The air cargo sector has taken a step towards consolidation with the deepening of the ‘North Atlantic Joint Venture’ between KLM-Air France, Delta Cargo and Virgin Atlantic Cargo. Originally a joint venture established in 2015 between KLM-Air France Cargo and Delta Cargo, it has now been complemented by Virgin Atlantic Cargo which already had a relationship with Delta. This parallels co-operation between the three airlines at the group level.
Since 2015 the three airlines have been increasing the level of co-operation in ground transport and consolidation centre operations. KLM-Air France Cargo and Delta Cargo have been co-operating in sales for four years and have already moved to an integrated sales-force.
It appears that the “new expanded joint venture” means that Virgin will merge its cargo operation with the other two airlines whilst the joint venture will expand into what is effectively one company for operational purposes. Each of the member airlines cargo hubs will be utilised to handle the other joint venture member’s consignments with an integrated booking and tracking system.
The North Atlantic Joint Venture is focussed on serving Europe and North America routes, with “110 nonstop routes with onward connections to 238 cities in North America, 98 in Continental Europe and 16 in the U.K”. The network will be based around “hubs in Amsterdam, Atlanta, Boston, Detroit, London Heathrow, Los Angeles, Minneapolis, New York-JFK, Paris, Seattle and Salt Lake City”.
It is said that the joint venture will hold around a quarter of the market by capacity, although Transport Intelligence has not been able to substantiate this. Unsurprisingly the move by the North Atlantic Joint Venture to develop its integration has not been popular amongst rival airlines, however, the wider move towards greater co-operation by the airlines at Group level was not obstructed by competition authorities on either side of the Atlantic.
A full merger of the airlines would be difficult due to the numerous legal obstructions that prevent free-market access in the US and the EU air transport markets, however, both Air France KLM and Delta are already major shareholders in Virgin Atlantic. It is tempting to view the most recent development as a way of delivering the benefits of consolidation in the absence of a formal merger. Either way, on trans-Atlantic cargo routes it appears that the ‘North Atlantic Joint Venture’ will be a leading player. It will be interesting to see if it will stimulate a response from other airlines.
Source: Transport Intelligence, February 6, 2020
Author: Thomas Cullen