DHL launches virtual cargo airline for supply chain customers in Brazil

Levu Air Cargo in Brazil took delivery last week of an Airbus A321 passenger-to-freighter converted aircraft and will operate it at the direction of DHL Supply Chain. (Photo: SmartLynx Airlines)

The contract logistics arm of DHL Group has partnered with a startup cargo airline in Brazil to launch a private air transport service as a more reliable alternative to commercial passenger airlines and trucking for domestic distribution of high-value goods in sectors such as automotive and health care.

The venture with Levu Air Cargo is noteworthy because the freighter service involves DHL Supply Chain and not DHL Express, which has long outsourced freighter operations for its express parcel network to many companies under the DHL Aviation umbrella.

DHL Supply Chain announced last week it is investing $98.3 million in the new enterprise, mostly for enhanced airport facilities and payments to Levu for air service and expenses. DHL does not have any equity position in Levu. The contract has an initial term of seven years.

Levu Air Cargo is also investing more than $103 million to operate four cargo jets for DHL, including the first Airbus A321 converted freighter in Latin America. SmartLynx Airlines, a Latvia-based provider of outsourced airlift to airlines and charter services, said Tuesday that it leased the A321 to Levu Air Cargo and delivered it to the airport in Recife, Brazil, last week.

SmartLynx is the largest operator of A321 freighters (10) in the world, and more than half are committed to contracts for DHL Express in Europe. The A321 leased to Levu became available because another aircraft was assigned for DHL in Europe, SmartLynx spokeswoman Gita Deniskane said in an email.

Leave the flying to Levu

The new air cargo operation will launch in late June and initially connect the cities of Campinas and Manaus daily, with service three times per week between Campinas and Recife, DHL said Wednesday in an update provided to FreightWaves. Levu Air Cargo is still going through certification with Brazil’s civil aviation agency for its commercial operating license from the National Civil Aviation Agency of Brazil, which it expects to receive next month. The A321 must also meet certain compliance requirements before it can be registered on Levu’s operating certificate.

Officials said the all-cargo service could eventually be expanded to other cities and countries. Belém will be added to the network in the coming months, Plino Pereira, president of DHL Supply Chain Brazil, said in a Levu news release.

Levu Air Cargo plans to receive one more A321 freighter this year, followed by two used Airbus A330-300 aircraft also converted from passenger configuration to accommodate cargo containers. The A321 has 29 tons of capacity and the A330 can carry up to 68 tons of goods. Cargo aircraft can carry heavier, larger loads than the passenger aircraft DHL frequently utilizes in Brazil, as well as most dangerous goods.

The route for the second aircraft is still under study, but Levu said Porto Alegre is a possible destination.

The partners forecast they will transport up to 4,000 tons of cargo per month in the first year of operation and 10,000 tons per month by the end of 2025, when all the aircraft are in service. Second-year volume represents  about 3.5% of the total current air capacity in Brazil. Target markets for the new service include pharmaceuticals, life sciences, electronics, automotive, perishable goods and e-commerce. DHL Supply Chain’s business model is based on long-term arrangements under which it designs and plans supply chain networks, and manages warehouses, inventory, transportation, distribution and order processing for companies.

Other DHL Group units, such as DHL Global Forwarding and DHL Express, will also be able to take advantage of Levu’s scheduled service to connect imports and exports to the domestic network. Polar, a DHL company specializing in temperature-controlled trucking, is also expected to use the flights for shipments traveling long distances within the country.

Under the agreement, DHL will pay Levu upfront for fixed allocations of space, with guaranteed minimums. The arrangement is similar to partnerships DHL Express has with transportation suppliers. In addition to determining the network and flight schedule, DHL has priority access to the freighter capacity. Levu is able to sell any excess space to freight forwarders and other customers just as Atlas Air markets extra capacity on the aircraft it operates for DHL Express.

Levu is intent on using its share of the aircraft for e-commerce retailers, as Amazon and Mercado Livre fuel the popularity of online shopping in Brazil. Gol Linhas Aéreas Inteligentes S.A., until recently a pure passenger carrier, is Brazil’s largest cargo airline. It began transporting packages within Brazil for Mercado Livre in August 2022 and now operates six Boeing 737-800 converted cargo jets for the Latin American platform.

DHL will essentially resemble the virtual airlines at Amazon and Mercado Livre, which use their sales and logistics capabilities to fill aircraft that carry their brand name but outsource the flying to certified operators. The same model is used by tour operators in the travel industry that charter aircraft under long-term service agreements.

In 2020, DHL Supply Chain opened an exclusive air hub at Guarulhos International Airport in São Paulo to improve processing speed and handling care for domestic freight distribution, mostly via passenger airlines, at a lower cost than using agents.

DHL will continue to utilize passenger flights for freight distribution because they offer wider service across Brazil, but the dedicated freighters eliminate the risk of commercial airlines prioritizing passenger luggage and bumping shipments if space is tight. In addition to guaranteed capacity, other advantages include more versatility, better lead times and lower prices due to increased ability to do consolidations, said Solon Barrios, vice president of transport at DHL Supply Chain.

Click here for more FreightWaves stories by Eric Kulisch.

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