All Nippon Airways (ANA) is pushing for broader global reach.
On the heels of its joint-venture agreement with Lufthansa Cargo, the Japanese carrier has joined hands with United Airlines’ cargo division to form a partnership.
While cargo joint ventures tend to look good on paper, they don’t always unfold as planned. But the ANA-Lufthansa jv is adding a few new wrinkles to create a more symbiotic relationship. For example, both tie-ins differ from most traditional airline alliances on the cargo side in the inclusion of antitrust immunity. “This allows them to synchronize their network schedule, float common tariffs, and also carry out joint sales and marketing activities,” observed industry veteran Ram Menen, who headed Emirates SkyCargo from its early days until 2013.
“Antitrust immunity is great. However, it is a very expensive and time-consuming process in obtaining all approvals worldwide because of the global nature of the air cargo business,” he added.
Operational aspects aimed at achieving cost savings are secondary in such a constellation, but this does not mean there is no room for them, according to Menen. A spokesman for ANA pointed to joint activities such as co-location at a number of stations in Japan and Germany, but he confirms that the emphasis is elsewhere.
“We are not only focusing on sales activity, however. Joint sales is one of the biggest parts of the joint venture, which should be authorized through antitrust immunity,” he said. The ultimate goal of the venture goes beyond joint pricing to the emergence of “a virtual airline” to control both airlines’ capacity jointly.
How unfettered is each partner’s access to the other’s capacity? Interline agreements, which have played a core role in many alliances, are only effective if the partners have guaranteed space on each other’s planes, notes Jan Krems, president of United Cargo.
This was confirmed by the ANA spokesman. “We can sell each partner’s free space on each flight, then both sales sections are now communicating like [a single company] to fit our customer space requests to our joint capacity and maximize space accommodation. In that meaning, we are going to expand our transparency in space control through the joint venture program.”
At this point, the cooperation between ANA and the German carrier covers regular and express cargo. Mindful of customer interest in other segments, the pair would like to add special products gradually, ANA indicated.
The Japanese airline and its venture partners have left it open in how far product definitions should be aligned, as the SkyTeam has done with its lineup. ANA views this matter as a medium-term question to address.
Stan Wraight, executive president of Strategic Aviation Solutions International and a former executive of KLM Cargo, pointed out that the joint venture that KLM and Northwest had on the North Atlantic (which has survived to include Delta today) worked well, although both airlines sold their own products. The key element was the commercial decision to share revenues and profits, which eliminated the pitfalls of competition within the partnership, he said.
Senior Lufthansa Cargo executives have blamed the failure of the carrier’s former WOW alliance (with Japan Airlines, Singapore Airlines and Scandinavian Airlines System) on the absence of a joint bottom line, resulting in a lack of cohesion that allowed the members to drift apart.
A different kind of alliance that took shape last year was the connection between IAG and Qatar Airways, which centers on the former taking block space on the Middle Eastern carrier’s freighter service from Hong Kong to London, via its Doha base. This arrangement allowed IAG to return the 747-8 freighters it had leased prematurely to the lessor. To some observers this is pretty much all there is to the IAG-Qatar link, but Wraight reckons that partnership will go further.
“They’re trying to develop a real cargo alliance,” he said, adding that others are also on the hunt for alliance partners. “It is no secret that KLM has been trying for years to do something with China Southern.”
Some observers regard the central role of antitrust immunity in the Lufthansa-ANA venture as a reflection of the German carrier’s approach. “This alliance is driven by Lufthansa. Lufthansa needs it to build a strategy to compete,” Wraight said. The German airline has signalled its intention to form similar alliances with other partners. The alignment of ANA and United suggests a possible link between Lufthansa and United. Krems had no comment on this.
According to ANA, its venture with the U.S. airline would basically “be almost the same business program as we do have with Lufthansa Cargo.” For his part, Krems sounds less sure where the journey is going. Having taken over the controls at United Cargo last year, with some issues to address, building up the ANA link is clearly not at the top of his agenda.
“We look where we can grow together,” Krems added. “We look at each other’s network, we look at interline possibilities. How can we connect our schedules better? We do not want to move too fast, not take too big steps in the early stage.” —Ian Putzger