The trail blazing accord recently announced by Lufthansa Cargo and ANA Cargo could be a real game changer. If it works out according to expectations it could well become an attractive
business model that other carriers might be intrigued to follow.
In his first interview given to any media after taking the chair at LH Cargo, CEO Peter Gerber illustrated to CargoForwarder Global the opportunities the pact offers for both airlines.
The big bang is scheduled to happen on 1 December. Then, Lufthansa Cargo and their future joint venture partner ANA Cargo will kick off their capacity unification project on all routes from Japan
to Europe. Basically, the shoulder-to-shoulder process could start right away, but both sides are currently still straightening out minor issues to avoid any operational or communicative hiccups
before things start getting serious.
From one way to two way traffic
Politically, the way for their alliance is paved after the Japanese Authorities approved the JV on 3 September.
The pact will be implemented in two consecutive stages. During the first phase it encompasses the sharing of cargo capacity, aligned price offers and joint sales initiatives on all passenger or cargo flights operated by both ANA and LH on routes from east to west. In a second step, following sometime during the second quarter of next year the flights in the opposite direction from Europe to Japan will be included.
The charming and most significant aspect of the deal is the sharing of finances by introducing a common cash box, emphasizes LH Cargo Chief Peter Gerber. Each cent earned by either ANA or LH Cargo flows into a single pot and is split between both sides at the end of the day. So it literally doesn’t make any difference if a shipment is flown by ANA or LH since the entire earnings of this upcoming joint capacity utilization is brotherly shared, the executive illustrates.
Peter went on to say that both ANA and LH Cargo expect increased turnover figures as result of their joining forces and cost advantages through streamlined processes.
Why did LH Cargo select ANA Cargo as JV partner?
Because of a number of criteria, tells Herr Gerber. “Japan is a huge cargo market in itself; ANA is a globally operating carrier with a dense domestic and intercontinental network and an extremely high claim to quality and – similar to us – they have since long a clear focus on cargo.” Asked about beyond transports by ANA from Tokyo to Seoul or Shanghai, for instance, Peter said that such transits can be booked but are not part of the JV. “Our agreement covers all flights between Japan and Europe and soon also in the opposite direction, but transits beyond these markets are excluded from the deal,” he notes.
How do customers benefit from the JV?
Together, LH Cargo and ANA Cargo have a combined market share of some 33 percent on all routes from Japan into the EU, depending on seasonal effects, according to various sources. Asked about what kind of added value clients receive as a result of the pact Peter mentions the enlarged network they have access to, the seamless electronic data exchange based on systems developed by Indian IT provider IBS and applied by both LH Cargo and ANA Cargo, the streamlining of all operations, and identical locations for export drop off and import delivery once handling activities are merged.
Who comes next?
The ANA-LH Cargo JV can be seen as blueprint for similar bilateral agreements. This is confirmed by Herr Gerber who announces more alliances subject to anti-trust immunity which will follow. Asked about potential candidates he remains tight lipped but indicates that a second partnership will most probably be announced by his airline in the course of next year.
Which requirements must a potential partner meet? According to CEO Gerber the carrier’s domestic market must be of substantial size, an intercontinental network together with a strong focus on cargo is essential and a compatible IT infrastructure would be helpful as well.
He concedes that based on these criteria there aren’t so many candidates that may come into closer consideration for LH Cargo. One hot tip could be United Airlines because the U.S. carrier fulfills the above listed items and uses the Bangalore developed IBS system for their data transmissions as LH Cargo and ANA do. “This is your speculation and not a topic on which I like to comment,” Peter reacted when asked.
Instead, he told CargoForwarder Global that LH Cargo will remain in the black in fiscal 2014. “We expect a slight increase in earnings against the previous year,” he predicted. In 2013, LH Cargo reported an operational net profit of €77 million.