Ten years ago, Cathay Cargo set out to link up Latin America with Hong Kong and Asia via a foothold in Mexico. The inaugural freighter flight landed in Guadalajara in October 2013, and people were, as Vice President Cargo Americas Fred Ruggiero recalls, slightly puzzled.
The move made sense. Guadalajara was a booming export centre, rich with perishables potential, but more significantly it was a high-tech centre, earning it the moniker ‘Mexico’s Silicon Valley’. But even as the inaugural flight landed, with Tom Owen, now Director Cargo but then Senior Vice President Americas, leading the celebrations, people were wondering why Cathay Cargo was only interested in Guadalajara.
‘I remember everyone was looking at us a bit oddly and asking “Only Guadalajara? Why not Mexico City?”,’ says Ruggiero. ‘And so we went back, we spoke to head office and within a span of a few months we were flying to Mexico City too because we hadn’t properly appreciated that it was the biggest import market in the country.’
Operations commenced with two flights per week routing in to Guadalajara from Anchorage and returning to Hong Kong via Los Angeles and Anchorage, with Mexico City being added into the loop within the first six months.
So how has it gone? More than 10 years on and flights are now daily and twice daily on Wednesdays throughout the winter season, routed Anchorage, Mexico City to deliver the imports led by e-commerce (and to pick up berries routed there in the peak perishables season), and then on to Guadalajara to pick up more exports and back to Anchorage and Hong Kong. Such are the volumes on board that these flights no longer call at Los Angeles. That big uplift and increased frequency is a sign of significant success. ‘I think it’s a gross understatement to say that these flights have gone better than anticipated – it’s much better than that!’ says Ruggiero.
Rory Cahill, Area Cargo Manager and Country Lead Mexico, adds: ‘We’re still the only Asian carrier with this frequency of freighter flights, so we are the biggest connector between the two regions.’
That said, it’s not all been plain sailing. Air cargo is closely linked to the fortunes of manufacturing, trade and the global economy. Throw in a global pandemic, and the past 10 years have been interesting, to say the least. ‘We’ve had to shift to accommodate new market realities,’ says Camilo Gallo, Area Cargo Manager, Miami and Offline. ‘That remains our strategy, to adapt over time to keep up the business and get the best out of the market.’
The growing team has managed to keep developing the market – and grow brand loyalty. Let’s have a look at some of the changes and events that have shaped the Mexico market.
Silicon Valley dries up
Guadalajara’s moment in the sun as a tech capital has faded. While Foxconn, IBM, HP, Dell and Siemens were in situ in 2013, a chill wind had started to blow through the sector, with a decline in manufacturing output. At that time perishables exports by air were starting to increase from a one per cent base to around 12. These had included, as they do today, avocados and berries. Trends in technology changed too, and the once essential business tool, the Blackberry, which was manufactured there, itself perished as the smartphone took hold in consumer affections.
Again, adaptability came to the fore both for Cathay Cargo and Guadalajara. Today, while some space is given over to electronic and automotive components, the bulk of the city’s air exports are perishables. ‘The airport has modified the cargo side of its operations to be more perishables-oriented,’ says Fernando Dragonne, Area Cargo Manager, and Cathay Cargo’s first employee in Mexico. ‘And the main destinations for these berries and avocados will be the Chinese Mainland and Northeast Asia, especially Japan.’
The market and the competition
After a few years since the start of the flights, one of the big markets was the Chinese Mainland, and it remains important, but over the past few years, that strategy has changed as well. ‘We had to adapt our strategy again because of market conditions,’ says Gallo.
This change was precipitated by a Chinese Mainland carrier starting flights to Mexico. ‘Our job is to get the best out of the market,’ Gallo adds. ‘In this case, the high yields were in other destinations across Northeast Asia, Southeast Asia and Australia, which we can reach via our network from Hong Kong, and we are putting more of a focus on higher yield solutions such as Cathay Fresh.’
