On a recent afternoon, a big yellow Boeing 757 freighter emerged from the dark clouds hanging over Cincinnati/Northern Kentucky International Airport and flew close enough for assembled local notables to see the painted red letters on its side: DHL.
After it landed and taxied close to the seated audience, a crewmember descended the stairs, entered an electric DHL van that motored the 100 yards to the dais and presented DHL CEO Frank Appel with a single box containing a giant pair of scissors.
It was just what he and Kentucky Gov. Steve Beshear needed to cut the ribbon and officially open DHL’s new super-hub.
Corny? Perhaps, but an entertaining way to underscore the growth of DHL’s global air cargo network, which serves more than 220 countries. “All except Turkmenistan,” Appel said, “but don’t ask me why.”
DHL’s hub at Cincinnati/Northern Kentucky airport joins DHL’s two other super-hubs in Leipzig and Hong Kong as the international gateways for air cargo trade in those regions. CVG (the symbol for the Cincinnati airport, which is actually in Kentucky) is the gateway for the transshipment of DHL cargo moving to and from Latin America and the rest of the world.
“If you look at where Asia was 10 to 15 years ago, that’s where South America is today,” said Stephen Fenwick, CEO of DHL Express Americas. “I’m not saying that South America will be as big as Asia, but there is a big opportunity there, because it hasn’t been an area of a lot of investment.”
DHL invested $110 million in its CVG hub during the last 10 years to build it up for the Americas trade. It also has been investing in regional hubs in Miami for transshipment to South America and the Caribbean, in Mexico City for the rest of Mexico and in Panama for Central America. DHL flies cargo from Asia to its CVG hub overnight and then on to its Panama and Miami hubs in the next day and then in one to two days to the rest of South America.
“The new free trade agreements between the U.S., Colombia, Peru and Chile make those countries into the three that are in the forefront of growth for us,” Fenwick said. “We see big opportunity because there are large middle classes that are well-educated in most of the countries. They have big purchasing power, which you can see in Miami when they come up to shop there.”
The volume of cargo shipped by air into Latin America through the CVG hub is growing at a rate in the mid-teens, while outbound cargo from Latin America to the rest of the world is slightly slower. “It’s more of an opportunity on the inbound than the outbound at the moment, but one of the opportunities we are looking at in the medium-term is the intra-South American trade,” Fenwick said. “That’s why we invested in places like Chile and Colombia.”
Cargo growth to and from Mexico is growing so robustly that DHL has added daily flights from CVG to Guadalajara, Monterrey and Merida, in addition to those to Mexico City. Asian cargo shipments to Mexico are growing so fast that DHL is considering turning its Mexico City facility into an international gateway for that cargo later this year. “We’re still looking at volumes vs. yield,” Fenwick said.
A lot of the growth is coming from shipments of Asian components for manufactured goods assembled in Mexico and exported back into the U.S. and Canada under the North American Free Trade Agreement. DHL also just completed a new hub outside of Mexico City for the domestic Mexican market.
“That’s the biggest investment we’ve made in Mexico recently, other than the extra aircraft we’re flying down there from CVG,” Fenwick said.
DHL invested $30 million to expand its Miami regional hub last year to serve Brazil and other major South American markets on its own aircraft or on commercial flights. The airline, which used to fly one plane a day from CVG to Miami, now flies three. It also flies cargo directly from Hong Kong into Miami for distribution into South America.
“There’s a little bit for South Florida, but not three or four plane loads full,” Fenwick said. “Brazil is a powerhouse because of its size, but we see Brazil as a domestic economy. Trade is not at the forefront of their thinking like it is in China or India, and they tend to be more protectionist.”