Air France, China Southern, and the future of alliances

China Southern 777F feature

If China Southern and Air France-KLM are both members of an existing cargo alliance, why do they have to form a new cargo partnership?

Back in the dim and distant past, two of the world’s biggest cargo carriers, one in North America, one in Europe, worked out a partnership that benefited  both.

Northwest Airlines is long gone, subsumed into Delta Air Lines, but once upon a time it operated fourteen 747-200 Freighters. Netherlands-based KLM, now in a somewhat unhappy marriage with Air France, also had a big freighter fleet, and was generally admired as the finest combination cargo operation in the world. But when they formed a cargo partnership, the world took little notice.

Their bilateral partnership worked well, but was ignored by other carriers, who instead scrambled to form multilateral cargo alliances, modeled on the increasingly important passenger alliances – oneworld, SkyTeam, and Star. Some of the new cargo alliances were formed by member carriers of passenger alliances, some were formed across passenger alliance boundaries, but with one exception, they all had one thing in common… They didn’t work very well.

Even the exception, the SkyTeam Cargo Alliance, hasn’t set the cargo world on fire. It is still operational – even seems to be going strong – but recent developments have raised questions about alliances in general, as partnerships limited to two carriers are becoming more and more common.

In the last eighteen months there have been well-publicized bilateral agreements signed by IAG Cargo and Qatar, Lufthansa and ANA,  IAG and Finnair, and, most recently, Air France-KLM and China Southern Airlines. This last is particularly interesting because, given that both AF-KLM and China Southern are members of the SkyTeam Cargo Alliance, they already have a partnership. Why form a partnership within a partnership?

But form a new partnership they did. Following the pattern of ad hoc cargo partnerships pioneered by KLM itself, rather than large (and largely unproductive) alliances, Air France-KLM entered what it calls “phase one” of an agreement with Guangzhou-based China Southern. The deal will give AF-KLM access to China Southern’s Asia Pacific network (particularly Australia, New Zealand, and Vietnam), while China Southern can take advantage of AF-KLM’s strong presence on the trans-Atlantic, and good connections to Africa. The first stage of the agreement will also see reciprocal access to ground handling facilities at each partner’s hubs.

But as mentioned above, both carriers are members of the SkyTeam Cargo Alliance (which last week celebrated its fifteenth anniversary) and one has to wonder what this agreement says about the future of broad cargo alliances. Regarding the question of the SkyTeam Cargo Alliance, AF-KLM’s EVP Cargo Bram Graber would only say that he viewed the Alliance as “a red carpet to enter together into cooperation,” but added that “bilateral co-operation always remains the responsibility of the individual airlines.” And regarding the agreement itself, he was quoted as saying: “We are pragmatic cargo people, so let’s call this agreement phase one. It is a good first step but with a limited number of destinations on both sides. Let’s make it work in phase one and then we have the ambition to implement phases two and three that will deepen and broaden the agreement.” He did not elaborate on what specific steps might be taken in those next two phases,

Get more air cargo insights at the 2015 Cargo Facts Symposium, Oct. 26-28 in Miami. Click here for details.

 

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