LH Cargo and ANA Cargo go 'Metal Neutral'

Both carriers consolidated their joint capacity on trade lanes between Japan and Europe in order to secure additional market shares. It's the world's first antitrust immunity authorized cargo joint venture. Although unique, it might become a trailblazer for the entire industry. The carrier's highly innovative concept and their intended strategic moves were presented last week to the media in Tokyo.

Michael Stoermer
Michael Stoermer

'Metal neutrality' were the most heard two words from either LH Cargo or their ANA counterparts at meetings, conferences or bilateral talks in the Japanese capital. This because their agreement to join forces is a completely new kind of partnership two independent carriers have engaged in and which is expected to produce substantial benefits to both the participating airlines and their clients.

Phase one of the carrier's capacity consolidation started 1 December of last year with shipments routed from Japan to Europe flown either by LH or ANA. The next step is slated to follow this summer, presumably in August, with the eastbound cargo transport.

'Metal neutrality' simply describes the irrelevance if shipments routed from Japan to Europe are flown on board a LH aircraft or in the holds of ANA's passenger fleet. "On these routes we are acting as one, whereas on all other markets we remain being competitors," illustrates LH Cargo's Regional Director Japan & Korea, Michael Stoermer.

Bernhard Kindelbacher
Bernhard Kindelbacher

Married since last December
Both carriers have commenced teaming up their sales forces at all mutually served destination. Handling activities are in the process of being aligned in Japan and Europe. And - most importantly - they have established a common cash box in which all payments from forwarding agents flow that had their goods transported under the joint venture agreement on westbound routes.
"Building trust was and still is our hottest topic to be accomplished in daily work," states LH Cargo's Head of Strategy, Bernhard Kindelbacher. Which demands thinking in new directions, adds Toshiaki Tomaya, ANA Cargo's Executive VP Global Marketing: "Until 30 November of last year we were competitors. Since 1 December we are married."

Secret financial formula
No doubt, the common cash box is the core element of the two carrier's pact. However, the revenues generated by both partners are not exactly split 50/50 because ANA offers more capacity on their flights to Europe than its partner LH Cargo. The financial deal - or better: who gets how much at the end of each month? -  is based on a complicated formula that a handful of revenue management experts on either side are sorting out. But leaving the secret of this special task aside, the general impression is that the joint venture seems to work well both operationally and financially. At least this was unanimously assured by leading managers of both airlines at the Tokyo-held gathering.

However, looking behind the curtain only a partial marriage of the honeymooners comes to light. This, because the cargo pact agreed between ANA-LH is solely based on two products which are mutually sold and transported under the 'metal neutral' scheme - standard shipments and express items. Excluded are - at least during the initial phase of the JV - special products like pharmaceuticals or dangerous goods, for instance. They might be added at a later stage because the partnership is based on growth.

What comes next?
Meanwhile, the flight schedule of LH and ANA Cargo is consolidated in the booking systems, rates and surcharges are aligned and shipments transferred to and flown on partner's flights can be tracked in an own system.

Fears of some staff that jobs would be sacrificed as result of the agreement have vanished because both sales organizations stay in place.

Toshiaki Toyama
Toshiaki Toyama
Peter Gerber
Peter Gerber

So where do both go from here?
"It's no secret that we try to set up a similar antitrust immunity authorized joint venture with United Cargo on transpacific routes," says ANA Cargo's marketing chief Toshiaki Toyama. He expects a decision to be taken by the Japanese and U.S. officials soon. Similarly, LH Cargo seems to have taken first steps to team up with a potential North American partner. "We expect to announce results on an additional 'metal neutral' partnership at a later stage this year," states LH Cargo's CEO, Peter Gerber. He refused to confirm when asked whether this may well be United Cargo. “It’s the media’s privilege to speculate but please accept our principle that we do not comment on rumors,” states the airline’s helmsman.

Heiner Siegmund

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