Chuck Grieve
Like it or not, global alliances are the way forward for the air cargo industry. This was the overwhelming sentiment from speakers at Air Freight Asia 2000.
Following in the footsteps of the major passenger-focused alliances was the key to meeting clients' needs for quality, reliability and best price for their global transportation needs.
The lone dissenting voice was that of Peter Sedgley, Emirates cargo marketing and product development manager. Emirates, the Dubai-based carrier and a consistent award winner on the cargo side since its inception 15 years ago, preferred to go it alone, entering into codeshare agreements only when it made business sense to do so. "We prefer to use the word 'partnerships'," says Sedgley. This suggests a win-win situation founded on the two guiding lights of the business, customer service and profit.
Economies
Sedgley is not convinced that mega-alliances are appropriate for cargo. Those who have followed that route, he says, have not found the anticipated economies of scale - quite the opposite.
The concept of alliances is commendable, but the reality is full of pitfalls.
Dr Ludwig Bertsch, president and chief executive officer of Swisscargo, says globalisation, the trend for industrial conglomerates to focus on their core businesses, economies of scale and cost as well as the desire of clients for a "one-stop shop" for transportation services make the move to alliances inevitable.
For SAir Group subsidiary Swisscargo, which last year took over marketing of freight capacity for Swissair, Sabena, Crissair and CityBird, and has numerous other blocked space agreements, the way forward is to build a global air cargo system with harmonised products and standards - an "umbrella brand" for all the companies involved.
Quoting an Arthur Andersen survey, he says mid-sized players will be forced to position themselves internationally to compete successfully. Acquisition opportunities will be at a premium as the number of attractive targets decreases.
Air cargo carriers could be expected not only to position themselves through further alliances, but also to gain increased control over other parts of the logistics chain through vertical integration. In this respect, the deal between SAirGroup and Panalpina should not prove an exception.
Jern Andersen, business development director of SAS Cargo, said partnerships were vital to the future of his company, which he describes as a small player with a strong position in its home market. As a Star Alliance member, SAS benefits from closer ties with Lufthansa on the cargo side as well as passenger.
Although the two alliance partners now account for more than 50% of the Sandinavian air cargo market, market concentration is not the issue that it is on the passenger side. In answer to a question, Andersen said no rules had been broken, so aviation industry regulators were not concerned.
He also feels that cooperation on the cargo side between the major alliance partners, especially the bigger airlines, is inevitable.
Freight forwarder Jost Hellman, chairman of the Hellman Group which is a member of Lufthansa's global Business Partnership alliance, is in no doubt that global connections are a must to meet client demands, but he cautions that alliances "mean vulnerability - a partner is not necessarily in charge of his own destiny."
He cites the example of the French postal organisation's recent 42% stake in DPD, the leading private parcel organisation in Europe, which he believes has upset the balance of partners.
"Every alliance of equal partners is vulnerable if one or more partners are bought out by a party with a different strategy or agenda," he says.
He feels strongly that only those alliances which develop a single global brand would succeed. "The brand name is more important than the shareholding of the company behind the product or network," he says.
Source: Flight Daily News
