Cargo alliances await technology

Airline alliances have been successful on the passenger side, allowing seamless transfer of travelers and meshing of passenger loyalty programs.

However, that hasn’t been the case thus far for air cargo. Technology is lacking on the cargo side as are common processes, industry officials say.

Kenji Hashimoto’s perspective on airline alliances is steeped in experience. Prior to being appointed American Airlines’ president-cargo last year, he spent three years as the airline’s vice president of strategic alliances. He notes that while passenger alliances have been highly successful, there are significant challenges on the cargo side.

“On the cargo side of things, we do a limited amount of interlining, and it’s not very technically advanced,” Hashimoto says. “We are in the early days of alliances and cargo.”

Hashimoto says the biggest challenge is the lack of robust technology and technology platforms. Alliances only work if they are for the benefit of the customer, and putting a marketing label and declaring an alliance is not enough.

“Otherwise, it’s just a pretty slogan or something you slap on boxes,” Hashimoto says. “If people are really focused on the customer and the technology can be overcome, there are real opportunities. We at American Airlines believe in alliances, but within those constraints. We do alliances more than many other airlines, but we do it with just a certain number of carriers who we have relationships with and aligned products and procedures. We only do it when the customer benefit is there. If those come together, we pursue it and do it.”

Cesar Marti Garro, director, revenue management, network and alliances for Delta Air Lines, agrees that it is harder to make alliances work for cargo. He says there is an established culture within passenger alliances that is not there for cargo.

“On the cargo side, you can always have an interline agreement with another airline, and it pretty much gets you anywhere you want,” Marti Garro says.

Marti Garro says alliances play a large role for Delta in three ways: with joint-venture partners, with SkyTeam partners and with interline agreements. Delta has joint ventures with Air France/KLM and Alitalia and plans one with Virgin Atlantic.

“When you look at the joint ventures, we work as one company and there’s a lot of benefits we can gain from that,” he says. “On the SkyTeam, we have 10 partners. We have three objectives with SkyTeam: effectiveness, efficiency and image. They are our three pillars.”

China Cargo Airlines will become SkyTeam partner No. 11 in June.

In terms of effectiveness, SkyTeam offers common products with the goal of making it easy to do business.

“The fact that we have the same product, processes and parameters helps make the connection in our hubs,” Marti Garro says.

SkyTeam has a goal of being under one roof to boost efficiency. Marti Garro says this is the case with 38 airports.

“There may not be the 10 of us, but at least three of us are under one roof, which makes it easier to transfer among each other and reduces costs,” he says.

The alliance’s image efforts include joint exhibition at the world’s major cargo shows and sponsorship of events such as the golf tournament at the CNS Partnership Conference. The alliance shares the cost of exhibiting.

“We have a big booth at the major trade shows and the other carriers are there. This is something that on a stand-alone basis we wouldn’t do,” Marti Garro says.

Delta is active with about 70 interline agreements. Marti Garro says Delta can pretty much cover the world through this arrangement.

The addition of China Cargo Airlines to SkyTeam will give Delta more access to mainland China and mainland China more access to the U.S. through Delta’s Shanghai flights.

Marti Garro acknowledges that improved technology is a major need if cargo alliances are going to advance.

“We don’t have other carriers’ schedules in our system, and there is not good connectivity among the carriers,” he says.

Oliver Evans, chief cargo officer at Swiss International Airlines, says there is a compelling logic to having cargo alliances, but it takes a major effort to extract benefits. He says there is an opportunity to develop common processes on the cargo side, but it will take much longer than it did on the passenger side. He adds that unlike the passenger, side there are fundamental differences on the cargo side when it comes to alliances.

“In the cargo world, we write very detailed processes for our handlers and even when we move under one roof, you find that the process descriptions of the airlines and the freight forwarders are fundamentally different,” Evans says.

Evans says cargo has very different understandings of how alliances work.

“SkyTeam is a passenger alliance that has now developed a cargo alliance model,” he says. “With the Star Alliance, to which my company belongs, that is not the case. We will collaborate in terms of common facilities where that make sense, but we maintain an autonomous business model because that is what is driving value for our customers.”

Freight forwarders have a decidedly different perspective from the airlines.

“From a passenger perspective, if my favorite airline has an alliance with another carrier so that as a passenger I can make a transfer, I am excited,” Brandon Fried, executive director of the U.S. Airforwarder’s Association says. “As a freight forwarder under the same circumstances, I am nervous because I am hoping and praying that the same standards are used and there is a linking of synergies. I might trust my first carrier, but I really don’t know about their code partner. I am not saying it’s good or bad; it just leaves open the possibility for issues.”

Fried says members of his association report that there is not always a defined benefit from shipping within an alliance, but airlines are working closer together.

Des Vertannes, IATA’s global head of cargo, says if the air cargo industry can become more E-centric, it can be far more transparent with its services.

“We are keen to drive things that catalyze a future benefit to the air cargo side. If the forwarders can see electronically as we develop alliance partnerships, it gives them a greater choice This is about information reaching them where today it’s not visible.”

Vertannes says FedEx and UPS offer the industry a model to follow in terms of technology sharing.

“If you look at FedEx and UPS today, do you think they operate on all continents and every city? No they don’t. They have subcontractors, but what they give to subcontractors is their IT platform,” Vertannes says. “It allows seamless service to its customers that FedEx or UPS controls from start to finish. We don’t have that in our world today, but I believe as we develop standards you will begin to see it in the years to come.”

Fried says it’s vital that forwarders not be left behind as cargo alliances and the technology to run them are developed.

“There needs to be a market-driven solution,” he says. “Forwarders come in all shapes and sizes, and customers pick forwarders based on many different criteria.”

  Like This Post
Current Issue Magazine Cover
Sign Up Email List