Friday, June 28, 2013

Two Major Air Cargo Carriers Sign up to Long Term Freight Handling Agreement

As EU Commission Clears Virgin and Delta Merger Things Move Swiftly
Shipping News Feature

US – UK – With the news last week that the proposed joint acquisition of Virgin Atlantic by Delta and Virgin Group had been ratified by the EU Commission things moved swiftly on the cargo front with the two air carriers announcing their first joint cargo agreement. The Commission's investigation confirmed that in all markets the combined entity would continue to face competition from several strong competitors, notably British Airways and American Airlines after the proposal was put before it on May 15. Now Virgin Atlantic Cargo and Delta Cargo have entered a multi-year freight handling agreement in which Delta Cargo will provide cargo handling for Virgin Atlantic at New York’s John F. Kennedy International Airport and Boston’s Logan International Airport, effective Aug. 26, 2013 and July 15, 2013, respectively.

Delta will replace Singapore Airlines as a 49% minority shareholder in Virgin Atlantic, while Virgin Group will retain its 51% stake. Furthermore, Delta and Virgin Atlantic will enter into a fully integrated joint venture in order to bring together their passenger air transport operations on routes between the United Kingdom and North America. Delta and Virgin Atlantic's non-stop services overlap on the London-New York and London-Boston routes. In addition, Delta's one-stop services overlap with Virgin Atlantic's non-stop services on several routes between the UK and North America.

After close consultation with the US Department of Justice and the Department of Transportation the Commission concluded that the proposed transaction did not raise competition concerns, as on each of the transatlantic routes where both Virgin and Delta operate, sufficiently strong players – in particular British Airways and American Airlines, which joined forces in a joint venture - are present and capable of exercising a significant competitive constraint on the combined entity. Moreover, Delta and Virgin are currently not particularly close competitors, but primarily compete against British Airways and American Airlines.

New York-JFK is Virgin Atlantic’s biggest cargo gateway in North America, with four daily wide-body flights and annual cargo volume of nearly 10 thousand tonnes whilst Boston is another of Virgin’s prime North American cargo markets, generating some 2,500 tonnes kilos of freight annually. Five-year agreements will benefit freight customers at two of the largest airports in the north eastern United States and John Lloyd, Director of Cargo at Virgin Atlantic, commented:

“We are delighted to be working with Delta because they are so well established at JFK and in Boston, and share our focus on delivering the highest standards of customer service. We will continue to offer full Virgin oversight at both facilities to ensure we provide a great customer experience and maintain the reliable and flexible service our customers expect from us. Both airlines are committed to making this partnership the best operational offering at the two airports. We want our customers to benefit from this move and to continue to make us their carrier of choice.”

Tony Charaf, senior vice president and chief cargo officer for Delta Cargo, indicated this may just be the first in a new era of cooperation and rationalisation between the two carriers saying:

“This cargo handling agreement with Virgin Atlantic at New York-JFK and Boston represents another facet of the expanding relationship between our two airlines. We anticipate more growth potential from this innovative partnership.”