Next hurdle for ANA acquisition of Nippon Cargo Airlines
18 / 12 / 2023
Nippon Cargo Airlines Boeing 747-8F. Photo: Daisuke Shimizu/ Shutterstock
All Nippon Airways (ANA) is preparing to face the next hurdle in its proposed acquisition of freighter operator Nippon Cargo Airlines (NCA) from logistics group NYK.
The Competition and Consumer Commission of Singapore (CCCS) is now inviting public feedback on the proposed takeover until January 2.
On December 7, CCCS accepted an application from ANA Holdings Inc. – the holding company for the ANA Group, which owns ANA, and NCA for a decision on whether the proposed acquisition would infringe section 54 of the Competition Act 2004, which prohibits mergers that have resulted, or may be expected to result, in a substantial lessening of competition within any market in Singapore.
The acquisition, first announced in March, has already been delayed. In September, the transfer of NCA from NYK to ANA was postponed from October 1 to February 1 next year.
Tokyo-headquartered ANA provides both international air passenger transport and air cargo transport to and from Singapore. NCA is Japan’s sole freighter airline and provides air cargo transport through the use of freighters on international flight routes to and from Singapore.
According to the companies, the proposed transaction will not result in a substantial lessening of competition in the relevant markets, said CCCS.
The reasoning put forward by the companies includes that the international air cargo business is a largely commoditised business, and therefore competition occurs amongst all of the airlines in three primary areas, namely pricing, network flexibility (destination times), and services.
They said there is also strong competition between all airlines in the international air cargo transport market, including other “combination airlines” that utilise both freighters and passenger aircraft for the transport of cargo, and integrator airlines that also offer air cargo transportation services to other forwarders.
Customers (i.e. forwarders) can easily switch between airlines, with little cost and time required, added the companies. Additionally, air cargo transport contracts are normally of a short duration and do not contain exclusivity clauses, allowing customers to easily switch.
ANA and NCA stated there are no significant or insurmountable barriers to entry for the supply of international air cargo transport for the relevant markets.
Coordination between market players in the supply of international air cargo transport for the relevant markets is also unlikely to arise given the large number of potential global competitors who are able to and currently do supply cargo services to and from Singapore and would be able to disrupt any coordinated behaviour amongst existing competitors, noted the companies.
They added that within international air cargo transport, substitutes are available, as the combination of different routes between different cities (including direct and indirect flight routes) can satisfy the same or similar demands for air cargo transportation between Singapore and Japan.
Although ANA has some freight forwarding capabilities and collectively the companies offer some related services such as warehousing (which is outsourced to a third party), this limited vertical integration would not enable the merged entity to foreclose existing or potential competitors from competing in the air cargo transport market, or restrict the freight forwarding or warehousing options available to buyers in the market, concluded ANA and NCA.
