The categories of perishable goods moving through South Florida include flowers, seafood, fruits and vegetables. Currently, more than 85% of inbound perishable air cargo to the US from Latin America lands in South Florida. Specifically, approximately 95% of flowers, 75% of seafood, 95% of vegetables, and 70% of fruit land at South Florida.
Several parties are involved in the logistics chain, but importers are ultimately responsible for driving perishable volume to a specific airport. The logistics chain operates as follows: (i) Latin American based perishable suppliers grow or catch their respective perishable commodity. (ii) US based importers purchase a specified quantity of the commodity and contract with air cargo carriers to ship the goods to South Florida. (iii) Upon landing at South Florida, the goods are unloaded by an airport ground handler and are inspected at the airport by USDA/CBP agents. In many cases the inspections occur at the warehouse facilities of the importer/logistics company. (iv) The perishable goods are then transported to importer owned warehouses or distribution centers where importers conduct value added services (e.g., putting flowers in bouquets), store inventory, and repackage inventory by end customer for distribution. (v) Wholesalers and retailers will then contract with a logistics provider to pick up the perishable goods and truck them to stores or distribution centers.
In some cases, importers contract with logistics operators to handle this process on their behalf. That is the case for the majority of importers. Therefore, despite a highly fragmented industry, a smaller number of core logistics operators and major importers handle most of the volumes.
A mixture of non-perishable high-value goods (e.g., electronics, auto parts, etc.) will be shipped outbound from Airglades to the various Latin American air cargo hubs. There will also be operations at Airglades that will drive additional air traffic, including general aviation and MRO operations, although there will not be passenger traffic at Airglades.
The cargo freighters will load up on non-perishable goods while at Airglades and head southbound to Latin America, although not always to the same destination. For instance, flowers from Colombia may be unloaded by an air freighter at Airglades. The same freighter may then pack electronics or auto parts destined for Brazil (which is the largest export destination from South Florida), before returning to Colombia to receive more flower cargo and repeat the journey.
Currently, more than 65% of all inbound perishable air cargo to the US and, as mentioned above, more than 85% of inbound perishable air cargo from Latin America lands in South Florida. South Florida is a critically important region for air cargo because of its proximity to Latin American air cargo hubs. South Florida is the closest US air cargo accommodating region to the major Latin American air cargo hubs, including Bogota, Lima, Santiago, Sao Paolo, and Quito.
Air transportation is the most expensive way to ship even low-weight, high-value commodities. However, perishable commodities from Latin America are shipped to the US via air because alternative modes of shipping, such as trucks and marine transportation, are too slow based on the distance. By contrast, perishable commodities produced in Mexico are shipped by truck across the US and not by air, because of the shorter distance to market. Based on the cost and weight of fuel, the most efficient location for a cargo airport is as close to the departure point as possible that is accessible to truck transportation to all the potential markets. For perishable commodities from South America, this makes Airglades’ South Florida location ideal.
Once perishable goods reach the US, truck transportation to the final destination is far more cost efficient than air travel. A 2016 study submitted by Airglades to the FAA identified double digit percentage transportation cost savings by flying goods from Quito, Ecuador to MIA and then using five trucks to ship the goods from MIA to LAX compared with flying the goods directly from Quito to LAX. The savings are driven primarily by three factors: a) Trucks cost less per hour traveled than aircraft in the US; b) Relatively strong US interstate infrastructure; and c) Flight distance/time “tipping thresholds” – Aircraft that travel above certain distances/times require reductions in the volume of cargo they carry to accommodate aircraft fuel requirements.
Other southern airports in Atlanta and Alabama are subject to the same cost disadvantage over Airglades based on their distance from Latin America. Furthermore, their location requires a major overhaul of the trucking network and does not benefit from a close location to the closely-knit perishables-community network that exists in South Florida. Airglades is situated along the pre-existing major trucking routes that run from South Florida to the rest of the US and back, requiring no disruptions to the existing trucking network and routes. Airglades also has substantial land for development space, both on-airport and off-airport. Existing airports cannot offer this kind of space to accommodate the development that will follow from the logistics chain.
All types of cargo benefit from the shipping costs savings generated by the proximity of Airglades to export hubs in Latin America. As a result, Airglades’ location in Florida is critical to all types of perishable cargo that will are shipped by air. Lower value commodity crops, that can be kept fresh for longer period of time, such as bananas are not shipped by air but by ocean freight and are not included in our business model.
Yes, perishable goods require an unbroken cool-chain. Flowers, fruit, vegetables, and fish require specific temperature zones for optimal handling. Inventories need to be carefully managed to ensure high-speed throughput. Radio-frequency identification (“RFID”) technology is being integrated into tracking cargo. The infrastructure also needs to meet specifications of a wide range of end customers/logistics companies, and this requires in-depth understanding of their needs. Airglades is running a process to solicit and consolidate this information into its term sheet discussions.
Furthermore, Airglades has hired a specialized firm to design a facility that can meet user requirements. This design will be revised once further information from customers comes through, but initial estimates of requirements and their operating and investment costs have been incorporated into the business model.