Colombia’s cargo expansion is coming up roses for Avianca

The roses are packed, labelled and cold-stored for shipment. A Some 500 million Colombian roses will be picked and packaged off to the U.S. for sale on Valentines Day. Colombian flower growers, suppliers of 65 percent of all roses that enter the U.S., will load up as many as 32 flights daily to supply the U.S. market on that day, exporting about 15 percent of their total annual overseas sales. Flower associations have complained the government isn't doing enough to help the industry after a 10 percent increase in the value of the Colombian peso since 2010 crimps profits of the nation's exporters who get dollars for their goods, leading some to fire workers. Bogot�. 2/02/2011

The roses are packed, labelled and cold-stored for shipment. A Some 500 million Colombian roses will be picked and packaged off to the U.S. for sale on Valentines Day. Colombian flower growers, suppliers of 65 percent of all roses that enter the U.S., will load up as many as 32 flights daily to supply the U.S. market on that day, exporting about 15 percent of their total annual overseas sales. Flower associations have complained the government isn't doing enough to help the industry after a 10 percent increase in the value of the Colombian peso since 2010 crimps profits of the nation's exporters who get dollars for their goods, leading some to fire workers. Bogot�. 2/02/2011

Published Feb 13, 2012

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Blake Schmidt Bogota

As night fell at Bogota’s El Dorado airport on Wednesday last week, truck drivers unloaded boxes of roses on to conveyor belts and into refrigerated warehouses, where workers bundled in sweatshirts and reflective vests prepared them for shipment on one of as many as 20 daily flights.

The pre-Valentine’s Day ritual, which sends 12 percent of Colombia’s annual flower output abroad in less than two weeks, mostly to the US, is running more smoothly than in past years.

As part of a $1 billion (R7.7bn) renovation, Latin America’s busiest cargo airport is doubling its capacity, making it easier to handle a surge in shipments forecast by cargo companies as a free trade agreement with the US is to take effect as soon as this year.

Avianca Taca Holding, owner of the country’s biggest airline, is betting on that expansion. The Bogota-based company doubled its cargo fleet with a $500 million purchase last year of four Airbus freighters and says it is considering cargo acquisitions after it sold $260m in an initial public offering last May.

“Avianca’s cargo business will probably take off, especially once the free trade agreement gets under way,” said Jorge Zuniga, an analyst at Bogota-based Interbolsa, Colombia’s biggest brokerage. The new facility was “one of the most advanced cargo terminals in the world”.

Zuniga is one of at least four analysts recommending Avianca as a buy after its 23 percent plunge made it the fifth-worst performer on Colombia’s IGBC benchmark index since its shares began trading last May. The gauge fell 0.8 percent in that time.

The company’s initial public offering (IPO) came just before a bear market in Colombia. That, along with an arbitration claim from Avianca’s former owner, Valorem, contributed to the shares’ poor performance, said Santiago Melo, an analyst at Bogota-based brokerage Alianza Valores.

Chief executive Fabio Villegas says the Airbus planes will allow Avianca Taca, which also has a Miami cargo hub, to maintain or increase its 35 percent share of Colombian air exports to the US. Flowers account for about 70 percent of Colombian air exports to the US by volume.

The new planes, the trade pact and expanded terminal would help Avianca boost its revenue from cargo by 13 percent in 2012 from the year before as the company increased its services in Argentina and Chile, Villegas said. The company’s Bogota cargo hub was more than doubling capacity as part of the airport expansion, he said.

“The US free trade agreement will create a new trade dynamic that is a golden opportunity,” Villegas said last week.

Cargo volume at El Dorado would grow by as much as 20 percent this year with the completion of the second of two cargo terminals in June, said Matthew Zagaja, the manager for OTCA, a contractor managing the new terminals.

The bulk of the Valentine’s Day rush at El Dorado came at night, Zagaja said.

“The loading docks get busiest at two or three in the morning,” Zagaja said. “The flower growers like the empty roads and cool temperatures.”

Zagaja said OTCA was installing a $2m security system as heavier traffic increased the need for heightened protection in a country ranked by the UN as the largest cocaine producer.

Avianca has about 26 percent of Colombia’s international cargo market and Lan has about 14 percent, according to statistics from Colombia’s aviation authority for the first nine months of 2011.

Total sales will probably rise to $4.1bn this year from $4bn last year, according to Acciones & Valores, a Bogota-based brokerage. Avianca’s share drop last year “cannot be explained by fundamentals”, the brokerage said in a January 18 report, in which it assigned a share price target of 6 050 pesos (R26). Avianca shares gained 1.9 percent to 4 070 pesos, a three-month high, on Friday. – Bloomberg

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