Tomorrow (03MAY21), United Cargo and Lufthansa Cargo will celebrate the third anniversary of their transatlantic joint venture (JV). It is not known whether champagne corks will be
popping at the cargo airlines' headquarters in Chicago and Frankfurt to celebrate the date. Though if this is the case, it would certainly be appropriate because, after some initial hiccups, the
partnership has developed into a success story - for both sides, equally.
Looking back is sometimes very instructive, as in the case of the JV agreed between Lufthansa Cargo and United Cargo. For example, the first joint shipment, flown across the North Atlantic on
03MAY18, kicking off the partnership, weighed just a meager 1.3 kg. “Last week, we carried a shipment of 43 tons between Europe and the U.S.,” reports Thomas Egenolf, Vice President
Western Europe, Lufthansa Cargo. A considerable jump in shipment size compared to the early days of the collaboration.
Key success factors
The success of the carrier’s transatlantic JV is based on a simple idea: “Delivering a combined and convincing offer to the market, which beats the standalone solution,” Mr. Egenolf reasons.
These are the big points that make the JV attractive for shippers and forwarders alike: Firstly, the ‘metal neutrality’ of transports. In day-to-day practice, this means that it does not matter if a shipment is flown aboard a UA aircraft or a Lufthansa jetliner. What matters are capacity availability, attractive routing options, and short transportation times. The underlying commercial model is based on metal neutrality, a trust-building prerequisite for joint metal neutral selling.
Secondly, the network expansion is a key issue, benefitting both sides equally. This way, United Cargo and Lufthansa Cargo can offer customers a multitude of flight options. For instance, freight transports from Florence, Italy, to Buffalo, USA, with precisely timed transits at the carrier’s European and North American key hubs are now possible, Mr. Egenolf illustrates.
The compatibility of electronic systems, standardized handling procedures, identical tracking and tracing solutions, and similar warehouse procedures and infrastructural offerings round off the commonalities. Weekly telcons are held to identify weak spots or highlight successes achieved. “Thanks to our joint venture, we are able to offer our respective customers a wide range of pan-European and domestic U.S. transport services, which have become very popular since we started our collaboration,” manager Egenolf explains.
AWB 016 or 020 – it makes no difference
Ultimately, it is the customer who decides which AWB they prefer. “We put our capacity into the systems and the customer decides which AWB to use to book their goods: UA's (016) or LCAG's (020).” Due to the metal neutral commercial set-up between both parties, it is irrelevant which JV partner transports the goods physically across the North Atlantic.
For antitrust reasons, the pact is limited to the EU and the USA. Shipments coming from a European forwarder destined to MEX or CAN, but transited in the USA, are not part of the JV scheme, for example. The opposite is also true for U.S. consignments landing in an EU member state first, but flown right after to the UK, Ukraine, or Russia, for instance.
The carriers’ fleets, says Mr. Egenolf, complement each other. While UA operates hundreds of passenger-only aircraft but not a single freighter, Lufthansa Cargo offers the market main deck capacity thanks to its 13 Boeing Triple Seven freighters, including the exclusive capacity at AeroLogic, plus a few MD-11F tri-jets. Assets, that the U.S. carrier can equally utilize as well as its access to the lower deck compartments of Lufthansa’s passenger jetliners once Covid-19 fades out and air travel picks up again.
We asked United Cargo, how the JV worked out so far from their point of view. This is what they said: "There are several reasons why an airline would consider partnering in a cargo joint venture. As JV partners, United and Lufthansa have cooperated on the availability of capacity, we shared our extensive network and rourtes facilities, and aligned the booking and handling processes."
And which benefits did it deliver? "This partnership gave United Cargo customers in Europe and the U.S. access to almost 300 additional connections throughout Europe and the U.S."
Finally, what still needs to be done to bring the JV to the next level?
"Customners want solutions that are nimble and quick-to-market. As global commerce and supply chains recover from the pandemic, our focus is increasing the joint venture's efficiency and agility."
More products could follow
“I’m sure that there is great potential in expanding the product scope of our joint venture,” Egenolf says. However, he does not comment on any possible details or time frames, merely
points out that any rollout would basically be carefully prepared and would also have to be covered by antitrust law.
Superb Q1 results
Finally, both cargo carriers sweetened their anniversary with outstanding traffic results achieved in Q1, 2021, to which the JV contributed substantially since the USA is Lufthansa Cargo’s prime market. Lufthansa’s logistics arm reports sales totaling €802 million (+ 45% y-o-y), while United Cargo’s operating revenues jumped from US$264 in Q1, 2020 to US$497 during the first 3 months of this year (+88.3%). However, both carrier’s outstanding results are mainly attributable to the ongoing mismatch between limited transport capacity and persistently high demand. This drives rates through the roof, filling the coffers of UA Cargo and Lufthansa Cargo. For the parent airlines, this is probably very encouraging in view of continuingly reduced passenger numbers, but not enough to fully offset the outage costs caused by the pandemic.
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