At the beginning of November, Cathay Pacific added another US city to its footprint in North America. The launch of twice-weekly Boeing 747-8 freighter service to Portland, which is served in tandem with Los Angeles and Anchorage, marked the Hong Kong-based airline’s 18th cargo destination in the Americas.

Cathay has kept building up its presence in North America in recent years, adding destinations like Portland, Rickenbacker and Mexico City for its freighters. At the same time, its maindeck presence in Europe has hardly budged, a reflection of the tepid Asia-Europe sector and the airline’s ongoing deployment of 777s on the passenger routes to Europe, which have given its cargo division ample capacity to fill.

At this point, however, Cathay’s focus is stronger on Europe as the carrier is building its joint venture with Lufthansa Cargo, which was announced in May.

On October 1, the German carrier moved into Cathay’s cargo terminal in Hong Kong, a step that will help with the joint management of freight between their respective home markets. For customers of both carriers this means one single location for export drop-off and import delivery arrangements.

“There will be many advantages for our customers and it represents an important milestone for the start of our partnership at the beginning of the year,” said Peter Gerber, CEO and chairman of the executive board of Lufthansa Cargo. “The teams of both airlines can now work on the optimal coordination of their handling processes.”

Cathay is planning to move its ground handling in Frankfurt to Lufthansa’s facility, and more co-terminal arrangements are to follow, the airlines signalled.

The pair have made it clear from the outset that their partnership is about more than reducing costs through sharing handling facilities. They want to work closely together on network planning, as well as sales, IT and ground handling.

The main thrust is on joint utilization of their combined capacity between their home markets. This will kick off in February with joint sales activities out of Hong Kong, to be followed at a later date by the same approach to marketing lift from Frankfurt to Hong Kong. With more than 140 flights a week on this sector, they can offer clients more choices and greater flexibility. According to the partners, customers will be able to access the entire joint network via the booking systems of both partners.

“Thanks to the strengths of our respective networks, our customers will soon benefit from more direct connections, greater flexibility and time savings,” said Simon Large, director of cargo at Cathay.

“We will also have more options for shipments which have to be transported by freighter due to their size or properties,” added Gerber.

For the airlines this translates into a ‘metal-neutral’ approach, under which revenues on the joint sector are distributed from a central pot. With this arrangement, their sales teams have no incentive to prioritize their own services, which has been a stumbling block in some earlier alliances.

The blueprint for the Cathay-Lufthansa alliance follows the matrix of the German carrier’s joint venture with All Nippon Airways Cargo, which has been in place since 2015 and now covers over 90 weekly direct connections between seven European points and four Japanese cities.

This has gone very well, said Frank Naeve, vice-president, Asia-Pacific, at Lufthansa Cargo. “Out of Japan we have seen a marked increase in shipments that we sell and then go on ANA flights, and vice versa. The customers see value in the combination of our networks.”

There have been suggestions that ultimately the full benefits from such alliances would come from an extension of their joint sales efforts beyond their respective home markets, which would allow the partners to tap into feeds beyond. For United Airlines, ANA’s Asian network is of great interest as the US carrier replaces its passenger flights between Japan and Asian destinations with direct connections for the latter to the US. Given the long stage sectors, this limits United’s bellyhold payload out of these Asian markets.

However, Lufthansa has no plans along these lines with either Asian partner for the time being, according to Naeve. “Our focus with both partners is on the home markets of these partners,” he said.

Still, the alignment has ramifications beyond Hong Kong. Lufthansa has no plans to expand its presence in the Pearl River Delta. “Our cooperation with Cathay in Southern China is a factor,” Naeve said.

By Ian Putzger

Air Freight Correspondent | Toronto