Putzger perspective: Alignment headaches

Shipping companies’ thirst for end-to-end supply chain solutions has seen their interest and investment in the airfreight industry continue to grow, but airlines would do well to think about what this trend means for the future, writes Ian Putzger.

Airline boards have plenty of food for thought these days. Shipping lines’ quest for comprehensive end-to-end business has intensified, with CMA CGM striking a strategic alliance with Air France KLM and Mediterranean Shipping Company (MSC) teaming up with Lufthansa to bid for an 80% stake in ITA, the successor to defunct Alitalia.

Swimming in money, container carriers have a lot of cash to throw their weight around and build global businesses that offer one-stop shopping.

The top five ocean carriers made a collective profit north of $64bn last year.

Airlines, while doing well in cargo, are still bleeding money. From that vantage point, these alignments seem a logical match.

Having airfreight capacity at their fingertips benefits ocean carriers, especially in the current situation, where congestion forces shippers to shift some of their traffic to air.

Beyond this, there is the overarching case pioneered by Maersk for the comprehensive end-to-end logistics reach that is gaining traction among large shipping lines.

Capacity access is not an immediate gain for MSC – which would hold a 60% stake in ITA, compared to Lufthansa’s 20% – but the Italian carrier is poised to grow its long-haul network with A350 planes.

Quite likely, MSC would support investment in some freighter aircraft for ITA down the road, although its financial muscle is bound to weaken as the windfall of profits for container lines dwindles.

The alignment with Lufthansa – just like CMA CGM’s partnership with AFKLM – should give the lines access to the airlines’ respective networks and capacity.

Equally important, they can leverage their airline partners’ expertise in airline management, operations and in marketing airfreight capacity as they build up their own aircraft fleets.

From the airline perspective, the benefits are less immediately tangible.

Access to the ocean carriers’ networks and client bases is of less use to them.

Moreover, the large ocean carriers that are building up airfreight capabilities have all acquired forwarders.

CMA CGM owns CEVA Logistics and GEFCO, while MSC acquired Bolloré’s Africa Logistics earlier this year.

This will cause forwarders to think twice about forming close ties with an airline that is linked to a self-declared logistics integrator that owns one or more of their competitors.

At the end of the day airlines’ fortunes are dictated by their passenger business.

Cargo divisions could find themselves wedged between parent companies and stakeholders whose priorities and goals are not in sync.

Putzger perspective: Thinking outside the cargo hold

Putzger perspective: Cargo capacity alignments