Cargo Chat: How ANA Cargo intends to get to its ‘next stage’

ANA Cargo is not the company it once was. That’s because in October 2013, ANA Cargo became ANA Cargo Inc., a stand-alone company, wholly owned by ANA Holdings Inc., the parent of All Nippon Airways.

This subtle change in corporate governance is important. It has precipitated significant alterations at ANA Cargo, some of which are not readily apparent to the global air cargo industry and all of which are crucial, considering that ANA Cargo was the No. 8 cargo carrier in the world last year and has a stated goal of reaching No. 5 this year.

Among the more noteworthy changes is a refocus of ANA Cargo from a “Japanese air cargo carrier” to one with a regional and global viewpoint. With its revised viewpoint, ANA Cargo has initiated a joint venture with Lufthansa Cargo, inked last year, and is planning several more initiatives as it enters what the company calls its “next stage” with its eleven 767 freighters.

The next stage is the brainchild of Akira Okada, ANA Cargo’s thoughtful CEO. In a recent exclusive and wide-reaching interview with JJ Hornblass, Air Cargo World’s executive editor and publisher, Okada shared a unique insider’s look at ANA Cargo’s strategic directive for 2016 and beyond, and offered his worldview on Asian economics and the transformation of China into a consumer-driven economy. Portions of their conversation at ANA’s Tokyo headquarters appear below.

What’s ANA Cargo’s new core strategy?

We are very focused on intra-Asia. Central to this focus is our Okinawa cargo hub. Our concept is to connect the Asia area that is within a four-hour flight radius. Some areas we serve are not covered in exactly four hours – OK, but generally all our cargo flight coverage is within four hours. There are 2 billion people living within that radius, so there is huge demand… As well, we see quite a lot of potential in e-commerce shipments in China, and we are targeting that. ANA Cargo has a logistics arm: OCS. By utilizing the network of OCS, we can secure e-commerce shipments and put them on ANA Cargo flights. ANA Holdings and Tencent [the Chinese e-commerce company] last year made an agreement to enhance a partnership that will result in more ecommerce shipments for us. Beyond intra-Asia, we are focusing on Asia and China to Europe and to the U.S.

 How does the partnership with Lufthansa Cargo come into play here?

The joint venture is not only about jointly increasing the revenue, but about increasing the customer benefit. The customer can have more varied flight choices and have more access to the capacity on TC2 [Asia-to-Europe routes]. That is why we got the ATI [antitrust immunity], something no other airline has received. With the ATI, we can talk about capacity issues with Lufthansa – are we going to increase or decrease capacity? We are legally allowed to discuss that with Lufthansa, and that is what we are doing.

 And for Asia to U.S.?

We will launch a similar, new joint venture with United Cargo no later than June 2016.

 What about the weakness in Asia-to-Europe traffic? Does that run counter to your Europe strategy?

We acknowledge that demand to TC2 and from Europe is not as strong … but it is also true that cargo is still moving there. We just need to get the capacity right. We are arranging the capacity, but the cargo is there. We have three options: We can use our freighters or our belly space or rely on Lufthansa Cargo capacity. In that sense, we can respond to the market conditions quite flexibly. We are a combination carrier, and we are taking advantage of our network. It is not a point-to-point business. It is not like Cathay Pacific or NCA; they have big widebody freighters, and they are going point-to-point. We see [point-to-point] as a difficult business. With Lufthansa, we are looking to use the capacity in our belly and in our freighters. The cargo market has a lot of volatility risk. We are trying to respond to the market situation so we can get the business wisely. If we just had widebody freighters, we could not respond to the market promptly or wisely.

 Can you describe an example of how this hyper-flexible approach works at ANA Cargo?

We used to have double-daily flights from Narita to Paris. We suspended one flight [and] started Narita to Brussels. By last November, Lufthansa had already done a capacity reduction for its winter schedule. We can supplement the reduction in their winter schedule with our freighters or with belly space. That’s the kind of flexibility we are talking about.

This four-hour strategy relies on Chinese traffic volume, but China GDP growth has been spotty. Does this concern you?

I am not that much worried. For the Okinawa hub, China is an important area … but we are focusing on Asia. Of course, China’s economy is slowing down, but the production foundation can shift to other parts of Asia. In that sense, we are not so pessimistic about it. It is true that the production is slowing down in China, but the consumption aspect is still growing there.