A partnership of giants

Two of the world’s top three international cargo carriers have joined forces.

Lufthansa and Cathay Pacific rank second and third, respectively, among all airlines in international cargo traffic, trailing only Emirates. So their formation of a joint network to connect Hong Kong to Europe, as announced today, is an interesting move.

Regarding the agreement itself, the carriers said it would take the form of “a highly integrated bilateral cooperation.” How highly integrated? Lufthansa and Cathay say they “will work closely together on network planning, as well as sales, IT, and ground handling.” Further, customers will be able to access the entire joint network through either of the partners’ booking systems, and the two carriers will offer joint handling at their hubs in Hong Kong and Frankfurt.

The agreement covers over 140 direct flights per week between Hong Kong and thirteen cities in Europe. Simon Large, Cathay’s Director of Cargo, said: “Cathay Pacific’s large number of direct connections to multiple European destinations fits perfectly with Lufthansa’s strength in Frankfurt, the most important European air freight hub, and in Europe through its dense feeder-network.” Peter Gerber, CEO of Lufthansa Cargo pointed out that the deal would give customers “more flights to choose from, and a combination of feeder and direct flights.” This, he said, would shorten origin-to-destination times. He also pointed out that the agreement would give the two carriers more options for “shipments that have to be transported by freighter, due to their size or properties.”

Implementation of the partnership is still some way off. The first shipments covered by the agreement won’t fly until 2017, and then only westbound from Hong Kong to Europe. Eastbound shipments will become available “in the course of the year.”

As is often the case, the formal announcement raises many questions.

• Will the partnership grow beyond Hong Kong/Europe? Cathay has a strong trans-Pacific network and Lufthansa has a strong trans-Atlantic network. Is there scope for further cooperation across either of these oceans?

• What does the agreement mean for Lufthansa’s freighter fleet? Lufthansa Cargo has struggled recently, and Lufthansa Group CFO Simone Menne made it clear last week that the company was going to take a hard look at its main-deck capacity. Will access to Cathay’s vast belly capacity allow Lufthansa to park some of its MD-11Fs? And, of course, one could ask the same question about Cathay’s freighter plans.

• What impact will this partnership have on other carriers on the Europe-Asia trade lane? Carriers from the Gulf region, as well as all-cargo carriers Cargolux and AirBridgeCargo have taken an increasing share of the cargo traffic flying between Asia and Europe. Will this partnership help Cathay and Lufthansa regain market share?

• Will other partnerships follow? We have seen a recent trend of carriers forming bilateral cargo agreements – Lufthansa/All Nippon, Qatar/IAG, Air France/China Southern for example – instead of relying on the old alliance model that rarely worked well. Will Lufthansa and/or Cathay form partnerships with other carriers? Will they welcome a third partner into this current partnership?