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FedEx-CMA CGM deal hints at new battle for air cargo capacity

When CMA CGM announced its $1.4bn acquisition of FedEx Supply Chain, most attention focused on the contract logistics business changing hands. But tucked into the announcement was another important detail: the two companies also expect to enter commercial agreements covering "select air cargo capacity solutions". However, neither company has so far explained what that means. Asked for more detail, FedEx told The Loadstar: "As the PR noted, the companies expect to enter into ocean and air commercial agreements to support our respective strategies. "At FedEx, we regularly enter into commercial agreements with third parties to support our global network. We have no further information to share at this time." CMA CGM did not respond. In FedEx's carefully worded answer, the reference to third-party commercial agreements may offer a clue to how the proposed cooperation could work. An industry source told The Loadstar that FedEx was already a significant buyer of capacity from scheduled airlines, particularly where direct passenger services offered a cheaper and lower-risk alternative to deploying its own aircraft. A shipment sold to a customer as a FedEx service might, for example, travel between London and New York in the belly of a British Airways or Delta passenger aircraft, with FedEx controlling collection, handling, and delivery at either end. The customer buys FedEx's network and service commitment, but does not necessarily know - or even need to know - who operated the flight. The source said scheduled airlines could offer capacity at extremely low rates, while FedEx could sell the resulting end-to-end movement at express prices. That model gives the integrator access to direct services without assuming the cost and utilisation risk of operating an additional aircraft. This is hardly a new practice. Integrators have long supplemented their own fleets with block-space agreements, charters, interline arrangements, and capacity purchased from passenger and cargo airlines. But FedEx appears to be giving third-party flying a more prominent role in its wider air freight strategy. The company last month signed an agreement with China Southern Air Logistics to explore cooperation covering cargo capacity, route networks, fleet resources, operations, and digitalisation. FedEx has also identified international air freight as an area for growth, while indicating that third-party providers could carry less urgent traffic as its own aircraft focus on higher-priority shipments. The strategy makes the CMA CGM agreement more interesting. The cooperation may prove to be a relatively conventional arrangement involving space on FedEx-operated flights. But FedEx's response leaves open the possibility that it could draw on the integrator's wider network of commercial airline relationships and the procurement of third-party capacity. Were Ceva Logistics to gain access to that broader pool of lift, the arrangement could be significantly more valuable than a simple agreement to buy space on FedEx freighters. It would also complement Ceva's existing forwarding business and CMA CGM Air Cargo's dedicated fleet (of five 777Fs and one A330F) without requiring CMA CGM to own or operate every aircraft needed to support customers - at a time when the future freighter market is in short supply. Atlas Air chief commercial officer Richard Broekman recently said the carrier would add no aircraft to its fleet this year because suitable capacity was simply unavailable. "This year is the first in many, many years that we are not adding aircraft to our fleet, and that's really just a function of no availability out there," he said. Atlas itself has agreed to acquire a 49% stake in Air Atlanta, giving it strategic access to the Icelandic operator's fleet of 14 widebody freighters, and described the deal as part of its growth strategy in a "structurally constrained widebody freighter aircraft market". However, rather than acquiring an entire airline or waiting years for new freighters, companies can seek to control capacity through commercial agreements, purchasing relationships, and network partnerships. That raises questions for scheduled airlines too. The source argued that airlines' growing reliance on digital booking platforms and bidding systems risked eroding yields, while leaving freight forwarders and integrators in control of the customer relationship and distribution channel. If an integrator can buy direct belly capacity cheaply, combine it with collection and delivery, and sell the resulting product at an express premium, it is capturing much of the commercial value from the aircraft's owner. In a market where owning more aircraft is increasingly challenging, the competitive advantage may lie in controlling access to the widest possible capacity pool - whether you charge express rates for it, or not.

Evergreen's family drama - the audience now includes prosecutors

Taiwan's founding shipping dynasty finds itself in a courtroom, not a boardroom, as the long-running Chang brothers' feud spills into a criminal investigation at the worst possible time for Evergreen Marine. When Taiwanese prosecutors dispatched investigators to 10 locations on July 6, including the offices of Evergreen Marine and affiliate Evergreen International Corporation, the raid marked a sharp escalation in a family power struggle that has simmered for a decade. But it also put a governance spotlight on one ...

Frankfurt cargo volumes impacted by Middle East conflict and strikes

Europe's largest cargo hub saw cargo volumes increase by 1% in the first half of the year as the Middle East conflict and strikes at Lufthansa affected performance. The German airport saw volumes reach 1m tonnes over the first six months of the year, but several trends had a negative impact of performance. Airport operator Fraport firstly highlighted a 12.4% year-on-year fall in airmail volumes during the first half to 15,000 tonnes as a structural shift towards digital documents and communication continued to impact volumes. Fraport said that overall volumes stangnated during the second quarter as a result of the Iran conflict and strike action. "Particular contributors included the six-day Lufthansa strike in April and the grounding of Lufthansa's A321P2F fleet," Fraport said. "Since the beginning of the Iran war in March, significant capacity reductions in Middle East traffic have impacted the development of the airfreight market. "Closures or heavy restrictions of key airspaces led to a significant decline in available capacities on routes with the Middle East, forcing market participants to make extensive changes to their networks. "As a consequence, freight flows were increasingly shifted to direct routes between Europe, the Far East, and Africa. At the same time, airfreight rates in the second quarter rose significantly due to limited capacity." E-commerce volumes continued to be a "major growth driver" in the first half, although Fraport said "some of its dynamism was lost" due to regulatory changes in locations such as the European Union (EU), which has introduced a €3 customs duty on low-value parcels imported from outside the bloc. Looking at regional performance, Fraport said that volumes from the Far East were up 7% year on year, having benefitted from e-commerce volumes and the shift of cargo flows away from the Middle East due to the conflict in the region. "The trend for China traffic was weaker in the second quarter; other major airfreight markets performed significantly more positively," Fraport said. "India, Japan, and Taiwan recorded strong growth, which was mainly attributable to additional freighter capacities. "The Taiwan route also benefited from strong export demand from high-tech products. The impact of capacity constraints in Middle East traffic is reflected in the figures for both Far East and Africa traffic." Volumes from the Middle East declined by 19.8%; Africa traffic increased by 11% as demand for direct connections between Europe and Africa rose significantly, as freight flows were increasingly diverted to avoid hubs in the Middle East. US traffic saw "only a modest increase" of 1.2% despite positive US economic trends. Latin America recorded an increase of 1% due to growth from Mexico of 4%, which benefited from the positive development of airfreight trade between Germany and Mexico. By contrast, European traffic fell by 6.9%, with the impact of the grounding of the A321P2F fleet especially affecting performance.