Podcast: Modern Logistics’ Koga at Cargo Facts LATAM 2024

Jeff Lee
Hello and welcome to this episode of cargo facts connect, the podcast of cargo facts, the newsletter of record for the air cargo and freighter aircraft industries for over 40 years. I’m Jeff Lee, editor of cargo facts and it’s Friday, the 31st of May. Earlier this month, at Cargo Facts LATAM, I had the pleasure of sitting down with Cristiano Koga, chief executive of Modern Logistics in Brazil, for a fireside chat. Koga, who was appointed to the role in May 2023, is leading the company’s transformation into a fully integrated logistics player, and today we bring you this excerpt from the discussion.

Jeff Lee
You’ve really been everywhere in the logistics industry, you’ve been in so many different sides of the industry. But when it comes to modern logistics you joined exactly a year ago last week. What do you think you’ve you’ve learned and achieved during this time.

Cristiano Koga
It’s been a great journey, the last 12 months since I joined, modern logistics are more, just to step back a little bit and tell a little bit about our history. We celebrated 12 years, last month as well. So we were we were founded back in 2012. To be not cargo airline company. That’s a very important remark. But to be an integrator logistics provider, leveraging strategic assets, like airplanes, trucks, vans, and warehouses. In this new phase of the company, we are accelerating, you know, our growth not just on the airline business, but also on the ground business, as well as the supply chain, which means warehouse management content delivery, because at the end of the day, the industry has evolved. And customers, they just don’t want a airport to airport piece of their logistics, but they want a need to greater provider, you know with full visibility in the whole supply chain. And that’s where you know, more logistics come into play. And the long term strategic plan that was approved a couple of months ago takes us into this journey to become a logistics as a service provider. And part of this investment plan wants to bring you aircrafts, because we we think and we you know, we are very confident that the aircrafts that we have signed and already operating in Brazil will help us achieve this long term goal to be an integrated logistics provider with a time that a product end to end. So that’s a little bit about it. But also there is another important component in the overall strategy the last 12 months which is people human capital. Right we are in an industry, very technical operations process driven, but we cannot forget about the human capital side of it. So we have invested a lot of resources and a lot of capital in hiring good people right now. So uh, train these people in these new technologies, including AI, for example, because we intend that the way to differentiate in this market is through people leveraging cutting edge tech

Jeff Lee
All right, we’ll touch on some of those points in a little bit. But you were you obviously bring a lot of experiences with a sudden integrator based in Memphis. To what extent can that model be emulated in Brazil? And are you? Are you trying to reproduce that kind of model?

Cristiano Koga
That’s a very interesting question. Because once you operate in a global company in the region, and when you move to headquarters, right, that you manage the regions through, you know, zoom through PowerPoints, it’s quite interesting to see that one size does not fit all, when you think about strategy meeting a region like Latin America. So the reason I’m saying that is, is important, yes, to have a global framework. But the intention to do once is of every country in our region, for example, Brazil, Mexico, Colombia. So the way that we call Trump’s allies, the solutions from global companies into the region is very critical to be successful in a journey like that.

Jeff Lee
So when we talk about air freight and freighter aircraft in Brazil, would you say right now that there is an overcapacity situation in Brazil, just in Brazil?

Cristiano Koga
I think so, because we know the market was very optimistic about the rebound of the volumes in the short term. But it’s, you know, it’s coming up using the stairs, not the elevator. So very, very slowly. And capacity, I would say is outpacing demand, as we speak in Brazil, so that’s why it’s very important to diversify your network. Not only use your Raiders where it makes sense, but also adding different I would say assets into your network like trucks, vans and also warehouse So depending on the region, we expect the market to start growing faster the next 12 to 18 months, but still is growing single digits, I would say on the airfreight.

Jeff Lee
Right. But at least it’s growing.

Cristiano Koga
At least it’s growing yes that’s right.

Jeff Lee
Now, as I was saying earlier, you you are kind of making the move from previous generation to next generation when it comes to your freighters. And you have recently started your 737 800 BCF operations, talk a bit about the process of certifying those aircraft and inducting them into into the country and into your fleet.

Cristiano Koga
So everything is related to the long term strategy that we have a group with the board of directors, and that is grow as an integrated logistics provider. And we’re making the studies of the network planning and the fleet profile, the 800, the new generation made a lot of sense for us to you know, recommend to the Board to approve these investment is a long term investment, as you all know, and they will have approved last year. And finally, we received the first aircraft in Brazil last October. And the second one is past March. So both aircrafts now are certified by ANAC, it took around five to six months for the whole process. But working alongside our regulator at NEC, it made our lives a lot easier. Because we were very structured away, we prepare the whole paperwork, the documentation, the outlets, site visits, and the training of the pilots for the new aircraft. For us, we were expecting to have those aircraft certified in 12 months, but at the end of the day, we got it done in sick less than six months. And we’re ready flying them. And it’s amazing when you compare it to the classics and we still have in our in our fleet. The performance of those aircraft from payload perspective, from a cost to serve per unit perspective is amazing. So we’re very excited about the fleet. But again, it needs to serve the right industry, the Right Sector in the right routes. That’s why one of the pillars of our long term strategy is network planning. How do you apply the right asset to the right network to the right price point. So that’s, you know, the model that we have built using some new technologies.

