugs and medications that are most frequently transported by air. As industry analyst Brian Clancy told the SeaCargo Americas luncheon in November, air cargo is dependant on innovation because carriers must attract “customers that innovate products that people want to buy at sufficient price points to then justify the use of air freight.”

Innovation is key

One example of a high-prized temperature-sensitive pharmaceutical is Pfizer’s Genotropine, a human recombinant growth hormone to help children with stunted growth. It must be transported and stored at 2-8°C and costs more than $4,000 per package. A full LD3 container of Genotropine can reach a value of more than $20 million.

A recent analysis by Novumed Life Science Consulting shows the growing attractiveness of the air cargo market for temperature-sensitive pharmaceuticals.

The world logistics market for pharmaceuticals was valued at $28 billion in 2007. Of this number, $3.2 billion could be attributed to airfreight, up from $2.2 billion in 2003 and that reflects an annual growth rate 10 percent.

According to Novumed, “One sees especially strong growth in the segment for temperature-controlled pharmaceutical transports. Transports cooled at 2°C-8°C or at freezing temperatures are growing at an annual growth rate of approximately 15 percent.

The Novumed study asserts, “Transport costs, in relation to product value, are minuscule for such valuable freight. This relationship reduces customers’ price sensitivity and offers the opportunity for high-quality providers to achieve a price premium by reducing the damage frequency for temperature-controlled drug transports.”

And David Y. Bang, CEO of LifeConEx, LLC adds, “The annual sales of the life sciences industry (ethical drugs, biotech, diagnostics, medical devices, clinical trials, generic, vaccines, etc.) is about EUR 600 billion.  The transportation spend is approximately EUR 15 to 20 billion, out of which "temperature sensitive" air transportation takes up about 25%. 

Flower power

A recent study by the Amsterdam-based Seabury Group also found that while the value of air cargo has slipped in favor of sea cargo recently, perishables foodstuffs valuable enough to be transported by air are holding their own or increasing market share.

According to Marco Bloemen, vice president in the Seabury Air Cargo Group, “U.S. perishable air imports are countering the overall decline in U.S. air freight imports, which are declining strongly at -30% for Jan-April 2009 compared to same period the previous year. Perishable air imports are declining by a mere 8% for the same period, with a growth of 2% in April. This is primarily caused by continuing strong demand for fresh cut flowers (especially roses) from Colombia and to a lesser extent Ecuador. Within the perishable air trade there are even some commodities showing substantial growth, of which asparagus deserves particular attention. This commodity, which the U.S. imports by air from Peru, has almost doubled to 4500 tons in April 2009 compared to the year before.”

Bloemen said another interesting aberration is the growth of perishable shipments, primarily vegetables, from Europe to America.

Bloemen study echoes the anecdotal reports of executives throughout the industry. Rasheme Richardson, Senior Director Airport Operations, Amerijet International, Inc said he has seen no decline in perishable food imports from Latin America and the Caribbean and that perishables have helped all-cargo Amerijet “manage through the tough times”it handles cargo for its own fleet and loads from Martin Air and British Airways.

“Perishables have never been better,” Richardson said. Asparegus is huge right now out of Lima and now European asparagus is starting. Northbound from a parishable aspect has been significantly higher with perishables comprising a good 40 to 50 percent on the import side.”

While asparagus are strong, Richardson’s Caribbean and Latin American trade lanes provide what he calls “a happy mix” that includes mangoes, bell peppers, bread fruit, string beans and fish on the import side and retail goods including perishable household commodities to stock the shelves of markets on the southbound legs.

Ameriject can handle the happy mix at its Miami hub because it has constructed Amerijet Miami hub a state-of-the-art storage warehouse which include pre-cooling systems and separate climate-controlled chambers, offering a choice of frozen, refrigerated, or chilled storage.

“We have separate cooler compartments sealed by hardened doors because the diverse commodities cannot be commingled,” Richardson said.

Richardson said Amerijet learned a lesson when it briefly moved from MIA. “Nobody else makes it work like Miami,” he said. “In other places customs doesn’t understand when and why we work 24 hours a day.”

American Airlines also underlined the importance of Miami for its perishables business when it introduced a new perishables program with expedited USDA and Customs clearances and the construction of a pair of pre-coolers that extract humidity from cargo and cool it to preserve freshness and extend its shelf life, according to American Air Cargo vice president of sales and marketing Joe Creedy.

The clear evidence of the sustainability of perishable air cargo commerce has attracted the attention of major U.S. airport developers at Pittsburg, Houston, Los Angeles, Barbados and Mascoutah, Illinois.

Opportunity has finality met reality at Houston’s George Bush Intercontinental Airport where Trammell Crow built a 60,000-square-foot perishables center in the expectation that Houston was ready to become a gateway for produce and flowers entering the country by air from Central and South America. Originally no flights followed because no company stepped in to finish and operate the reefer processing facility. But the facility is now complete and open for business.

