Airline alliance activity is on a high. The latest move on this front is the formal launch of All Nippon Airways’ cargo joint venture with United Airlines in early July. Hard on the heels of this follows the extension of ANA’s cargo partnership with Lufthansa beyond the pair’s home bases, opening the door to feed the venture’s trunk routes with cargo to and from other points in Japan and Europe.
At the same time, the German carrier is moving forward with its partnership plans with United Airlines and Cathay Pacific. For its part, though, the Hong Kong-based carrier has no ambitions to strike up additional partnerships in the foreseeable future.
As of July 12, ANA and Lufthansa are spreading their alliance into their respective regional networks. According to the German partner, their joint venture now includes more than 90 weekly direct connections between Frankfurt, Munich, Düsseldorf, London Heathrow, Paris Charles de Gaulle, Brussels and Vienna in Europe, and Tokyo Narita, Tokyo Haneda, Nagoya and Osaka in Japan. Lufthansa added that its European customers can also ship freight via Haneda to Fukuoka.
“We are now offering our customers throughout all of Europe even greater flexibility and speed,” declared Peter Gerber, CEO and chairman of the executive board of Lufthansa Cargo. “This is another important step with ANA.”
He added that joint handling at a number of stations should result in time savings for shipments.
The pair have not given any indication about the possibility of extending the joint network further to other points in Asia and Lufthansa destinations in the Middle East and Africa. According to a spokesman for Lufthansa Cargo, there are no concrete plans for this at the moment.
United Airlines Cargo, which just launched its joint venture with ANA, is looking to the Japanese to feed its trans-Pacific flights out of Tokyo. Increasingly the US carrier, which has fifth-freedom rights out of Tokyo, is cutting back its intra-Asian network centred on the Japanese capital as the deployment of long-range aircraft permits it to mount direct flights from Asian points to its home market instead of routing passenger flights over Japan. The long stage sectors limit the payload on the aircraft, prompting United to look to its Japanese partner to haul cargo to and from these points to connect with its own trans-Pacific routes.
But this is not on the initial agenda. For starters, the joint venture between ANA and United concentrates on joint sales and aligned operations for cargo flowing from Japan to the US and Canada, which will subsequently be extended to the opposite direction. The combined UA-ANA network includes 175 nonstop flights a week to 12 destinations.
Besides network reach, the ventures are supposed to deliver cost savings to the partners as they can reduce capacity. The pressure to cut costs has intensified in the depressed market, where overcapacity has wreaked havoc with cargo yields. According to the International Air Transport Association, the global interest group of the commercial airline industry, rates for general freight have sunk 15-20% from last year, as capacity has outstripped demand by a factor of three.
“It’s a landslide,” Gerber said. “With prices falling so quickly, we have to cut costs.”
Lufthansa Cargo has already taken steps to trim its costs. Two of its MD-11 freighters were taken out of service, as the carrier’s results in the first quarter showed a loss before interest and taxes of €19 million (US$21 million), down from a €52 million (US$57 million) profit a year earlier, with revenues down 21.8%.
In mid-June, LH announced plans to lay off 800 staff of its 4,600-strong global workforce. According to management, this will shave another €80 million (US$88 million) off its costs.
Next year, the airline’s next Asian joint venture is supposed to kick off, which will align LH with Cathay Pacific. This will cover over 140 weekly flights between Hong Kong and 13 European destinations. In addition to the joint marketing of their combined capacity on those routes, the pair intend to align their IT systems and network planning and join up handling activities, initially at their respective hubs in Hong Kong and Frankfurt.
Simon Large, director of cargo at Cathay, has made it clear that the partnership will not entail cuts to the Asian carrier's maindeck capacity to Europe.
He has also ruled out further cargo alliances for Cathay in the foreseeable future, noting that the LH partnership has been in the making for years and that the development of such ventures requires a lot of time and resources.
By Ian Putzger
Air Freight Correspondent | Toronto
