Ocean shipping lines: A disruptive force in air freight transport and forwarding

Two of the world’s leading ocean shipping groups have pursued a fast-paced strategy in the past 18 months that has transformed them into end-to-end logistics players from largely “box” carriers for international trade. Denmark’s Maersk and France’s CMA CGM are now forces to be reckoned with in airfreight transport and forwarding thanks to a mixture of acquisitions, heavy investment and, in the case of CMA CGM, a major partnership. Driving this diversification has been the COVID-19 pandemic and the resulting supply chain chaos triggered in its wake, which in turn brought into sharp view the need for bi-modal, sea-air capabilities in shipping goods around the world. The ocean carriers also have had the financial means to embark on such a strategy, becoming extremely profitable as a result of prolonged high ocean freight rates. However, in some quarters of the freight industry, Maersk and CMA CGM turning a focus to air freight amounts to “disruptive” action, a blurring of lines between market players, calling into question the long-established forwarder model based on neutrality. Logistics 'integrators' Two recent developments illustrate the scale and scope of Maersk and CMA CGM's intentions in air cargo and with it their emergence as logistics “integrators.” Maersk’s new airfreight company, Maersk Air Cargo , came about in April from its existing in-house air operator, Star Air , a long-standing provider of capacity to express parcel companies on European routes. Maersk Air Cargo is taking over Star’s activities to support current and new customers along with Maersk’s end-to-end logistics at its hub at Billund Airport (BLL) in Denmark. The company in May also announced plans to build a multimodal distribution center near Toronto Pearson International Airport (YYZ) . Maersk stated that one-third of its annual tonnage would be carried via its own network, comprising a mix of owned and leased aircraft. The remaining capacity will be provided by strategic commercial carriers and charter flight operators. Meanwhile, CMA CGM, which launched its own cargo airline in 2021 , signed a long-term, strategic partnership with Air France-KLM in May . Provision was also made for CMA CGM to take a 9% capital stake in Air France-KLM. Under the 10-year agreement, both parties will exclusively operate the full-freighter aircraft capacity of their respective airlines, consisting initially of a fleet of 10 full-freighter aircraft and an additional combined 12 aircraft on order . This includes four freighters operated by CMA CGM Air Cargo and Air France-KLM’s six freighters based at Paris-Charles de Gaulle Airport (CDG) and Amsterdam Airport Schiphol (AMS). The partnership also includes belly cargo capacity on more than 160 of Air France-KLM’s long-haul aircraft. Meanwhile, another major Europe-based ocean freight carrier, Mediterranean Shipping Company (MSC), is also broadening its logistics footprint, albeit in far less eye-catching fashion. The Switzerland-headquartered group has submitted a joint bid with Lufthansa to gain control of Italian state-controlled ITA Airways, formerly Alitalia. MSC has said little about its intentions in taking a stake in the airline other than to indicate that its interest “derives from the possibility of activating positive synergies for both companies in the cargo and passenger sectors where MSC is a global leader,” according to a release. Forwarders have mixed responses While some forwarders may be looking forward to additional available capacity, the moves by Europe's major ocean shipping mastodons to become logistics integrators has generated mixed views from others. Fast-growing Danish forwarder Scan Global Logistics (SGL) has experienced "excellent cooperation with both CMA-CGM and Air France-KLM, and we expect this to continue in the future as well, be it as a joint offering or as individual offerings,” Mads Drejer, global chief operating officer and chief commercial officer at SGL, told Air Cargo World . The world of logistics and transportation remains fragmented, and no single asset or non-asset player will be able to dominate the market, Drejer added. "At the end of the day it will be customers who decide which party to deal with. From a freight forwarding perspective, we provide an added-value service, together with flexibility, something that we do not see asset players being able to deliver,” he said. Forwarders are neutral and can offer an “ a la carte” menu of options across shipping companies and airlines as opposed to one “fixed meal,” Drejer said. "If anything, the last couple of years have shown that a ‘one-size-fits-all’ approach does not work with customers needing a multitude of options to cater for their supply chain requirements, and this is not least the case across transport modes, as well as geographies,” he said. “We look forward to seeing what new and potentially enhanced solutions will come from the CMA CGM-Air France KLM strategic partnership.” France-based forwarder Geodis is also largely upbeat about the partnership. “Any developments which strengthen capacity options from [Charles de Gaulle Airport] CDG can only be considered as positive for our customers and therefore for us,” Eric Martin-Neuville, executive vice president of freight forwarding at Geodis, told Air Cargo World . “However, we would have preferred that both Air France-KLM and CMA CGM compete on services and price rather than market their capacity jointly, as competition usually benefits the cargo, and the new venture is bound to control a large part of the capacity available ex-CDG.” Martin-Neuville also played down any threat posed to airfreight forwarders from the ocean carriers' integrator strategy. “Shippers need logistics companies that guarantee a resilient supply chain. In that sense ‘designed-to-suit’ solutions, as well as transparency, offered by international forwarders remain the most appropriate solutions,” he said. ‘Punch in the face’ to forwarders Stephan Haltmayer, CEO of family-owned, Frankfurt-based forwarder, Quick Cargo Services (QCS), was highly critical of the CMA-CGM-Air France KLM alliance, describing it as “a punch in the face for hundreds of forwarding agents.” "It shows us where the 'journey' is going — multinational shipping lines who own airfreight forwarding companies and buy shares in national airlines to get access to capacity. It will become more and more difficult to get space on these airlines,” Haltmayer said. He questioned whether ocean carriers’ “air” offering is really what customers are looking for. “It will be a service of the 'mass-produced' kind rather than individually tailored.” For the British International Freight Association (BIFA), the alliance is another example of some airlines, container shipping companies and assorted digital disruptors challenging the status quo by increasingly encouraging shippers and beneficial cargo owners to deal directly with them to the exclusion of forwarders, a BIFA spokesperson said. “It has never been more important to explain why a relationship with a professional freight forwarding company is of much greater value,” the spokesperson said. “Whilst the architects of the deal may think this is an opportunity to expand their horizons, it causes BIFA to question whether they really know what it takes, behind the scenes, to totally serve a cargo owner today.” Meanwhile, Joel Glusman, president at French forwarders association TLF Overseas , said it was too early to draw definitive conclusions about the CMA CGM-Air France KLM partnership but the trade body is paying close attention to its likely impact on both commercial and air cargo network levels. “Our members are long-time customers of Air France-KLM, and much more recently of CMA-CGM Air Cargo,” Glusman said. “We are direct customers of the airlines and intend to remain so. What is important for us is the operational efficiency and the quality of service provided by the airline we work with.” The partnership reflects “market change and is complementary to our activities and represents a real opportunity for our profession,” he said. “It encourages us, as freight forwarders, to reinvent ourselves, to strengthen our agility, to develop our creativity in order to continue to differentiate ourselves and satisfy the needs of our import [and] export customers.” Established forwarders not concerned As for the industry's largest forwarders, vertical integration of the ocean shipping lines does not appear to be a concern. “Being a global leader in airfreight, we have an established worldwide network of multiple carrier partners we work with to provide our customers the best service. We don’t see any impact on our business approach,” noted Yngve Ruud, executive vice president of air logistics at Kuehne+Nagel . As for Danish giant DSV , at a capital markets day it held in May, participants expressed an interest in hearing about how the company’s management viewed the challenge of ocean shipping lines entering the freight forwarding and broader logistics space. DSV CEO Jens-Bjorn Andersen was quick to point out that there aren’t several ocean carriers challenging DSV and its peers but “really only one,” without identifying who he was referring to, although it was understood to be Maersk. “And the actions of a single carrier are not going to make us change our strategy,” Andersen said. Reassurance from Air France-KLM Cargo Asked about claims that Air France-KLM Cargo's strategic partnership with CMA CGM Cargo will make it more difficult to obtain capacity and that preferential access will be given to in-house counterparts, Adriaan den Heijer, the carrier's executive vice president of cargo, sought to allay such fears. “The commercial partnership with CMA CGM Cargo has the purpose of benefitting the whole forwarding industry, offering a better, broader and more seamless [full freighter] network with a strong commitment also to invest in future airfreight capacity and distribution,” den Heijer said. “Neutrality will also be the guiding principle of the contemplated commercial partnership, which is intended to provide more and improved offers to forwarders. We are fully committed to our forwarder partnerships, and the co-operation with CMA CGM will not change that.” The carrier aims to position itself as a neutral capacity provider, enabling it to extend its network, den Hiejer said. “The purpose is definitely not to exclude players or limit output but rather to offer the market a broader and improved offer that neither CMA nor AF [Air France]-KLM is able to offer on its own,” he said. This story has been updated with the corrected term for BIFA.

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