The pandemic
Cathay Cargo’s operations were not immune from the effects of the pandemic. Mexico’s manufacturing output, particularly in the automotive sector, actually increased at some points during the pandemic as lockdowns in the Chinese Mainland snarled supply chains. This to some extent foreshadowed the post-pandemic trend for near-shoring, and Gallo says that Cathay Cargo picked up automotive volumes during this time.
But then when the Hong Kong SAR imposed more stringent restrictions on flight crew in early 2022, this temporary boom went bust as the overall Cathay Cargo freighter contracted. ‘I guess the best way to describe it is we that didn’t fly into Mexico for five months,’ says Dragonne. ‘But the first three flights, when we resumed, were full. The loyalty was there; we didn’t lose customers. And that speaks volumes of our product, the work our GSA does and the commercial side of our business.’
MEX to NLU and the new interline hinterland
This year started with the news that in order to reduce congestion at Mexico City’s main airport, the government decreed that pure freighter carriers would have to move their operations to a new separate airport, Felipe Angeles International Airport (NLU) by the summer. That would prove problematic for freight arriving at MEX in interline partner passenger aircraft from across the continent.
While the new airport is an improvement in terms of facilities and it was straightforward to organise forwarders to deliver directly there, it has become less easy to guarantee smooth timely transfers by road from the old airport.
Again, adaptability has been key here. ‘We lost some belly capacity, but we didn’t lose the business, which is the important part,” says Gallo. ‘We’re working with our Partnerships team to look for freighter operators that fly to NLU. We are also working with our existing passenger interline partners by feeding cargo that would have transferred in Mexico City into Los Angeles, Miami, New York or even London to connect with our services to make sure that Mexico continues to be an essential connection point to and from Latin America, just like Miami. And we’re confident that we can repay the loyalty of our customers.’
And the future…
Mexico is experiencing something of a boom again as one of the principal beneficiaries of the de-risking and near-shoring phenomenon which sees manufacturing diversifying or shortening their supply chains to be closer to markets. As the industry moves to EVs, Mexico is becoming something of a manufacturing hub, with a need for access to the US market, and a supply chain that spreads across Asia. This is being strengthened further with the proposed Tesla ‘Gigafactory’ that should break ground next year near Monterrey.
‘We do see an opportunity, not only now, but in the future,’ says Gallo. ‘If Tesla does establish itself in the Monterrey area, I guess in the next 10 years we could be flying to Guadalajara, Mexico City, and Monterrey. Who knows but why not?’
10 years of Mexico operations celebrating with customers and suppliers
We thank the Cathay team for the invitation to celebrate its 10th anniversary. Cathay Cargo has offered a very good service, great route coverage, flexibility, partnership and always looks for solutions that allow us to grow together.
Mariana Hernandez Garay, Head of Airfreight, DHL Global Forwarding Mexico
During all this time to work with Cathay Cargo in Mexico, we received the best service and support to move our cargo to the Chinese Mainland (our principal market) and other destinations. It has been a pleasure to celebrate these 10 years together and we want to wish more years to win more business opportunities not only in Mexico but in the rest of the word.
Elizabeth Vazquez, Station Manager, Express Forwarding Company
Congratulations to Cathay Cargo for a decade of successful air operations in Mexico! Your commitment to excellence shines through, and the outstanding service you provide is truly commendable. Here’s to many more years of success and seamless logistics!
Brenda Ochoa, National Airfreight Director, Freight Forwarding, GEODIS Mexico
Congratulations to Cathay Cargo on your 10th Anniversary. These years are evidence of consistency, collaboration, innovation and an understanding of customer needs. The success of this long-term partnership has enabled us to improve the customer experience by continually working together on operational efficiencies and innovative solutions. And a special thank-you for all your support.
Evelyn Beltran, Air Manager, Expeditors Monterrey
Celebrating 10 years of Cathay Cargo services to Mexico with customer and supplier events in Guadalajara and Mexico City last month
