Cargo Chat: Azul’s Frota on Brazilian carrier’s ‘box-retail’ strategy

As the demand for north-south e-commerce in the Americas heats up with the recent recovery of the Brazilian economy, Azul Cargo Express, the cargo division of carrier Azul Linhas Aéreas Brasileiras, has begun utilizing the belly capacity on Azul’s 800 daily flights to 103 airports in the Americas to deliver small parcels.

In May, the division launched the “Azul Box” program, which allows Brazilians to purchase goods from any e-tailer in the United States and send the goods to a depot in Miami, where Azul completes the necessary customs clearance before flying the goods to more than 3,500 cities in Brazil and abroad. In just the first week, Azul Box received 50,000 registrations, and currently has about 80,000 participants. Today, the program has 205 franchised sales outlets spread throughout Brazil. The São Paulo-based carrier also flies to Europe and Argentina, and operates a few interline general sales agents in Chile, Puerto Rico and Canada.

Air Cargo World recently spoke with Azul’s cargo planning manager, Enio Rabelo Frota, about how the Azul Box program came about, what is done to expedite customs clearance and its strategy of working more closely with Correios, Brazil’s national post.

Q: What is unique about Azul Cargo Express’ operations?

Enio Rabelo Frota: The differentiating factor of what we do here is the domestic business, where we operate using a franchisee model. Apart from the airport, we also have retail stores similar to those operated by FedEx or UPS, located in large cities with an abundance of commercial or industrial activity. Franchisees handle selling, pick-up and delivery. We not only handle airport-to-airport, but also the final-mile, so we can provide a full solution, doing the distribution of books, electronics, auto parts, wines – everything that is sold via the internet. On the international side, we also do last-mile internationally, with a courier product to the U.S. and Portugal. For this, we are mainly competing with the large integrators such as DHL and FedEx.

Q: What kinds of commodities are moving on Azul metal?

ERF: If we’re talking about the domestic market, most of what we do is courier – small package, door-to-door e-commerce. Almost 100 percent of the domestic flights are bulk loaded. We use A320s, Embraers and ATRs. None of those aircraft are palletized. We do bulk loading, and we have operational procedures to do mailbag consolidations for parcels. The only aircraft that we carry palletized loads on is the A330, from which we have four routes in Brazil that utilize that aircraft.

Q: What is Azul’s relationship with freight forwarders?

ERF: We have a lot of freight forwarders as our customers. For our international business, most of the cargo is from forwarders. All of the U.S. flights from Orlando and Fort Lauderdale are almost completely full, and 90 percent of the cargo is general cargo. International cargo arrives in the morning, and then, in the afternoon, we can do the domestic routing. Or, if the destination is in São Paulo, we do the final-mile delivery.

Q: What is Azul doing to accommodate growing demand for e-commerce?

ERF: Every day we bring in many packages from the U.S. This is really good for Brazilians buying internationally. People travel to the States to shop, but the e-commerce option is seen as a positive. If you shop on Amazon’s U.S.-based website, many products cannot be shipped to Brazil using traditional couriers. Azul Box thus makes thousands of additional products available. You can now shop the same selection available in the U.S.

Q: How does Azul Box handle the customs clearance process?

ERF: Duties and taxes must be prepaid before a shipment is sent to Brazil. This solves a lot of future problems because the customs clearance process is really rigorous and by-the-book. Duties and taxes are quite steep, so we calculate the duties and taxies prior to the shipment with a quick calculator on the website. We then charge duties and taxes together with the freight so that no additional fees are collected upon delivery. Other couriers receive cargo in Brazil, clear, pay and then ask for reimbursement at time of delivery. This is often a problem, as the cost of duties and taxes sometimes surprises the customer. But it’s only a matter of four to six hours to clear customs.

Q: What is the rationale behind the recently announced plan to launch a JV-company with the national post agency, Correios?

ERF: The purpose is to create a new company with investment from Correios and Azul. The new business will handle a lot of the mail for Correios. [Pending government approval] everything that needs to be transported by air through the JV company will be handled by Azul, carried in the bellies. The idea is to reduce transit times and costs for the post mail. The model has operational advantages and financial benefits because we use commercial flights. The Post is currently trucking a lot of cargo, and mail that is flown travels along a select number of capital-to-capital routes centered around 18 airports, with trucks providing onward distribution. In the new model, we can fly to 100+ airports to reduce congestion in the capital with direct flights to the final city. If everything goes well, we expect government approval to take around 90 days. The implementation will occur beginning in the final quarter of this year, and gradually through next year.