Jeff Lee
I must say it’s maybe a bit unusual to hear about certifying something ahead of schedule these days. But when it comes to your 737 Classics, what’s what’s the latest thinking in terms of renewing those aircraft and keeping those in the fleet? What role do they serve right now?

Cristiano Koga
we’ll be back to the our long term strategy to become a integrated logistics platform with the strategic assets like airplanes, you know that the 3730 sevens are hundreds and the 300 is makes sense for specific projects, like charters or even ecommerce because it’s the cheapest airline, I mean, cheapest aircraft. And for depending on these like E commerce, it makes a lot of sense. So we still have you know, the classics, we have the two NGS and the classics that are within our in our fleet in reply those, you know, those assets to specific project mainly on ecommerce and charters, and it’s proven to be a very good decision to apply is, you know, tier one aircraft to these kind of projects and leave the NGS for the big route and international expansion as well.

Jeff Lee
So how much longer would you say you foresee keeping the classics right now?

Cristiano Koga
I think the right answer, it depends. It depends on how the customer will accept, you know, the classics, the projects that we’re working on. And not only keeping the classic but also expanding the fleet to some other projects that we are working on. So we have a plan, we are staying the course, what we have now is the two energies already operating and flying, the classics had to classics and for the time being I would say for the tiny which means six to 12 months, I think with a good position with those aircrafts and let’s see what the future holds.

Jeff Lee
I have an interesting question here from the audience. Do you see modern logistics expanding outside of Boeing Freighters into others, such as Airbus or Embraer?

Cristiano Koga
For the time being, to be really honest with the audience, I don’t see that because for us, it makes sense to stick to one profile fleet from many reasons, right, from a cost perspective, from a training perspective, from a experience perspective. But again, depending on the project, and we have some of them in the works, a different type of LEAP might make sense in the future. But for the time being, we’re very happy with aircrafts, that we have a DNGs. And we’re keeping that trend. But we know that depending on the market, e commerce or smaller, you know, routes not so as we call thick lanes or thin lanes, it might make sense to have a different aircraft a smaller one, for example, not a bigger one. And we’ll see. And I don’t foresee us having bigger aircrafts in the fleet. But depending on the regions models,

Jeff Lee
right, I was going to say because it’s such a vast country, and there are so many places that maybe you can’t really use a 747 Even at 300.

Cristiano Koga
Yeah, but also we need to take care of Brazil and also Mexico need to create demand, right? You have some regions in Brazil, like Salvador receive it that you have a lot of passenger flights, we have a lot of belly space. But if there is a demand in the future, it might make sense to have more aircraft and we see you know, some airlines already operating you know as well. On a press for ecommerce in Brazil, mainly to blame and now depending on the on the routes, but they’re very focused on that ecommerce site.

Jeff Lee
Now, as you take modern logistics into the future, and really make it modern. In the more short term, timeframe, where do you think the fleet will be at the end of this year? And next year?

Cristiano Koga
The end of this year, we have just signed for the seven 737 800. Right? We are operating them? What is four months, so pretty, pretty recent, the classics are still crazy, so we expect to keep the same profile. And if some of these other projects materializes, who knows which kind of aircraft we’re going to need to support our customers in that sense.

Jeff Lee
Are you already thinking about more eight hundreds, because we’ve seen we’re seeing lease rates much lower than than before. Are you thinking potentially you could take advantage of that.

Cristiano Koga
That could be right. So when you think about fleet, the mindset is kind of beauty suit for an aircraft, right. So if you have like a warehouse, or warehouse, depending on the project that you have for that specific facility, I see aircraft the same, right? So if the aircraft suits that specific project and could tie that contract to that specific fleet, I’m more than fine with that. So could be a 700 it could be a 400 could be another one like, you know, the Embraer errs or the airbuses. Who knows? But it all depends on the on the project that you have up in the near future.

Jeff Lee
Great. Well, Cristiano, thank you so much for your time, and we look forward to seeing your 800s fly outside of Brazil very soon.

Jeff Lee
That was Modern Logistics CEO Cristiano Koga, talking to me at Cargo Facts LATAM in Panama City earlier this month. And that’s all the time we have today. For more coverage of the freighter aircraft market, visit cargo facts.com. Thank you very much for tuning in, and join us again next time.