Pittsburgh International Airport is also working to develop a facility to handle flowers from Latin America with similar constraints.

Los Angeles International Airport recently opened a 12,700-square-foot refrigeration facility that is small by comparison to Miami but nevertheless the largest at any West Coast airport. Mercury Air Cargo, a wholly owned subsidiary of Los Angeles-based Mercury Air Group, Inc, built the $1.1-million refrigeration unit. The facility is located at Mercury’s Avion Drive Cargo Facility on LAX property.

Convergence of facilities and freighters

 

Miami International Airport dominates the Americas for perishable and food imports in much the same way Amsterdam dominates Europe for flowers. With the exception of a few precious items including cherries and fish to Japan from the Pacific Northwest, the perishable trade lanes are typically south to north. Location plays a large part in the success of airports entering the trade but facilities for cold chain processing and distribution are also of great importance. Also important is regulators and inspectors who are willing and able to work on air cargo timetables. And that lesson has not been lost on American Airlines, Amerijet, LAN, Gemini, Arrow, Centurion and Helios among the many that have made MIA one of their major hubs.

High value fruit and vegetable imports have grown tremendously, according to Chris Mangos the head of marketing at MIA. In 2002 MIA dominated U.S. airports with 49 percent of all perishables imported by air into the U. S. The remaining 51 percent was spread across 12 other airports. In each successive year MIA has attracted a larger percentage of the growing import category reaching 60 percent of all U.S. perishable imports in 2005 and achieving more than 70 percent of all fruits and vegetables in 2008, he said.

To keep ahead of the competition MIA has completed a $500 million Cargo Development Program that included 17 new cargo buildings, amounting to over 3.5 million gross square feet.

Ground zero

Under pressure to reduce costs, many cargo airlines have subcontracted for perishable cargo handling. According to Alfred P. Kuehlewind, CEO at Commodity Forwarders Inc., one of the largest perishable handlers in the world, the ground handling aspects remain the weakest link in the cold chain.

To prevent buildup of heat on the tarmac, Commodity Forwarders has been running trials with refrigerated dollies at its home base, experimental units developed by a venture in which CFI holds a minority stake. The idea is to keep temperatures low in non-active containers until the cargo is loaded onto the aircraft, so the other elements used, such as gel and insulation blankets, can maintain the temperature inside the container or pallet during the flight instead of exhausting their operating span prior to takeoff.

AMR innovation

American Airlines is also researching a coalition with Envirotainer, a pioneer in developing active temperature-controlled air transportation solutions including the RKN e1 unit, which is the latest in the field. The RKN e1 was designed in collaboration with ThermoKing for extreme requirements of the life sciences industry capable of maintaining temperatures in the +2 to 8 °C range as well as in room temperature,

+2 to 25 °C. The RKN e1 is a European Aviation Safety Agency (EASA) certified air cargo ULD (Unit Load Device) designed to ensure seamless handling throughout the global supply chain. The unit can be carried on board the most common long-haul aircraft types. 

FedEx Custom Critical is also using the Envirotainer technologies for FedEx Express lift in its Temp-Assure Air offerings aboard freighters, a different environment than belly cargo. FedEx has done extensive testing with that company to ensure it has correctly thermal mapped FedEx airplanes.

FedEx pharma innovation

For its Temp-Assure Air Validated program, launched in October, FedEx Custom Critical is also using Sensitech’s TempTale technologies, RFID-enabled temperature monitors, to register routine temperature updates during transit and provide customers with data readouts. The service is targeted at the pharmaceutical industry, which is required to provide audit trails of all its processes to the Food and Drug Administration.

The FedEx-CryoPort agreement comes on the heels of a partnership deal between Continental Airlines and CSafe, a maker of active cooling units that recently obtained the nod from the FAA for its technology. CSafe’s compressor-based units have both cooling and heating capabilities and can sustain consistent interior temperatures in ambient extremes from –30 to +50 degrees Celsius.

Emirates SkyCargo’s Cool Chain solution is designed for the movement of highly temperature-sensitive goods including pharmaceuticals, healthcare products and perishables. In line with IATA requirements, SkyCargo Cool Chain is also geared to handle transportation of perishable goods requiring basic preservation of freshness from heat and frost.

Also, in February 2008, Emirates opened a 75,400 sq. ft. perishable center at Dubai Airport as part of its Cargo Mega Center with separate areas providing a wide range of temperatures from -18oC to 18oC (-0.4oF to 64oF).

 

Comments

[New Balance Sneakers]

The more you fight something, the more anxious you become ---the more you're involved in a bad pattern, the more difficult it is to escape. Do you understand?